During Watergate and the lengthy process of getting Richard Nixon to resign, political instability weighed all sorts of havoc on the US economy with the S&P 500 falling from a high of 142, when Nixon assumed his second term in January 1974, to a low of 86 just after his August 9, 1974 resignation.
Watergate involved a crime and a tremendous breech of the public’s trust, and a significant erosion of the business climate and market values.
As difficult as Watergate was for the US, it did not involve the election of a President without political experience. It did not involve an assertion that the an adverse power interfered with an election, an assertion of collusion or an assertion of a coverup. It did not involve a Republican Congress so subservient to a President that all checks and balances inherent in the government needed to be quickly reestablished and strengthened, at the public’s insistence, for impeachment proceedings to begin.
The US likely faces a difficult and uncertain next couple of years as the entire process around Trump, and the 2016 election, is sorted out. History shows us that the stock market is unlikely to escape these challenges ahead without real damage.
BestCashCow first projected that Trump’s extreme and malignant narcissism would cause him to fail properly to divorce from his assets in a way that would call into question his independence, his freedom from the emoluments clause, and his and his family’s liability.
Many well-versed in the law and in trusts maintained that Morgan, Lewis and Bockius, Donald Trump’s law firm, would put together an air-tight, yet complicated, ownership structure. A smart ownership structure would use his ascendency to the presidency as an opportunity to pass his assets to his children and grandchildren with limited tax liability, while assuring that he would have all of his needs met for the rest of his life should he be removed from the presidency.
Following this weekend’s release of the trust documents under the Freedom of Information Act, it is very clear that everything, including the lease on the Old Post Office Building in Washington, has passed into the Donald J. Trump REVOCABLE Trust. President Trump is the only beneficial owner of the trust, but the trust is run by his son and chief financial officer. There is no legal impediment to Donald Trump’s receipt of information on the trust assets and their performance (as Sheri A. Dillon proclaimed in her January 11, 2017 news conference) and the trust is revocable at any time.
In short, Donald Trump’s law firm has done nothing, absolutely nothing, to separate Trump from his assets and the ethical liabilities that those assets create, save to introduce a single legal entity, wholly owned by Donald Trump himself.
The new administration – and the Republican Congress – are bent on exploiting the government for their own self-interests. Inherent in that goal is an assumption that the majority of the population at large is totally indifferent to, or unable to understand, the color of the wool being pulled over their eyes. In this case, there is no smoke, no mirrors, and the wool can be seen right through.
It is exceedingly hard to look even months out with a modicum of confidence as to coming trends and events. We are in the most uncertain of times.
This is especially true for those in retirement. Over the last decade, really beginning in 2008, retirees have had to break with conventional wisdom and invest a much larger proportion of their assets in the market than in the past and than wisdom would suggest; bonds and cash simply offered too little yield to meet their needs.
Now, with a new and unsteady president, the market seems even more risky for all Americans, and especially for those depending solely on unearned income. The country has certainly enjoyed a significant upswing following the election, but that seems more fueled by irrational exuberance than by a thoughtful weighing of the major risks ahead resulting from irrational and off-the-wall government leadership.
Logic suggests that the market, however strong in recent days, is due for a major fall as the impact of a seriously unstable president with a seriously flawed agenda clashes with reality. Those in retirement are caught in the middle. Stay in the market and enjoy a temporary surge or get out now before an almost certain and lasting drop takes place.
Market timing has never worked. While all looks good for the moment (interest rates are beginning to creep up and the market is doing well), logic and clear thinking dictate that retirees need to act now in their best interests, reduce significantly their market holdings, and move to the safety of government-insured bonds and bank or credit union savings accounts and CDs. To do anything else will leave a significantly large proportion of the population today in great jeopardy of falling short of the resources required to cover basic needs.
