Trump Card:  something that gives someone an advantage.  

- Merriam-Webster Dictionary

 

The election results surprised me. I was sure the Donald wouldn't win. After all, the pollsters said his chances were virtually hopeless, right up to election day. As icing on the Hillary Clinton cake, certain last minute video revelations certainly didn't seem to increase Trump's odds of success.

 

What are the lessons of the Trump presidential victory?  First of all, most forecasting is not productive. At least not for us. Unpredictable things happen. Trump happens.

 

Prior to the election we heard various opinions about the election's effect on financial markets. Sell everything, some advised. Raise cash and wait for the inevitable plunge to buy cheaply. And as we all witnessed on election night, the market did seem set to plunge the following day as Trump approached the victory stand. But a funny thing happened on the road to financial disaster. The stock market decided that a Trump victory apparently wasn't so bad. Not only did markets reverse the overnight plunge and recover, they've enjoyed a post-election rally.

 

We've always cautioned against predicting short term trends, whether it's the stock market, economy or whatever. There's just too much noise and randomness to make effective decisions.  Like most others, we had no idea Trump would win. We further had no idea that a Trump win would be positive for the stock market. We further had no idea that our stock market investments would be big beneficiaries of the short, one-week Trump rally. Little did I realize that our portfolios were Trump portfolios, as we've seen an outsized increase since the election. Yes, it's only one week and things can change. I understand that.

My point is this: what you don't know can hurt you. But, and it's a big but, you can only hurt yourself if you act based upon your lack of knowledge. If you make decisions because you "just know" the election outcome and you "just know" the impact on markets, you're likely to end up with egg on your face. It's better for most of us to declare our ignorance about the outcome of short-term events.  Instead, position your investment portfolio to survive a range of potential outcomes, including the negative ones.  No, that's not a political statement.

 

For Triad, it's pretty simple. We analyze businesses, not pieces of tradable paper. We seek to buy when a big "margin of safety" (discrepancy between price and our estimated future value) is available to guard against our own miscalculations or adverse events. Then we wait for the world to recognize that value. It can take a painfully long time. As long as the business value grows we can afford to wait. Eventually our Trump card should arrive.