trying to rotate (iii)

Well, it’s longer than two days. Sorry.

I’m really puzzled, though, about the current state of the stock market, and how to transition away from this year’s winners by broadening out into the Consumer Discretionary sector.

For one thing, I think the election matters a lot. We can see in detail from Trump’s leaked tax returns what everyone in New York already knew–that although he excelled at playing the role on TV of a stereotypical heartless businessman, he was a genuinely terrible real estate investor who lost his shirt during a raging bull market. He has brought this “talent” to bear as president: reducing real domestic economic growth to zero, damaging business relations with the rest of the world and refashioning the image of the US from the land of the free to a white supremacist police state (not a look to inspire purchases of US goods by foreign consumers (to me, this is an important reason LVMH wants to wriggle out of its commitment to buy Tiffany, which has a huge Asian business)). If Americans sign up for four more years of this, Consumer Discretionary will look a lot less attractive, particularly high-end goods and services.

(An aside: the financial press doesn’t see things this way. To some degree this may be a result of the Rupert Murdoch strategy of trading highly partisan media coverage in return for political favors. But for whatever reason, commentators seem stuck in a pre-Reagan world where Republicans represent big business and Democrats organized labor. Also, a key facet of Trump operations also seems to have escaped his supporters’ notice (ex farmers)–that invariably the people who believe in and trust him are the worst-hurt victims of his actions. think: his limo ride yesterday or his NJ golf club meet-and-greet with fundraisers, knowing he was infected.)

In an unclear situation like this, where the areas to overweight aren’t evident, the first step, I think, is to identify areas to avoid.

I divide the areas to avoid into three types: left-behinds from structural change, accelerated by Trump’s coronavirus mishandling, like department stores, autos, cable TV, fossil fuels, financials (because they do best when interest rates are rising)…; coronavirus victims, like restaurants (and their suppliers), high-rise urban real estate; and casualties of the loony-tunes way Trump is waging his trade wars, like farmers and farm equipment.

The second step is to look at what’s left and comb through that for positive ideas to invest in. More about this tomorrow.

One response

  1. Thank you Dan – this is a helpful way to think about where not to look for investment opportunities in this difficult market.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: