When the Trump Trade Crumbles, Only the Cockroaches Will Survive

Politicians are taking over Wall Street.

All eyes are on Trump, the failed attempt to take down Obamacare, and where the administration will go from here.

Stock market analysts are hanging up the ticker tape and diving into political commentary. There’s no market news on the web. Folks who used to cover stocks are gossiping like beltway reporters. Instead of earnings and IPOs, all we hear anymore are Trump soundbites. Every single market tick is attributed to something happening in Washington.

I’m not the only one who’s sick of this ridiculous sideshow. Even billionaire and former New York City mayor Michael Bloomberg took to the internet over the weekend to smack around the political class as the bickering intensified.

“Who’s to blame for the failure of the Republican bill to repeal and replace Obamacare? Who cares?” Bloomberg writes. “What matters now is that Democrats stop gloating, Republicans stop sulking, and each party come to the table to improve a health-care system that both parties agree needs work.”

Will our politicians heed this advice, link arms, and start singing Kumbaya?

I’m not holding my breath…

If you ever wondered why I spend my days staring at charts, the nonstop political circus we’ve endured for the better part of the past six months sheds some light.

Our attempts to trade around the recent political shenanigans reminds me of a fantastic Morgan Stanley note I read last year. The analyst conceded last spring’s bizarre market conditions slaughtered most investors. But the cockroaches survived—even thrived—in the wacky market environment…

“Certainly the investors who have done well this year have been acting like cockroaches, reversing course when the winds changed direction,” he says. “The fundamentals haven’t really changed that much, but prices certainly have.”

While the calendar has flipped to 2017, the same old problems lurk around every corner for the investing class.

That’s why it pays to be a cockroach. When the coast is clear you skitter out from under the refrigerator looking for crumbs. You thrive in darkness. You’re a survivor. Not even a nuclear holocaust could wipe you out…

When it comes to the stock market, there are few absolutes. But there is one thing you can always count on:

Only price pays.

Traders who understand this simple fact have profited. Everyone else has suffered. It’s not just the little guys either. The market’s waylaying the Wall Street pros right now. Portfolios are busted. Nothing makes sense anymore…

Most investors can’t go where the market’s taking them. Instead, they’re trying to shove square pegs into round holes. But attempting to reason with the stock market is like trying to wiggle out of quicksand. The more you struggle, the faster you sink.

That’s exactly what happened to the “smart money” as they backed up the truck and bet big against stocks after Trump won the election. A huge rally ripped their faces off. Short squeezes popped left and right. Everyone was on the wrong side of the boat.

But not the cockroaches. These pure opportunists hopped on the rally—not knowing where it would take them.

The stock market is cratering this morning. What we’re experiencing right now could be nothing but a temporary slide. Or it could be the first wave of a bigger move lower. We can argue which one of these outcomes will win out until we’re blue in the face. But that won’t put a single penny in your pocket.

Remember, there’s no guarantee we’re going to see the major averages jet back to all-time highs. There’s work left to be done to repair the damage.

So instead of whining about an irrational market, you’re better off following whatever trends emerge and grabbing any crumbs the market leaves behind. Trading like a cockroach isn’t exactly glamorous. Not everyone is equipped to handle such an agnostic approach to the markets.  But if you can shut out the noise and reverse course when the winds change, you’ll fare better than all your other insect buddies out there—even if the market does get blown to bits.

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning