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Bold statements and big promises – Donald Trump’s first six months as president

By George Cipolloni, Sub-investment Manager of the Global Cautious Fund

Donald Trump’s first six months as president of the United States was filled with enough excitement to last a full four-year term. Direct challenges to traditional European allies, threats of lawsuits against the media, backing out of major multi-national deals, contentious dismissals of staff members and even early impeachment chatter kept the news outlets on their collective toes.

Just one quick look at the President’s controversial Twitter feed displays an endless unfiltered stream of his consciousness… and while you may never predict what you will see, it will always be direct and occasionally intelligible (what is covfefe?). 

Who would have thought it would have started out this way?

Well, actually, Trump’s track record would have given us a pretty good indication of what was to come:

  • Bold statements and big promises? Check.
  • Abrasive personality and ruffled feathers? Check.
  • Combining work and family interests? Check.
  • Limited results and passing blame? Check there too.

Track records are our thing

In selecting companies to invest in, the managers of the Nedgroup Investments Global Cautious Fund spend a significant amount of time researching the backgrounds and track records of management teams. While executives can bend the truth or make overly optimistic statements, one cannot change the past.  We believe a manager’s track record holds vital clues to help us set future expectations… to help us increase our odds for selecting successful investments. 

For example, a CEO with a record of achievement may be able to find similar success again. Certain core values demonstrated in running a business can possibly transcend time and place.  Conversely, unattractive attributes or poor decision making can be an indication of a manager that is ill-suited to handle the responsibility of running a business.  This part of our analysis may not lead to definitive answers or certainty in our assessments but it can help us to increase our odds of investment success.  

So to go back to that last question in the first paragraph – Who would have thought Donald Trump’s presidency would have started out this way? The truth is - a quick review of Trump’s track record gave us more than a few clues.

The Donald Trump track record

A look back at Trump over the past few decades reveals a controversial man that makes big, bold statements while only occasionally following through on his commitments. This man has an amazing talent though – promotion. While he enjoyed the highest of highs and the lowest of lows in the real estate market, Donald Trump ultimately is a great business promoter…and he is an even better promoter of himself. His skillful marketing of his own name allowed him to overcome bad real estate deals, billions of dollars in debt, casino bankruptcies and a failed stint as CEO of a public company. And through it all Trump always figured out a way to protect his personal interests no matter how much money his investors may have lost.   Bondholders were defaulted on and equity holders in his Trump Hotels & Casino Resorts (Ticker: DJT) were shown just how fast a bad choice can get worse.

George 1

But Trump overcame these obstacles as he learned a very valuable lesson. Trump was, in the estimation of his bank lenders, too big to fail.  His assets were worth more with his name on them versus the alternative which was complete insolvency.  So Trump picked up his remaining assets and pride and began licensing his name to just about anything he could – hotels (of course), golf courses, resorts, bottled water and even a university.   His stint as a reality star on the hit show “The Apprentice” reintroduced Trump into the highly visible role of a successful businessman whose tag line was “You’re Fired!”. The American public believed him to be as powerful and successful as he appeared on television.  

When Trump, who had toyed with a presidential run for many years, finally announced his candidacy in the 2016 Presidential Election, many thought it was a joke.   But the great promoter did what he did best.  He convinced enough disgruntled, middle-class Americans to vote for him and he pulled off one of the greatest upsets in the history of democracy.

His timing was impeccable as a populist wave engulfed much of the globe. He won votes as he hearkened back to days of American global dominance, manufacturing strength and even some good, old fashioned nationalism. 

Throughout the election, Trump made many bold promises. His economic policies and tax cuts would lead to higher rates of GDP growth.  He would build a wall on the Southern, U.S.-Mexican border and make Mexico pay for it.  He would dismantle Obamacare which burdened Americans with higher health care costs.  He would remove the US from “bad trade deals” like NAFTA.  He called America’s largest trade partner- China - a currency manipulator and promised to fix our trade imbalance.  On his inauguration day, Trump said that “from this day forward it’s going to be only America First…America First!”.

The US (and global) equity markets responded strongly to Trump’s rhetoric and promises of future growth. Interest rates jumped and bond prices slumped as government bond markets anticipated a shift from a deflationary psychology to a new, inflationary environment.  Infrastructure spending was going to lead to more jobs and more business for construction companies.  Promises of corporate tax cuts led to a shift up in earnings expectations and higher stock prices.  All was well in the US of A as Trump’s ultimate promise – to “Make America Great Again” – was seemingly going to happen overnight.

But then reality (and Washington politics) set in. Trump quickly realised that he was not managing a business with his name on the door.  He was not bossing around his close friends and children.  He had to exert influence on politicians that did not fully trust him in order to garner enough votes to pass laws.  Trump, always ambitious (and at times delusional), started with one of the toughest challenges – to repeal Obamacare.  Even with a Republican majority, he could not get the job done.  While a victory on this issue could have put the political wind in his sails and propelled him to an expedited pace of additional policy changes.

This high-profile setback effectively stalled his progress and raised doubts of support from his own political party’s base. Trump suffered his first major political wound.  But as Winston Churchill stated, “Politics is almost as exciting as war, and quite as dangerous.  In war you can only be killed once, but in politics many times.” 

Trump is early enough in his first term to get another chance to succeed or fail again…and again…and again. The political winds shift with the most unpredictable of elements - public opinion.  Six months is not enough time to judge a presidency.  Maybe Trump will be able to bounce back and figure out a way to regain his political footing.  Maybe he just needed some time to learn the rules of the game.  Maybe he will fulfill the bold promises that he made during his elections.  Maybe he will be a great success.   Or maybe he will display the same immaturity and petulance he displayed as a businessman.  Maybe he will make an even bigger mess of things and walk away leaving only blame for others.

As a US citizen, I wish for his success but fear that Trump’s track record foretold what was to come…that Trump’s need to feed his own ego is greater than his desire to work within the system to get things done. Was Trump ever serious about this presidency business or was this just another promotional trick?   Can the successful reality TV star be a success for the benefit of others in reality? 

His track record begs the question - but only the next three and a half years will deliver our answer - unless he gets fired in the meantime.

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