When paper-tiger Donald trashes stocks, chances are they'll go up

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jserraglio
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When paper-tiger Donald trashes stocks, chances are they'll go up

Post by jserraglio » Thu Jan 11, 2018 1:01 pm

CNN MONEY

January 11, 2018
Want to buy a stock that's a sure winner? One money manager jokingly suggests looking for companies that President Trump has bashed on Twitter.
Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management, set up just such a portfolio before the inauguration a year ago. He wrote on Bloomberg this week that it's up 42%.
He called it the Drain the Swamp Index. The biggest winner? Boeing, which Trump criticized for the cost of Air Force One, has doubled.
Amazon is up nearly 60%. Trump has made several erroneous claims about the company. He tweeted that it's unprofitable (it's not) and has claimed that CEO Jeff Bezos is using The Washington Post as a "big tax shelter" for Amazon even though the paper is owned personally by Bezos, not Amazon.
And then there's the supposedly "failing" New York Times. Its stock is up more than 40% in the past year thanks to booming digital subscriptions. Time Warner, the parent company of CNN, is also in Ritholtz's collection of Trump targets.
The Drain the Swamp Index has outperformed both the broader market and a separate index of Trump-friendly companies that Ritholtz named the Oligarch Index. They were each up about 20% in the past year.
In an interview with CNNMoney, Ritholtz said that when he set up the two portfolios a year ago, things were different.
Between the election and the inauguration, the companies Trump attacked performed much worse the companies in his Oligarch Index, which includes Exxon Mobil and Goldman Sachs.
Ritholtz put them in the Oligarch group because former Exxon CEO Rex Tillerson is secretary of state and Treasury Secretary Steven Mnuchin used to work for Goldman Sachs. National Economic Council chief Gary Cohn left his job as Goldman chief operating officer to join the White House.
"When I created the two indexes a year ago, I went through Trump's tweets and the media coverage, and at the time every time he got annoyed at a company, their stock price tumbled," Ritholtz said. "Nobody understood Trump at first."
That changed quickly.
"It didn't take long before the markets figured out Trump's going to kick up a lot of dust but that the storm would eventually pass," Ritholtz said.
Ritholtz adds that he is not recommending people use these indexes as a serious investment strategy.
For one, it's not as if the Oligarch Index, which also includes PayPal, the company co-founded by Trump backer Peter Thiel, has done poorly. A 20% rise in one year is not so shabby.
But Ritholtz said the two indexes show that investors shouldn't worry about what Trump says about Corporate America on Twitter. It really doesn't matter.
"Trump's tweets are ephemeral," Ritholtz said. "Trump is a paper tiger when it comes to threatening companies."
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