Bears Make Money, Bulls Make Money, Pigs Get Slaughtered
November 9, 2024
It was a surprising week in so many ways - the unexpected level of success of the Republican party that led to their controlling both the House and the Senate as well as the re-ascension of Donald Trump to the Presidency. And no sooner had that dust settled a bit than the stock markets surged wildly, also unexpected considering that it was already widely viewed as overvalued. While the latter benefitted me professionally and personally, the former was not what I had hoped for.
It is interesting to consider the complete about face of the two parties that was cemented with Trump’s latest victory. For years, the Democratic Party was the home of blue collar folks, union affiliated workers, minorities, and those with fewer economic resources and typically less formal education. The Republican Party was generally acknowledged to be the home of the elite - corporate executives and the well-to-do, including not only those of inherited wealth but also the newly minted millionaires (you don’t become conservative until you have something to conserve). Now the blue-collar workers and union types, along with growing numbers of minorities, are supporting the Republicans while the Democratic Party membership is increasingly characterized as the party of the elite, people by those with more education and higher net worth. These are broad oversimplifications, surely, and yet easy to accept as having much more than just a hint of truth. Bret Stephens was/is much more eloquent and nuanced on the matter:
https://www.nytimes.com/2024/11/06/opinion/donald-trump-defeat-democrats.html
It is clear that those on the lower socio-economic rungs in this country are discontent with the traditional political leadership of both parties, having witnessed only very limited improvement to their daily lives. So back the outsider, the renegade, the guy who promises to make their lives better. I only hope that those who voted for Trump get what they are seeking because I agree that as a country we need to do a better job of spreading the wealth - wages that provide enough income to have a reasonable, at least minimally comfortable existence, affordable health care, ample affordable educational opportunities, plenty of good paying jobs to choose from. Unfortunately, those were not the outcomes of Donald Trump’s previous term in office nor are they the likely benefits to be realized from his current policy pronouncements.
Lowering taxes disproportionately benefits the well-to-do. Imposing tariffs inevitably raises the costs of goods – a de facto tax on consumers that is more painful for those with less. Restricting immigration (as well as deporting those already here) will leave many jobs unfilled, will also keep out talented foreigners, and inevitably will hurt the economy (smaller population, lower economic activity). Dramatically reducing the size of the federal government again has a much greater impact on those who benefit from government programs - inevitably those much lower on the socio-economic ladder.
Donald Trump’s many deficiencies are easy to list and nothing is gained by doing so. He is the President-elect and I hope that he does help his supporters in meaningful ways. I already thought that this country was a very good place to live…I hope he can make it economically better – Great Again if you will – for his supporters without encouraging a further divisiveness in the populace, without enabling companies to thrive by ignoring environmental concerns, without further exacerbating the already enormous income disparity that exists.
As for the stock market, I am just going to repeat myself – bears make money, bulls make money, pigs get slaughtered. Don’t be greedy. Don’t be taken in by the combination of surging prices and your own FOMO. Stay invested but don’t chase. Trim your high-flying, highly profitable investments a bit. Check to make you’re your portfolio is diversified – e.g. not all technology. Make a list of what shares you want to buy and positions to add to when a downturn comes. It will, it always does…and it often does suddenly when it will be too late to start preparing for it.
Be reasonable – there are no medals being awarded to individual investors for ‘beating the market’. So stop trying…be happy that you have very meaningful gains from the last two years and find ways to reap some of them as tax efficiently as possible. And if you have to pay taxes? Great, it means you have made profitable investments. I’m reminded of my father’s mantra repeated frequently to me when discussing investments…‘nobody ever went broke taking a profit’. Be grateful for the gains.
The unusually warm fall is finally giving way to real autumn chill. Good running weather. I’ll be out there, clearing my head, focusing on all that I have reason be very grateful for. Maybe you all are doing the same and, if not yet, try it…it helps with dispelling gloom.