Home' Trinidad and Tobago Guardian : February 9th 2017 Contents BG14 | FINANCE
BUSINESS GUARDIAN guardian.co.tt FEBRUARY 9 • 2017
Investing in a Trump world
This week I changed my profile
photo on Twitter @IanNar-
ine to that of a red cap with
the writing "Make Stocks
Great Again". It's all tongue
in cheek, of course, as a play
on US President Donald Trump's campaign
slogan "Make America Great Again"
Since the November 2016 election date the
market has been on what has been termed "The
. There has been some front run-
ning of anticipated policy changes resulting
in stock market gains.
In between there have also been some blips.
Trump has had some spats with various com-
panies and sectors, mostly via Twitter that has
resulted in the stock selling off suddenly. The
unforeseen executive order on immigration has
hit airline stocks and also impacted travel com-
panies such as Expedia and Priceline. There
have been challenges to workers at large US
multinationals with technology stocks neg-
atively impacted as a result.
In the years gone by headline risk came from
the actions of the US Federal Reserve and what
the respective Fed Governors said. The market
hung onto every word and acted accordingly.
Today, the headline risk has moved into the
political space so much so that last week's US
Federal Reserve meeting was just a footnote in
the broader narrative. It was Trump and his
various comments, meetings and the fallout
from previous actions that was the order of
It's early days yet but if the uncertainty ema-
nating from the White House in the US persists
then over time that can lead to a contraction in
the multiple at which the stock market trades
and if earnings comes in below forecast then
the market may either pull back or trade side-
ways for a period of time.
In the above circumstances many an investor
would adopt a wait-and-see approach. Since
these are for all intents and purposes "political
events" and therefore can go either way the
presumption is that the safest thing to do is to
stand aside and wait and when the information
is known then to determine how to proceed.
This may sound like a good approach in the-
ory but the reality is that by standing on the
sidelines and discussing what is to happen and
what has happened all we are doing is debating
and you don't make money from idle talk.
Every day, week, month, year there is some
event that creates uncertainty in the financial
markets. If you wait though all of it then even
if you are right you still would be too late to the
table to generate any return from being right.
Assume you are 40 years old and want to
retire at age 60. That leaves 20 years before you
draw on your savings in the post retirement era.
Twenty years may seem like a long time but it
is really 240 months and, while you sit out the
next three months to see how the temporary
immigration restrictions will play out, it will
be 237 months to retirement.
In the last quarter of 2008 Treasury rates
in T&T were around seven per cent. Today
an 8-year government bond is being offered
at 4.1 per cent. This rate is an improvement
from prior years. We prefer the safety but how
long would you wait until safety gives a more
From 2008 to now represents 108 out months
so a 40-year-old in 2008 has seen off 45 per
cent of his timeline to retirement during which
he was either waiting because of fear or seeking
a pure route of safety at sub par rates. All the
while inflation makes these returns mean-
The safety trade of today is creating a risk for
tomorrow that many fail to recognize. What
would happen if you do not accumulate enough
resources at retirement, or that you live longer
than expected, or have higher medical costs
You are risk averse with your money today
and hold on tightly but those actions make it
more likely that in your later years you run out
of money. All you have done is defer the pain
of loss 20 years.
There is another more measured approach.
One that does not involve an "all or nothing
scenario" and where some amount of safety
is tempered by a prudent level of risk taking
designed together so that you achieve your
investment goals. It is about staying in the
markets, remaining invested and to a large
extent ignoring the selective cross talk that
comes from the social and political debates.
Barry Ritholtz is a columnist for Bloomb-
erg. He used to write a blog call "Big Picture"
and back then summed it up best with the
"An enormous difference exists between de-
bating policy and managing assets. They are
two radically different activities. You folks ..
can .. smoke clove cigarettes, and debate this
philosophically all night. That's fun, however,
that is an indulgence of the student philos-
"Anyone who toils in the markets profes-
sionally or manages money for other people
(or even their own investments) does not get
to enjoy such a lavish, self-indulgent luxury.
Their job is not to opine on such matters, but
rather, to manage cash in the environment that
is; the world that exists presently, and is likely
to exist in the near future. It is not their role to
manage money based on the way things ought
to be; rather than the way things are."
"I think of myself as a sailor, and my job is
to navigate the seas on behalf of my clients/
passengers. Any good sailor knows the Seas,
the prevailing tides and the lunar cycle, He un-
derstands the trade winds. He must know how
to read charts, the weather, the sky & clouds.
He anticipates the changing seasons. He can
navigate by the stars."
"A good sailor knows his boat inside and out,
and can make repairs with whatever is at hand.
An experienced sailor knows when to ride out
a storm, and when to turn around and head to
the safety of port."
"An old salt, a professional sailor, he knows
when the sea is angry, when the storm gods are
vengeful, where the sea monsters live."
"The sailor that knows all of that, and is a
little bit lucky, might return home to port alive.
The rest don't stand a chance. You can discuss
the sea and the storms and the serpents all
you want, but all this chatter is mere spit in
"Stop talking, and start sailing."
So while many stand on the sidelines and talk
about what is happening markets will contin-
ue to move. A rising stock market is one that
is climbing "a wall of worry"
. Climb that wall
instead of standing on the side and discussing
Trump's Mexican Wall.
Those that focused on the volatility, the fear,
the rumour mongering and even the political
malaise over the last decade have missed out
on some of the best investment returns of a
lifetime. While all of this is going on many of
these same investors were happy earning sub
2% returns in what they presumed to be "safe
haven" investments not recognizing the risks
they were creating for themselves as the clock
ticks away to retirement.
Mind you there is room for the safety assets
in your porfolio its just that it should form part
of as opposed to being exclusively the sum to-
tal of your investment catalogue. There is a
method to the madness. Appreciate that there
is inherently no such thing as a conservative,
moderate or high risk investor. Many advisors
will attempt to characterize you as such. You
answer a questionnaire and eventually you are
likely to come out as conservative because you
start out wanting to be certain that your advisor
does not play games with your money and be-
cause the way most questions are framed have
the majority of your investments placed in an
environment that does not seek risk.
Most times I take the opposite approach.
That is to understand your return requirements
based on what you are trying to achieve and
then help you manage your risk profile towards
achieving those returns. It's the same road but
how you navigate the course is entirely dif-
Investing in the current environment more
than ever requires the support of an invest-
ment professional. You would do well to seek
out advice from those that can "anticipate the
changing seasons and navigate by the stars."
Ian Narine can be contacted at firstname.lastname@example.org
It is not their role to
manage money based on
the way things ought to
be; rather than the way
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