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Blackmailing Investors

05/18/2017

O

Paul Munnis

I know the GOP is running scared and I know that when stock investors look at Trump, they have lost confidence and are rearranging their portfolios to be less dependent upon GOP tax reform that favors a $1T give-away to the rich and corporations.

What rearranging means is to put more emphasis on earnings and less emphasis on account manipulation. Thus corporations that aren’t producing real returns have to get their act together and produce real quality product at competitive prices.

Under the present GOP calculus all that a failing company had to do was expense everything as deductions and then write down the losses before awarding the CEO a fat bonus. Now he has to stand and deliver.

This is good for Capitalism and smokes out the flim-flam artists.

Whenever this happens then mergers and acquisitions (M & A) occur to the joy of investors. I say the joy because if you hold shares in a company that is being acquired then the value of the shares go up in anticipation of future returns. If you hold shares of a company being sold you usually get a stock swap into the new integrated company.

Such M & A activity can lead to monopoly and that is part of what Dodd / Frank is meant to prevent. No wonder the GOP hates Dodd / Frank and its predecessor: Glass / Seagal.

So just how big of a deal is this veiled GOP threat aimed at investors?

I think mainly speculators are hurt and I don’t shed tears for them. People like Warren Buffet are rearranging their portfolio now to reposition for a market response based upon fundamentals. Many others are too as we saw with the 350 point market drop in the Dow yesterday.

A good investor selects quality, well managed, profitable companies, and let’s the managers of the company run it. Then they share in the result.

If you want to see where to not put your money just look at the stock losers. If we have so many losers that it will drag the market down 10% then let’s get on with it.

Under such circumstances politics is displaced.

I note that whether or not Trump is impeached, the modifications of investor portfolios has already begun, making blackmail a waste of time.