Fair warning: The analysis I provide today on the chances of a Trump victory in November will probably leave you shell-shocked, tickled pink or with some sweet-and-sour mix of both.
I will name eight inescapable facts that political pundits from both parties are underestimating or missing entirely.
I will show you how the presidential election campaign and the stock market could soon be feeding off each other in a vicious spiral.
And I will tell you how to prepare for virtually any outcome in November.
The key: No matter which camp you’re in, you should know that I’m tackling this topic objectively and unemotionally.
Like most readers, I’m an American citizen with deep fears and high hopes for America. Like many, I could also let those emotions cloud my vision.
But when it comes to my hard-earned money, and when that money is vulnerable to history-breaking landmark political events, I stick with the facts and only the facts.
What you want is not always what you get. And what you think should happen must never influence your judgment of what could happen. That’s how I approach this election madness. And that’s how you should too.
So here are eight inescapable facts that could make all the difference in the world in 2016 …
1. Trump has momentum.
Since the first day he jumped into the race, Trump’s poll numbers have been rising virtually nonstop.
Last year, months before the first primaries, his support level leaped from last in the pack (at 4.5% on May 28, 2015) to top dog (at 22.5% on August 3).
In the Republican primaries, as competing candidates dropped off like flies, his percentage of votes jumped from 24% in Iowa on February 1 to 66% in Oregon last Tuesday.
And in a head-to-head match with Hillary Clinton, after trailing by double digits, the recent data shows they’re already locked in a tight, volatile battle. In fact, the very latest poll from Fox News now gives Trump a 3-point lead.
2. Trump naysayers have been dead wrong.
Nate Silver, a disciplined political prognosticator that I respect, gave Trump a meager 5% chance of capturing the Republican nomination, saying he would peak early and "flame out" quickly.
Both Democratic- and Republican-leaning pundits for The New York Times, NBC News, Fox News and every major media outlet unanimously voiced similar opinions.
And today, most pundits are making the same arguments with the same tools. Nate Silver still gives Trump only a 25% chance of winning the White House. Sports betting site Paddy Power gives him 33% odds. And most say he’s still a long shot.
They may be right; Clinton has lots of advantages in the electoral map and in the country’s demographics.
But the pundits admit they were wrong before. And yet most don’t want to change their methodology.
3. Trump’s event risk is low.
Can you think of a new Black Swan event that could suddenly knock Trump for a loop? I can’t.
The barrage of attacks — from the media, from Democrats, and from the Republican establishment itself — has already been so intense, it may have vaccinated Trump against future hits, including those coming from the Clinton campaign and Super PACs.
Sure, Clinton’s got all the anti-Trump research on a platter, left over from the Republican primaries. But that steers her to mostly old, recycled, material that’s already been posted on social media, seen widely on TV, and absorbed by the political marketplace.
Like a stock price that already reflects the bad earnings news, Trump’s current poll numbers already reflect most of his political weaknesses.
Meanwhile, Trump himself has already shot himself in the foot a few times without any lasting damage. So it’s hard to imagine any future self-inflicted wounds that could make a big difference.
In contrast, Clinton’s event risk is high, with most of her bad news still pending …
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4. The FBI investigation into the Clinton emails hangs over her campaign like the Sword of Damocles.
FBI Director James Comey, who’s personally overseeing the investigation, says he doesn’t "give a spit" about the political calendar, and nor does his professional staff.
This means that, if there’s going to be a Justice Department indictment against her, it could strike before she’s nominated as the Democratic candidate, a big disaster for the Democrats. Or it could happen after she’s nominated, an even bigger disaster for the Democrats.
5. Terrorist attacks also play right into Trump’s hands.
And they don’t have to be domestic. Events like last Thursday’s downing of Egypt Air Flight 804 are enough to continue fueling Trump’s anti-ISIS, illegal-immigration narrative. This alone transforms Larry Edelson’s large body of work on rising war cycles into a political thesis of special importance.
6. The U.S. economy has flatlined like an EKG without a heartbeat.
If this malaise continues or worsens, it’s Clinton who takes the rap.
Reason: Early in the campaign, her advisers assumed she could chalk up points by associating herself with the Obama-led recovery. But they grossly underestimated the discontent and anger of millions of voters left out of that recovery.
Worse, they apparently figured the economy would continue on a growth path at least until November. But now, that assumption may also be questionable. (See Mike Larson’s recent columns on the reeling retailers, the stock buyback bubble, and job market warning signs.)
7. The stock market could be an even bigger risk for Clinton than the economy.
Reason: If the Dow falls, there’s no room for interpretation. The voting public — and the campaign donors that count — will promptly see it as a warning sign of another 2008-type crisis. And even if 2008 has receded from memory, Trump will likely do his best to remind them.
8. Black Swan events are likely.
Specifically, don’t forget the Black Swans I told you about on May 2:
A collapse of the Fed’s QE bubble.
Chaos in China.
Even nuclear terror.
And we’re already witnessing a major plunge in U.S. capital expenditures.
But what’s most ironic is that Trump himself is considered a Black Swan. He’s anti-Establishment. So Wall Street big hitters, fearing that a President Trump will upset the established order, are already taking protective action as his prospects rise.
Here’s the irony: The more Trump gains, the more they’ll sell. And since Trump benefits from a stock market decline, the more they sell, the more likely he is to prevail in November.
Maybe this is one of the reasons that three of Trump’s fellow billionaires are already starting to warn of a major stock market disaster, exit the market or even go short:
Carl Icahn, with an estimated net worth of $20 billion, has a net short position in the market of 149% — a large leveraged bet on a stock market plunge. (See Mike Larson’s recent column What Do the Billionaires Know that the Fed and YOU Don’t?)
Stanley Druckenmiller, founder of Duquesne Capital, with a net worth of at least $4 billion, recently told investors to "get out of the stock market" and switch to gold.
And most recently, billionaire George Soros disclosed that his fund management company owns put options on 2.1 million shares of an S&P 500 index fund, more than double the position he had in the fourth quarter. In other words, he’s betting big that the S&P 500 will crash. (See Another Billionaire Bets on Stock Market Bedlam … Should You?)
No matter who wins, my advice is unchanged …
Whether Trump sinks or soars, and whether Trump-fearing investors are right or wrong, my advice was already focused on risk protection. So adding political risk to the pot doesn’t change the recipe:
- Build a big hoard of unencumbered, uninvested cash. I don’t care if your net yield is zero, even less than zero. I don’t care how many so-called "experts" say "cash is crazy." Cash is your treasure chest for bargain hunting if political instability and economic disaster collide like two ships in the night.
- When you buy, focus strictly on cream-of-the-crop companies — those with stellar earnings and pristine balance sheets. To withstand the pressures ahead, they’ll need both.
- Hedge! Reconsider the dangers I outline in Worse than 2008? and continue to follow my prescriptions in My 7-Step Portfolio Protection Strategy.
Then pray that the worst will not happen.
Good luck and God bless!