Monthly Archives: May 2016

The time to buy Trump stocks

Trump pulled off a stunning victory. The Wall Street fashion this morning is to buy Trump stocks, sell bonds, sell gold GLD, -0.07%  and silver SLV, +0.29% and sell Clinton stocks. The probability is very high that you will lose money following Wall Street in buying Trump stocks and selling Clinton stocks.

Before discussing specifics, let us understand the background.

Let us start by carefully examining the chart of Nasdaq 100 futures NQZ6, +0.21%The equivalent ETF is QQQ, +0.46% I would have preferred to use a QQQ chart or S&P 500 chart SPY, +1.06%  because most investors do not trade futures, but ETFs do not trade all hours like futures.

Stock futures initially fell limit down 5% before recovering and even turning positive, as shown on the annotated chart of Nasdaq futures.

This up move is shocking Wall Street again as they were predicting further down move. Wall Street was wrong, and that by itself gives you a reason not to follow them.

Let’s dig down and take a look at what the Trump victory may mean for stocks.

Infrastructure stocks

Infrastructure stocks are flying sky high. On the surface, it makes a lot of sense. Trump plans to build a wall on the Mexican border and has been emphasizing improving infrastructure.

It is important to note that infrastructure stocks were also Clinton stocks. One of the favorite Wall Street theses was to buy infrastructure stocks as it was deemed a winning proposition irrespective of who won the election. As a result, these stocks were overbought going into the election and after the election, are becoming even more overbought. Furthermore, these stocks are expensive both relative to their own histories and also relative to their projected earnings growth rates even under Trump presidency.

Examples of the favorite Trump infrastructure stocks are Martin MariettaMLM, +11.57% Vulcan Materials VMC, +9.87% Granite Construction GVA, +10.90%Tetra Tech TTEK, +2.37% FLR, +10.16%  KBR KBR, +11.18%  , United RentalsURI, +17.12% AECOM ACM, +12.59% Terex TEX, +14.78% and ManitowocMTW, +14.22%

ld be avoided at this time and considered for buying only if there is a significant pull back.

Gold and silver

Wall Street was predicting gold to jump up $100-$200. Gold jumped up to $1336, nowhere near $100 gain, and then plunged to $1280. If you had bought gold on the Trump victory, you would be losing money right now. ETFs of interest are GLD and SLV.

A small position in gold and silver is fine, but taking on a huge position on Trump victory is not supported by hard data at this time.

Presidency may prove beneficial to luxury real estate

Donald Trump’s triumph in the U.S. presidential election was still sinking in by the earlier hours of Wednesday morning—but across the Atlantic, news of an upset led by discontented voters felt all too familiar.

Real estate experts in London and Europe who watched the presidential election unfold said in the near-term, Americans can expect a storm of economic and financial volatility similar to the chaos felt directly after the British vote to exit the European Union in June. But they differed over how a Trump presidency might affect luxury real estate markets in the long term.

“A Trump win will bring a property industry leader into the White House for the first time in American history. Without a doubt a Trump presidency will be pro-property and pro-real estate,” said Peter Wetherell, chief executive of Wetherell and a leading London real estate broker.

He said he thinks Trump’s presidency will greatly benefit the luxury real estate markets in the U.S. and internationally.

“It shows just as we had with the Brexit vote in the U.K. that American voters also want a change of direction,” Wetherell said.

Already since Brexit, there’s been an uptick in American buyers in London’s Mayfair and West End neighborhoods thanks to a depreciated pound, he said. And as Britons turn away from Europe, a Trump presidency could mean strengthened trade relations with the U.S.

“U.K. Investors are turning away from the E.U., so a Trump win opens the electrifying possibility of new U.S. and U.K. trade deals,” said Wetherell. “We are already seeing over the last four months an upturn in U.K. buyers looking at New York, Miami and L.A.”

And: U.K. home sales set to slide in wake of Brexit vote

However, Gary Hersham, managing director of luxury property specialists Beauchamp Estates, predicted that Mr. Trump’s victory may cause financial markets to crash further than it did overnight and weaken the dollar.

Markets started plunging Tuesday night on the news of Democratic nominee Hillary Clinton’s possible defeat. Futures for the Dow Jones industrial average fell more than 700 points, or 4%. Futures on both the Nasdaq and Standard & Poor’s 500 dropped 5%, while stocks were down about 2% in early trading.

But a devalued dollar would not be all bad news for some international investors. The weakened dollar would effectively strengthen the British pound, Hersham said. “It would therefore certainly help with pound-based purchases in the U.S.,” he said, particularly in cheaper luxury areas like Miami, where price per square foot is less than $1,000.