Let us speak truth about Washington. It has gone from a fabulous tailwind to a headwind, and on days like today it's an actual tornado that you just hope misses you.
That's right, Washington's back to its old tricks and it's time we rethink the whole idea of "the Trump trade."
Don't get me wrong. There are still Trump trades. They just aren't what you think they will be.
For example, what's this morning's Trump trade? Easy, it's the one that came off this tweet from @realDonaldTrump: "North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! USA."
The Trump trade? Buy gold! Buy Randgold (GOLD) . Buy any precious metal. Buy gold bullion and stow it in Switzerland. OK, it may not be the Trump trade you thought. If calling an irrational government out in front of everyone works, and China responds, well, terrific.
Otherwise the Trump trade is strictly gold.
Look, I know it could be worse. Trump could send two-time Apprentice loser Dennis Rodman to try to rekindle the dialogue that the basketball star had with North Korean leader Kim Jong-un, but I don't know if Rodman ever recovered from spelling the first lady's name wrong, Milania, an act that contributed to his firing the second time he was dumped from the show before winning the prize. We know Rodman's got some street cred with the North Korean dictator. He called the Supreme Leader "awesome" right around the time he was fired and said Kim is "very humble as a man, he's very strong as a man."
But perhaps he wouldn't be the best conduit to avoid World War III.
The next Trump trade is beckoning shortly.
It's the April 28 deadline to raise the debt ceiling.
Given the inability of the Republican House to repeal and replace Obamacare, even as they had eight years to think about how to do it, what are the odds that we have a government shutdown or another S&P downgrade of U.S. debt? Remember the last big doozy of a debt ceiling fight, the 2011 fiasco where the Dow Jones average fell from 12,724 to 10,718. We saw that fight coming because the Republicans hated the Democrats so much. But now we have the Republicans hating the Republicans and the Democrats at the same time. Who will shepherd that through, especially given that Speaker Paul Ryan has already said the White House doesn't have its act together when it comes to tax policy? If Ryan's in charge, will this self-styled genius, who failed miserably with repeal and replace, have any more luck with this ceiling?
Could be another Trump trade -- puts in the indices as we get closer to the ceiling.
We had another White House CEO meeting today and I am beginning to get the hang of these meetings. The more CEOs he brings in, the more likely they are to hire. Creating high-paying jobs is at the top of the agenda, the president says. But to me that's starting to feel like a warning not to do any deals that could cause layoffs. Lots of trans-border deals and deals among companies here need synergies to make money. Synergies mean layoffs. Let's be careful if any company that's merging with another has a CEO in the White House. I think that means the synergies might not be there.
And it also might mean that deals might be blocked. I am growing worried that the AT&T (T) -Time Warner (TWX) deal might not close by the end of 2017, not because it is anti-competitive but because it's a high-profile deal that the president said he didn't like. Maybe a Trump trade could be some out-of-the-money puts on Time Warner? Why not? It will be hard to get the synergies anyway given the scrutiny this deal is under.
We have to start wondering what will happen to retailers if the House gets its way and the president gives in on the border tax. We know the indebted retailers like J.C. Penney (JCP) and Sears (SHLD) might not even survive a border tax. Sears is so heavily shorted as it is. But Penney makes sense as something to bet against as a Trump trade. Maybe the president wants to get something done so badly he sacrifices the very people who voted for him on a national sales tax, which is exactly what a border tax amounts to. You give a break to the big, fat corporations and you hurt the working person with the border tax. Maybe some out-of-the-money puts on the dollar store could work? Seems reasonable. They can't become the Two Dollar Tree or Two Dollar General, can they? But they won't be able to pass on the costs without losing their way against Walmart (WMT) , which has a much bigger balance sheet than they do and can eat the border tax. So you buy puts on a basket of retailers and some calls on Walmart, betting the millions of people who work at these places get sacrificed right along with tens of millions of customers once Paul Ryan gets his way.
You know the more we run this United Airlines (UAL) tape, the more likely we are to get a presidential tweet calling for an investigation of what happened and new rules calling for the airlines to end double booking. Without double booking, it is hard to envision profitability holding up.
I would normally recommend buying the stock of United Continental, the offending airline, a few days after this incident, but who knows when a tweet might surface? Have to watch Fox news coverage to be sure.
Finally, do we have to buy puts on the automobile companies? First, obviously they no longer have the maneuverability to even threaten their unions with moving jobs to Mexico. Second, you have to wonder how they even get any work done. General Motors (GM) CEO Mary Barra was in to see the president again today as part of a CEO roundtable. When does she have the time to spend helping to direct the company, a key task of the CEO. Let's hope Ford (F) CEO Mark Fields isn't called away from the New York International Auto Show tomorrow. It would be good spending some time in the field and not just in the Oval Office.
Look, I wish I were being facetious, and maybe I am a tad to suggest that Dennis Rodman might intervene in the North Korean situation, not that he would be any more effectual than the Chinese, who have been leaned on endlessly to do something in North Korea and have always done nothing. Of course, Trump put up a tweet that could be worthy of buying some puts on some of the bigger exporters to China today, "I explained to the president of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem."
And if they don't?
That's where the puts could come in.
Nor am I calling for all of us to go buy 3M (MMM) surgical masks with anti-fog shields because we are now going easy on coal. They wouldn't move the needle for 3M anyway.
But here's my take: It's time to redefine the Trump trade. At this pace we've got the direction all wrong. The Trump trade involves taking down a lot of puts and a lot of gold. Hey, as long as there is volatility, money can be made. Until, however, Trump gets a handle on what the House of Representatives is doing to derail his agenda and until he's banned from Twitter by his family, you might want to get some protection even as so many U.S. companies are doing so well.
