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January 30, 2017 | High Anxiety

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Well that was no surprise. Stock markets took their worst one-day jolt since the US election on Monday, with triple-digit sheds in Toronto and New York. We told you it was coming. And to ignore it.

Donald Trump will be the inflation president, but also the king of volatility. If you have an all-stock portfolio, ensure an adequate supply of Tums is on hand. Download Leonard Cohen. Get a black lab. Buy yoga pants. Immediately stop reading this blog.

For the rest of you, there’s a predictability about having an unpredictable guy in the wheelhouse. It’ll bring significant investor opportunity on the way to higher markets. Trump’s a business guy. His cabinet is full of fossilized billionaires, senior execs, Goldman Sachs honchos, hedge fund managers and dudes that personify the status quo of capitalism. From this gang you can expect an historic pro-business agenda feeding US corporate profits. If he does carry through with a 20% corporate tax cut, it’ll be positively Kardashian.

So why did stocks lose ground Monday, while bonds and gold went up?

Easy. We all know he’s rash, impulsive, headline-seeking, impetuous, indefatigable and utterly inexperienced in governing. The Muslim ban was a big mistake. Picking a fight with Mexico was stupid. The wall is idiocy. Pissing off China is intemperate. And there’s lots more to come – governing not through the political process, but by hasty executive orders that can be dashed off without consultation or compromise. This is a formula for trade and foreign policy disasters. So, expect some.

For example, a senior Canadian military officer told me on Monday, if the Quebec City massacre had happened on US soil Sunday night, the Trumpian response would likely “have been devastating.” Expect that, too.

Now most Canadians (typical) see only the danger in all of this, not the opportunity. Witness the latest Nik Nanos poll done for Bloomberg

Household confidence among Canadians just fell to the lowest level since the US election period as Trump started talking about a 20% border tax, axed the TPP free trade agreement and mused about renegotiating NAFTA. People are worried. Since election night the share of folks who say the economy will get worse has climbed a dramatic 9%, now sitting at 33%. That’s a big premium over those who believe things will get better (21%).

“This is a noticeable drop coincidental with the U.S. election and focus on the Trump Administration looking to renegotiate the Nafta” trade pact,” says Nanos. And ditto for personal finances. Just under 29% say they’re worse off now than a year ago – an astonishing result given that last year investment portfolios rocked, house prices went up and oil prices doubled. Of course at the same time, Canadians grossly overspent, bought real estate at the peak and walked into record levels of debt.

Meanwhile the mainstream media is showcasing the hate-Trump sentiment that sparked widespread travel ban protests on the weekend, further painting the new president as an demagogic bully whose racist, xenophobic, isolationist nature is being revealed. What’s abundantly clear is that we’re in for a few years of divisive politics that could rend the social fabric of the world’s dominant country. We’ll also see some trade wars. Maybe a real one, too.

Thus, volatility. But also a unique time to make money.

Donald Trump is unlikely to measure his presidency in terms of how more people came to enjoy health care, how greenhouse gas emissions were curtained, how many desperate refugees were saved, how America grew in global respect or the male-female wage gap was closed. Forget that. Not important. Loser issues.

Instead it will be gauged by GDP expansion, corporate profitability, labour market participation, wage growth, energy self-sufficiency, job creation, car and house sales and equity market records. The rash cut in regs, corporate tax slash, repeal of banking controls and border barriers are all means to the same end – an economy on steroids. Bigger. Fatter. Greater.

As an investor it would be unwise to reduce your US exposure given what’s sure to come. So load up on those ETFs before you paint your ‘Trump’s a Fascist’ sign and protest for human rights and social justice at the US embassy.

Just in case.

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January 30th, 2017

Posted In: The Greater Fool

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