By Pam Martens and Russ Martens: June 18, 2019 ~
President Donald Trump has now tied his campaign, and himself, up in ticker tape. On June 15 the sitting President of the United States Tweeted the following message:
“The Trump Economy is setting records, and has a long way up to go….However, if anyone but me takes over in 2020 (I know the competition very well), there will be a Market Crash the likes of which has not been seen before! KEEP AMERICA GREAT”
First, since the stock market lost 90 percent of its value from 1929 to 1932 and the President is calling for “a Market Crash the likes of which has not been seen before,” he is effectively predicting that the stock market will lose 91 percent or more of its value. (Even for raging bears, that’s quite a stretch.)
But since it’s the billionaires and multi-millionaires who own the bulk of the stock market, the President is actually predicting a re-balancing of America’s unprecedented wealth inequality. Millions of Americans see that as a good thing and something that is desperately needed to keep the billionaires from perpetually buying elections.
According to a white paper released in November 2017 by the National Bureau of Economic Research and authored by economist Edward N. Wolff, this is how the ownership of the stock market stacked up at the end of 2016:
“…the richest 10 percent of households controlled 84 percent of the total value of these stocks, though less than its 93 percent share of directly owned stocks and mutual funds.”
Secondly, Presidents only get to serve two terms so if the stock market is going to crash when Donald Trump leaves office (a proposition we’ll explore further in a moment) it would be better for it to crash at its inflated level in 2020 rather than risk an even greater stock market bubble bursting at the end of his second term.
The Tweet from the President was widely covered in the media, meaning that he has now irretrievably tied his success to the success of the Dow Jones Industrial Average. Let’s say that Trump’s trade war brings on a market crash this year instead of obediently waiting until after November 3, 2020. Trump would be toast and Republicans might even be forced to run a different candidate.
The Dow Jones Industrial Average, which is the closely watched benchmark of the health of the overall stock market, contains only 30 stocks. Three of those could pose a potentially big problem for the President by dragging down the overall Dow average between now and election day: Boeing, JPMorgan Chase or Goldman Sachs.
Boeing has a serious problem with profits and orders going forward as a result of the crashing of two of its new model 737 Max jets and serious ongoing safety concerns regarding that model. JPMorgan Chase already has admitted to three criminal felony charges in the past five years and is under a current criminal probe by the U.S. Department of Justice related to precious metals trading. (There is a former insider who has copped a plea deal in the matter.) Goldman Sachs was criminally charged by Malaysia in December of last year in the 1MDB scandal involving bribes and looting of a sovereign wealth fund. The U.S. Department of Justice is also involved in the situation. The Dow is a price-weighted index and so if you get a few high-priced stocks tanking, you’ve got a mess on your hands.
Trump’s peculiar willingness to tie his fate to the often fickle stock market raises the question of just how far he might go to keep it moving higher. As Wall Street On Parade has previously reported, Trump’s Securities and Exchange Commission is already allowing the mega banks on Wall Street to trade their own stocks in their own Dark Pools (including JPMorgan Chase and Goldman Sachs) and Trump is relentlessly bullying the Chairman of the Federal Reserve, Jerome Powell, to take monetary actions that would be favorable to the stock market.
Confidence in the U.S. Department of Justice is also not exactly at its zenith right now and if there is any evidence between now and election day that Donald Trump is attempting to get the Justice Department to back off any criminal investigations in order to protect the stock market – that could derail his election as well.
All of the above is why it’s never a good idea to link one’s fate to the ticker tape.