Monday, May 22, 2017

Political War and Markets II

"Goddammit, when is somebody going to go on the record in this story?"
--Ben Bradlee (All the President's Men)

Following up on last week's missive involving all-out political war and markets, Fleck had additional exchange with 'Mr Skin' about the issue. Mr Skin writes in big blocks of text, but I want to reprint the exchange once again as published in its entirety because I plan to reference some of it in future posts.

Mr Skin: I am not a special trump fan - (more of an extreme case of Hillary phobia) - but the witch hunt going on now is almost exactly the same "play book" they (media and Democrats) used against Nixon. Given that many of today's "pundits" or self-proclaimed "political analysts" plus biased media editors and reporters were in kindergarten or not even born when Nixon blew up, they have no context for pursuing this thing, regardless of substance. This "thing" will not go away. In fact, even without anything tangible to hang something on, "they" don't need anything. Just make something up, spin it well out of context, broadcast the "accusation", thus attempting to force a denial, that in turn will be spun, twisted, "inflamed-on-social-media" for all the idiots to absorb, leading to more "sponsorship" for the witch hunt. The progression of time, heading toward the off year elections, merely aggravates Trump's problem. The Grahams and McCains, plus several other "fearful" or outright leftie congressional Republicans (RINOs - Republicans in Name Only) render Trump's "New Reality" - "It-Ain't-Happening-Dude". When he was elected I figured he may have a few months of peace, probably not any sort of "honeymoon", but I never thought his political opponents would, in effect, deliberately try to sabotage his presidency from day one. The "Rachel Madow" media lunatics and the "Maxine Waters" political lunatics are understandable but it also seems that everyone has out the "long knives". When the Nixon "playbook" started, there were mostly mild suggestions that he might be vulnerable. It took a while for the momentum to build up to the point where everyone piled on. The media always had a "thing" about Nixon, from his days as Ike's VP back in 1956-60. He was perceived as "slick" or phony and had earned the title "Tricky Dick". BUT, their displeasure was nothing like the outright venom shown Trump. Nevertheless, "they" started after him right after he was inaugurated in 1973. The relentless barrage of negative "Nixon Stories", filled with innuendo and speculation, gained momentum into 1974. He resigned in late summer of 1974, whereupon a market already down more than 25%, simply went straight down into September. The big indices lost about 50% from day one of the "witch hunt" in early 1973 until the bottom in September 1974. Of course, there were economic problems along the way, such as an oil embargo, but the assault on the President was unprecedented in modern times and it scared the wits out of both domestic and foreign investors.

Great opportunities grew out of that bear market. And our little money management firm was lucky enough to be in the right place at the right time. Today's "players" have never seen values like those found in late 1974. For context, consider Polaroid - the greatest growth stock since RCA in the 1920s. It had a lock on instant photography (doomed by Texas Instrument's digital revolution a few years later). PRD traded at 149 at the top in early 1973. It bottomed at 13+ in late 1974. It had no debt, and the stock price was not only lower than its working capital per share but also lower than its NET CASH in the bank. In effect, you got paid to own it, and EPS was $1.50. The most absurd value was Boeing - whose market cap was LESS THAN the selling price of three 747 airliners. Of course, such "stone age" stories are forever irrelevant these days, given direct sponsorship of markets by CB bureaucrats, but if enough panic hits a market, similar stories will appear again.

Fleck: So, the bottom line is you think the die is cast, that now, this will be 4 years of hand to hand media/Trump combat nearly 24/7 and that will take its toll at some point? Do I have that right?

Mr Skin: Yep. I think the media will keep trying to outdo each other going after Trump and his enemies will never give up looking for a way to destroy his agenda. Reagan was wildly popular and "they" even tried to get him. When Woodward and Bernstein went after Nixon, and gained "fame" by running a President out of office, "journalism" became a career ambition for a whole generation of "giant killers". The big question is whether the underpinnings of the stock market can remain strong if the "witch hunt" theme keeps playing. Of course, we have grown a new crop of "players" over the last few years, including a Fed (Bullard, etc.) that seems to panic every time the market dips. In any case, I can't see any logical reason for investors to ignore the possible threat that "they" might actually do serious damage to the political process. The whole thing makes me want to puke.

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