January 2017 Newsletter, Part 1
Well…the stock market was drifting as I expected until the inauguration speech and the first work week of the Trump presidency. The market (and I am sure you too) ALL wanted to actually see what Trump was going to DO rather than talk or tweet about before we finalized our first half 2017 money making strategy.
Boom...It's been 3 days into the Trump administration and we have record highs in S&P 500/Nasdaq Composite/Nasdaq 100 and Russel 2000...so we have the answer about Trumponomics: He is going to do EVERYTHING they can think of to
- goose the American economy
- keep manufacturing jobs in America
- bring back $2 trillion in offshore capital and manufacturing jobs to America
- get our energy production and pipelines booming
- Piss of as many liberal progressives as humanly possible
- Keep the US news media and "Political Class" from both the GOP and Democratic parties as his sworn enemies so he has daily targets of distraction.
Key Point:The Trumponomics Train is leaving the station at full speed…and in my analysis there is nothing on the horizon to stop the momentum UNTIL we get to what the TrumpCare plan is going to look like…and that will be 6-9 months at least (I will explain why in a moment).
GETTING Trumponomics right and not falling for the daily appalling Trumpism remarks is the KEY to making REAL money in 2017 from the Trumponomics transformation of America's anti-business progressivism of the last 8 years.
We can know CLEARLY forecast that what the stock market wants most:in the next few quarters it's going to get--and that means 8--12% EPS growth in Q1-Q2 2017 from
- Strong earnings reports from the 4th quarter that validate an economic rising tide
- Corporate income tax reduction by June-July (which boosts EPS and offsets strong dollar)
- $2 trillion in potential corporate cash repatriation (which means HUGE stock buybacks, higher dividends and incremental increase in capital investment)
- Daily destruction of anti-growth regulations and growth regulations adopted
- Major overhaul of banking and EPA regulations
- A replacement for ACA/Obamacare that does NOT leave 22 million newly insured without insurance coverage
- A new conservative business friendly SCOTUS Justice
- Possibly 2 new DOVISH Fed members to push out the rate hike hawks
- More favorable trade agreements to U.S. companies
- Hardline trade agreement re-negotiations
KEY point: To make our 28%+ annual return target for 2017 (which doubles your portfolio every 2.57 years) you and I HAVE to get an accurate view on the reality on what Trumpism can and can’t do to the U.S. and world economy in the next 6-9 months.
BTW—our annual capital appreciation rate since we started NBTI Pro through in 2013-2016 is a 45.5% annualized return on 182% total gain since July 3 2013. We are very proud our 2016 portfolio gains logged in at 82%...which makes us the #1 Investment Newsletter in America (based on results of top 50 investment newsletters we track). We closed the year with only two losing positions which means out of 96 positions we have recommended since 2013 we have had a grand total of 92 winning positions and only 4 positions with a loss (and losses were on average 6.5% vs. average gain of 45%).
Thanks to all the NBTI Pro team for an incredible year. NOW we have to do it again...here is how!
#1 We Have to IGNORE the Daily Cognitive Dissonance of Trump & Trumpism & Focus of The Highly Predictable ACTIONS and POLICIES of Trumponomics
Most liberals and progressives are literally everyday more and more brain damaged and appalled by what POTUS tweets and says. They have not figured out that Trump can't help himself...its just TOO entertaining to see his political adversaries turned into hysterical chicken littles on a daily basis (I must admit that now I find the daily progressive end-of-the-world proclamations pretty amusing too.)
From a stock market perspective, many money managers I know are concerned that the fear “gap” (as measured by the market fear gauge the VIX index) and market action which indicates to them that investors are ignoring the dangers President Donald Trump poses to global trade and security. “It genuinely feels like policy uncertainty is very high,” says Nicholas Bloom, the Stanford professor who developed the the VIX uncertainty index. “Why on earth is the VIX (the market's fear indicator) not picking it up and going higher?”
Well this is why: There IS no uncertainty about who Trump is and what his policies are going to be—he has made it perfectly clear what he is going to do 500-600 times. The UNCERTAINTY over Trump is about what is the next insanity/vapid inanity/alternative fact that will come out of his mouth or twitter feed..which we have to IGNORE!
Key Point: We have an ADD/Low spectrum AsbergersSyndrome POTUS...and the daily Trump schtick is a highly practiced ACT...it's a red herring to keep the poor press on "fact-checking" missions instead of in-depth reporting. Trump is like Lucy and Charlie Brown kicking off the football: we all know that Lucy is going to pull the ball out at the last minute...only Charlie is the one who thinks "this time is different."
Reality: The stock market has quickly adjusted to Trump's daily ADD/Aspergian bombastic rhetoric and it is NOT taking the bait—the market KNOWS they will hear DAILY inflammatory/borderline insane/alternate facts/petty/neurotic etc. statements out of his mouth and twitter feed--who cares? The market knows that ALL OF IT is mostly harmless insanity or a head fake designed to piss someone off or begin the negotiation process with someone or some country. In short, the daily horror show of Trumpism has been (as we analysts say) “priced into stocks.”
THIS is why the market fear index is so low…everyone with an internet connection or TV should by now know to NOT take Donald Trump's shock jock attacks and insane statements LITERALLY.
What counts is that we take this sui generis POTUS SERIOUSLY when it comes to the U.S. economy--we need to take Trumponomics literally...NOT Trumpism. What the market has NOT fully priced in IMHO are the positive economic outcomes of what POTUS Trump is going to DO…and the last three days of actions indicate THE most economically/business positive actions we have seen in many generations.
Call this divergence between markets and uncertainty “good” uncertainty, because previous spikes in the VIX have come from REAL worries about REALLY bad outcomes.
Yes it remains unclear how far corporate taxes will be cut, how big a fiscal stimulus congressional Republicans will approve or which regulations will be scrapped.
Key Point: This is the sort of uncertainty investors can happily live with. Journalists and liberals/progressives are ALL hot-and-bothered about Mr. Trump’s dysfunctional relationship with the truth, his approach to women and minorities, his conflicts of interest and friendly approach to Russia.
REALLY Key Point: Money has NO morals, and shares don’t need a squeaky-clean leader to go up in value if the macroeconomic environment is steadily improving.
Look: if Mr. Trump were to threaten the rule of law or separation of powers, or start a trade war with China or Europe it surely would hurt shares. But investors have enough confidence in the U.S. constitution and our tricameral legislative, judicial and executive branch power sharing to believe we will NOT SEE comparisons to the 1930s.where the Constitution was basically bypassed by FDR in the name of solving the Great Depression.
Final Point: I spent the last 20 years in DC and NYC and got to know some very big hitters in the business of government. I have spent much of the first few weeks of January trying to get a real feel of the first 100-200 days of the Trump presidency because there is NO more important transformational event facing the stock market than this. None.
The good news for you and me: In the short term we SHOULD see many pieces of the Trumponomics agenda passed and the momentum continue. Why? Because for one thing the Federal debt-ceiling extension expires on March 15 and that will push Congress to act sooner rather than later on tax reforms.
Key Point: Raising the debt ceiling before the fiscal reforms would be difficult politically. This means Congress will likely be highly motivated to pass the fiscal reforms and raise the debt ceiling at the same time. I now see the fiscal reform bill could be passed into law as early as June or July.
Meanwhile, the U.S. dollar and bond yields are poised to run higher in the near term based on historical trends as well as the sustained U.S. economic growth and Fed activity.
Better News: As I talk to people involved in the transition, I am gaining more confidence that a good part of that agenda will actually be realized. One reason I’m encouraged is that according to most of the appointees who have spent time with Trump, they unanimously say that he really “listens” to them. To me this says that the “know it all Trump…the “I know more than the Generals about ISIS” malarkey was once again his Trumpian campaign schtick aka the normal everyday Trumpian malarkey and NOT his “inside voice” governing M.O.
What We Know For Sure About POTUS Trump
Donald J. Trump likes creating surprises and can’t be pigeon-holed; he’ll be the most unique president in American history since Andrew Jackson. Yes running for POTUS was like auditioning for a new Reality Show gig—he created a character named Donald J. Trump and that character connected with many long lost souls in America.
But in fact, Mr. Trump is HIGHLY predictable when it comes to his agenda: what he said he will try to do is exactly what he IS trying to do. His inauguration speech and first 3 days of action are ACCORDING to the reality script he wrote...and he is following the script to a T!
After talking with many DC sources, here are a dozen key observations we need to use to “get your head around" the predictable Trumpian logic and behaviors:
- 1. To get Trump right you really have understand his bi-polar nature: DJT on camera is the performer/entertainer/”Needer-in-Chief” of enormous amounts of hourly affirmation of his importance and stature in the world. His need for adulation is endless—since I first interviewed him 8 years ago for Fox Business till today.
My 20 units (lol) of behavioral psychology studies tells me this insatiable black hole of ego affirmation has to be compensatory behavior from the lack of adulation he got from his stern father and mother. His deep insecurity seems born from being a kid from the wrong side of the tracks in NYC (aka Queens) who moved to Manhattan and was NEVER accepted by Manhattan elites…ever. In fact, to this day I know NO native elite Manhattanite who has met/done business with Donald Trump who likes him… zero. They in essence consider him “white trash” and won’t have anything to do with him.
Key Point: We are investors and as such we should NOT fall for the insanity and neurosis out of his mouth and twitter feed—his insecurity is what I call an emotional black hole: it can never be filled but since he says he has never participated in therapy (according to him “I don’t want to find out what makes me tick”) he will CONTINUE to kvetch and preen and exaggerate/make up “alternate facts.”
But ALL his insane statements have NOTHING to do with the improved growth economics his actual policies are bringing. Money has no morals: he is CLEARLY going to enact economic stimulating laws/deregulations in a way no POTUS has done since Reagan.
Bottomline: US and many global stock markets are going higher in the next few quarters on day after day positive economic news…period.
- 2. Donald Trump the businessman is a very hands on pragmatist who (like many businessmen I know and have dealt with in my biz life) EVERYTHING is a negotiation and every deal is subject to revision. In many ways he is like businessmen from China or India: EVERYTHING is a negotiation. His bombastic statements on policy are designed to throw off the other side of the deal …again we should NOT go nuts reacting to his hyperbole—hyperbole IS Donald J. Trump.
- 3. He’s incredibly detail-oriented: This is quite a surprise. Trump doesn’t delegate well; he planned virtually every detail of the Inauguration, and he’s getting into the weeds on legislation. He understands the incredibly complicated “border adjustability” tax provisions, which only hard-core wonks fully grasp.
- 4. Trump has no great affinity – or loyalty – to the GOP leadership: Trump will never have warm relations with Paul Ryan, and he has no reluctance to blindside his own party. Senate Republicans are still dumbfounded by Trump’s assertion that universal health insurance will pass quickly. They weren’t consulted – and they’d better get used to that. But political reality is IF Trumpism is showing results this time next year…and the stock market is up 10%+ that I expect this year (almost purely from financial stocks benefiting from higher interest rates and deregulation—more on that is a minute) NO GOP politician or Democrat in a state that voted Trump is going to cross him.
- 5. Surprise!! Trump doesn’t like a strong dollar: The financial markets were stunned by Trump’s declaration that the dollar is too strong; no president – or Treasury Secretary – has ever waded explicitly into currency policy. Trump really believes in a weaker dollar and has for decades... but until he gets a dovish Fed majority to support him and a Congress to approve HUGE deficit spending, the strong dollar remains.
- 6. He’s deadly serious about tariffs: For decades, Trump has asserted that the U.S. was getting ripped off by trading partners. He will not be dissuaded on this issue; he’s adamant that the U.S. has been fleeced by countries like China. Trump will talk tough, hoping for concessions, but he’s fully prepared to raise tariffs and pull out of trade deals.
- 7. He DOES listen to Pence and Priebus: Maybe it’s wishful thinking, but Congressional Republicans I talked with are convinced that Trump’s rough edges will get smoothed over by Mike Pence and Reince Priebus, who are essentially pragmatists. “Trump likes to sound like a provocateur, but at the end of the day, Pence and Priebus will run Trump’s policy that requires Congressional approvale,” says one insider.
- 8. His Impulse Disorder/control issues are REAL: This is a great worry, even in his inner circle. Trump’s remarks often are aimed at his adoring base, so he has no reluctance to differ with his Cabinet nominees on NATO, climate change, deficit spending, etc. He also has a vengeful streak and can be easily provoked – as North Korea and Iran surely must realize.
- 9. The tweets will continue: Get used to this; everyone we talk with is convinced that no one will take Trump’s Twitter away; he’s a huge fan of this new bully pulpit. The first thing I do, very early in the morning, is check what Trump tweeted overnight, because obviously he can move stocks and markets. BUT its ALL an act...it's impulsive but ONCE he really gets crazy his staff will install delay systems I guarantee it.
- 10. His bark is worse than his bite: One day Trump blasts the press, the next day he’s complimenting the New York Times. He’s a bi-polar genius at generating publicity as he taught us with his masterful manipulation of the press in 2015-16. He starts negotiations with something outrageous (it’s in his DNA), then he looks for a deal. After the election, he essentially said many of his broadsides – such as locking up Hillary Clinton – were just theater. SOME Americans understood this personality dichotomy…others (ahem like me) needed to wrap our heads around the surreal-yet-real nature of the man.
- 11. He DOES have a vision: Ronald Reagan had three major goals – diminish the clout of the Soviet Union, reduce the role of government, and lower taxes. That was basically it. Same with Trump – “With me it will always be America first” means he wants to make the country/borders more secure, he wants to reduce corporate taxes/regulations/growth constraints, and he wants to reverse the economic malaise in the Rust Belt. Period.
- 12. Trump has blind spots: Everyone we talk with proclaims that Trump doesn’t care about the deficit; he’s remarkably comfortable with the concept of debt. He’s tone-deaf on race and many social issues. And he obviously has no reluctance to meddle in the private sector, intimidating companies that displease him.
The second reason I am sure we will see so much pro-business legislation is the Republican majority doesn’t have to start over. They already did some of the heavy lifting in the bills that passed Congress for the last two years, only to see them vetoed by President Obama, and in bills that never got that far because a veto was assured. My 20 years in DC taught me a few things…and one is that Republicans already know who does and who doesn’t support these bills. With some minor updating, they can quickly pass the bills again, with a better White House reception this time.
The GOP is also dead serious about removing the most egecious regulatory tentacles that have impeded progress (and especially job growth) in some industries. They intend to employ a rarely used law called the Congressional Review Act to reverse some of the Obama administration’s regulations. They are also considering legislation that would require federal courts to stop accepting federal agencies’ statutory interpretations and defer to Congress instead.
For the reasons above the stock market is on a UPWARD re-valuation trip and we are going to ride it for all its worth.
Friday in Part II we will get out some new recommendations and start the clock on our existing recommendations. I have upped many of the buy under prices for our favorite sector leaders...but DON'T chase these with new money much beyond our buy under prices.
WE are still in the market to MAKE MONEY and not have a pretty portfolio of overpriced stocks without 28% upside (including dividends).
We double our money with 28% annual appreciation every 2.5 years...in the last 3.5 years we have almost doubled our money every 24 months..
So hang on to your winners for now...but take profits you need from our biggest winners NVDA MU AMD NEWT and build some cash from other positions to get set to make another small fortune on Trumponomics!
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