So the year begins and with it a new presidency. Everyone has ideas how best to invest your money. Simple indexing is the least expensive way to manage capital; no, smart beta is superior; this year we are told (once again) will be when active stock-picking makes its triumphant return.
Regardless of how you choose to allocate your assets, there is another way; a much better way; a method that cannot fail in its brilliance and simplicity. Go with the POTUS indexes.
Direct your attention to the relentless tweeting of the man who soon will be president. There is valuable information in those 140 characters that can move markets and alter perceptions of corporate fundamentals. This has real alpha-generating possibilities. Whoever is managing your favorite 401(k), hedge fund or trading account should take note.
To help you make sense of this, we have created two indexes based on Donald Trump’s tweet and other pre-presidential utterances.
Before we get to the specific stocks, I want to offer a bit more about the underlying concept. First it goes without saying that the U.S. president is the most powerful person on the planet. Although the U.S. Constitution places all sorts of constraints on his direct power, his every word is important, whether you agree with him or not.
Now consider the companies he has been tweeting or commenting about, both positively and negatively. You will recognize the two distinct groups that this creates, each with very different prospects.
In one group are companies that have drawn expressions of approval from Trump. An even greater endorsement is recruiting the senior executives of those companies to be cabinet members or advisers.
Let’s call this first group the Oligarch Index, or OLGY. (On your Bloomberg terminal, type .OLGY <Index> GP.) The Oligarch Index includes Colony Capital Inc., CoreCivic Inc., Exxon Mobil Corp., Facebook Inc., Ford Motor Co., Goldman Sachs Group Inc., JPMorgan Chase & Co., PayPal Holdings Inc., Sprint Corp., SoftBank Group Corp. and United Technologies Corp.
The other group is made up of those companies that Trump has trashed. We shall call this the Drain the Swamp Index, or SWMP. (On your Bloomberg terminal, type .SWMP <Index> GP.) This includes Amazon.Com Inc., Boeing Co., General Motors Co., Kellogg Co., Lockheed Martin Corp., Macy’s Inc., New York Times Co., PepsiCo Inc., Rexnord Corp., Tesla Motors Inc., Time Warner Inc., T-Mobile US Inc., Toyota Motor Corp. and Twitter Inc. and Constellation Brands Inc.
The Oligarch Index
On the positive, oligarchic side, these are the companies that will help to make America great again:
• Colony Capital: Chairman Tom Barrack spoke at the Republican National Convention, and is chairman of Trump’s inauguration committee.
• ExxonMobil: Chief Executive Officer Rex Tillerson, who has extensive global experience, is Trump’s nominee to be secretary of State.
• Goldman Sachs: Alum Steve Mnuchin is Trump’s pick for secretary of the Treasury and Gary Cohn, Goldman’s president, is his pick to head the National Economic Council. Besides, how could we have an oligarch portfolio without Goldman?
• JPMorgan: CEO Jamie Dimon was recruited to be Treasury secretary. He convinced Trump that he could do more to help make America great again by continuing to run the nation’s largest bank. A good guy and a great banker.
• United Technology: The company owns Carrier, which kept jobs in America. Thanks!
The Drain the Swamp Index
Now for some of the companies Trump disparaged, directly or otherwise: