I came across an article this morning about how Donald Trump is not as great a businessman as he would have us believe. The gist of it is this: Mr. Trump inherited a bunch of money from his father, and if he had merely stuck it in some imaginary stock market investment instead of working for the past four decades, he would have some billions of dollars today, which may or may not be more than his current worth. So this is basically an indictment to the effect of "Donald Trump has been outperformed by the average businessman". Unless, of course, his true net worth is greater than the $3 billion the author posits as the value of the imaginary 1970's investment.
Now, let me start my response by clearly and humbly stating that I am out of my depth when it comes to high finance and complex investment strategies. I'm decent with numbers and I am pretty good at thinking carefully and analyzing arguments, however, so that is what I'll be doing here. I will gracefully submit to the judgment of any financial experts if they wish to weigh in, but until then I can only point out what I see as the weaknesses of Mr. Date's (sorry I don't know how to make an accent mark over the 'e') case against Donald Trump. Here we go.
First of all, and probably most troubling, we have the fallacy that because we can look at the performance of the stock market over the past 40 years, then anyone with money in their pocket in 1970 should have known that investing in a specific set of stocks would yield a fat payday in 2015. This is just piss-poor reasoning. Plenty of people did invest back then and the nature of the stock market caused some of them to do worse than others. Of course it's easy to look back at the performance of the S&P 500 and say, "golly, I should've invested in that 45 years ago". Problem is, a person looking to invest in 1970 would have had to choose an investment strategy, and the author's imagined mutual fund of S&P 500 stocks is just one of many. The author unwittingly points this out by his comparison of Trump to Warren Buffett. Warren Buffett has had a wildly successful career, and outperformed pretty much everyone. This is confirmation bias, however, because in 1970 nobody knew how well Mr. Buffett was going to do. So the author has arbitrarily picked out two ways in which Donald Trump could have made more money without working, using the benefit of hindsight. Trump also could have done much worse. If he had picked the wrong investments, he could well have been ruined. Such is the nature of investing.
My second objection is even simpler. Mr. Date did not specifically detail how he arrived at his figures (perhaps there is an online S&P 500 calculator where you input year and initial investment and it tells you how well you would have done), but I am assuming that his number includes a reinvestment of 100% of any dividends from these stocks. Now here's the important bit: I am going to go out on a limb and assume that Donald Trump has spent some money on "non-assets" (for lack of a better term) in the past 40 years. He can list real estate and private jets and such as assets counting toward his net worth, but he has probably also bought a few suits, a few groceries, and maybe some non-durable toys. Therefore, over the years as he made money doing whatever it was he was doing, Mr. Trump also probably spent a lot of it on items which he cannot count toward his net worth. So if I am correct that the author has not, in his hypothetical model, allowed for Mr. Trump to extract and spend vast sums of money from his portfolio, then the comparison is invalid. There are additional problems as well, such as owning a house/apartment (an investment which also provides physical shelter) as opposed to paying rent and putting money in the stock market (an investment which does not provide physical shelter), but I think I've sufficiently demonstrated the problem here.
My final objection is that it is a bit problematic to oversimplify the economy by suggesting that every business owner whose company performs less well than the S&P 500 ought to just give up and become a stock market speculator. We have a lot of speculators already, and probably not enough "real" companies which build stuff, manufacture stuff, employ people, etc. So Donald Trump has had his companies go through bankruptcy several times. That's certainly not the most admirable business record, but it is a legal process which exists for good reason. Compared to the investment bankers who poisoned the well selling toxic mortgage-backed securities and devastated the entire global economy out of pure, unmitigated, selfish greed and outright contempt for the rules and regulations, I'm not so concerned about Donald Trump's business record.
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