## Wednesday, August 03, 2016 ... /////

### Trump, Goldman Sachs, stocks, and elections

Democrats may help Hillary to be elected by buying lots of stocks up to the elections

Sorry for the silence, I had some other offline duties today.

My computer had to work much harder – it took almost 3 hours in total to upgrade to Windows 10 Anniversary Edition. But it works great. The start menu is reorganized more effectively, colors are nicer, Edge may be getting superior but I don't plan to leave Chrome (it has extensions etc.), Windows Ink is fine and also offers Sticky Notes but I prefer my Long Notes Windows Gagdet so far. Windows now contains its own Bash (Linux shell) – search for it using the magnifying glass. I had to reinstall Windows Gadgets again (from GadgetsRevived.com). Windows decided that it refuses to resuscitate "Ccleaner", a somewhat parasitic "helpful" application I don't care about, and informed me about that ban. "SFC /SCANNOW" gives me "clean" again – I suspect that the violations before the upgrade were caused by some of the registry cleaning third-party software. The Windows calendar from the tray area contains your events from the Google/Hotmail calendar now, and so on.

There are lots of interesting things to mention about conferences etc. but it would take much more time and energy that I have now.

Instead, let me mention that Goldman Sachs and Donald Trump agreed about something: Get out of stocks now, they told everyone. Now, this is bizarre. GS should answer the question: Why now? Trump should answer the question: Why at all?

Goldman Sachs says that the following 3 months will be bad for stocks, with the expected 10% drop, while the following 12 months from now will be neutral. This is a really ambitious timing. How can they know it? The only explanation is that they want the stocks to behave like that, so that they have sold them yesterday and will buy them again in 3 months when they're cheaper.

The rest of investors are kindly asked to cooperate with Goldman Sachs and drive the prices according to the Goldman Sachs plan. Just keep on escaping from stocks when they're down, sell them even in nearly 3 months when they are near the minimum, and sell them to Goldman Sachs so that they make their desired profit. After these 3 months, start to buy stocks again because you're told they will go up. In reality, if you sold them before that, you will be much more likely to buy them for a higher price than the price at which you were selling – because the price will be elevated by the big purchase that Goldman Sachs will make in 3 months. The result is that Goldman Sachs will profit and everyone else will lose.

Goldman Sachs' decision to dictate the market and fool everyone else in this easy way is the most sensible explanation I have for this bizarre advice. I don't think that someone this big may know that the 9 months after the following 3 will be better than the following 3 months. If people knew it, they would have already sold the stocks, so the drop would have already taken place, and the subsequent planned increase would start earlier (now).

Somewhere on a Fox TV, Donald Trump told everyone to quit stocks – pretty much for good. More specialized investor writers obviously say ignore Trump and trust Buffett instead, especially if the investment is meant to help you retire in a distant future. Stocks are a better investment in the long run. Trump's argument is that the stocks are supported by "unnaturally low interest rates". I think that this reasoning is just plain wrong and I've addressed it in the text about the hypothetical ZIRP-driven bubbles in everything in April (note that the U.S. market has grown since that time).

The interest rates may be called natural or unnatural but it doesn't matter. These low interest rates look rather sustainable and they're dictated by a central bank (or many central banks) that can simply keep on doing what they're doing whether most of the mankind – and even politicians – call this policy natural or not. At the end, the "only" negative consequence of these policies will be inflation that will kick in again (however, the point doesn't quite seem to be imminent now). But the inflation won't lead to a collapse of the stock prices. During the future inflation, people may still be driven towards stocks if they will feel that the savings accounts etc. won't give them positive real rates (if the inflation will beat the interest rates). And the normal inflation that will appear at some moment will be largely irreversible so the increase of prices of everything – and also stocks – that will result from it will be irreversible, too. No bursting should be expected because of these simple things.

The zero or negative rates are highly controversial but the idea that they must lead to some bursting bubbles is simply logically flawed.

Rising pre-election market keeps the same party in the White House

There exists one intriguing explanation why Donald Trump actually wants people to sell stocks now. CNN Money reminded us that in 82% of U.S. presidential elections, the replacement of the party by the other party is correlated with the fate of the stock market between July 31st and October 31st (in the Olympic election years – multiples of four). If the stock market goes up in this 3-month period that started yesterday, the old president's party keeps the White House; when the stock market goes down, the president from the opposite party is elected.

So if the stock market goes up in the following 3 months (the same 3 months discussed by Goldman Sachs!), Hillary will be elected. If it goes down, Trump will become the president. This rule has been 82% successful in the past. Obviously, this correlation doesn't guarantee causation – equivalently, it doesn't guarantee that we should trust the correlation in these and future elections.

But there actually exists a natural mechanism that would imply that the rule is right and will be right. When stocks go up, people think that the current president is probably doing something right and they prefer to pick someone closer to him. If things go down, the old president is doing things badly, people think, and that's why the old president should be punished by his being superseded by a candidate from the competing party.

So Donald may simply want the stock market to drop in the coming 3 months because that could help him to become the president. Or at least he may believe that it's so.

Obviously, there is a way for Hillary and Obama to defend themselves. They may tell everyone – including their very, very wealthy supporters – to buy the stocks like mad at least up to the end of October. So if you're truly progressive, you should borrow lots of money and buy as many stocks as you can. That's how you may help Hillary to be elected. You may also try to send me a donation that ends with \$...1917 to emphasize where you belong and increase the odds that I will write a blog post supporting Hillary.

By the way, Peter Thiel has another excellent business project. He wants to suck the blood of the youth, become a vampire, and live forever. Some young people so hopelessly suck (but not blood) that this could be the best way to use them, indeed. No, seriously, imagine how much money an older successful person could pay for extending his life or becoming younger and how nicely it would satisfy many youngsters.

Obviously, at some point, the younger-than-median human could be shocked that the world is overrun by vampires and pensioners. Sometimes it already feels so when you go shopping at some time of the day. There should better be some sustainable checks and balances, something that encourages most people not to live forever. ;-)