But there’s one set of people who do better and better the more the president’s tweets or rants or out-of-nowhere actions unsettle the financial markets. I’m talking about trading desks, which generally get increasingly profitable as markets become increasingly unsettled.
First-quarter earnings announcements show that the trading desks at big financial firms have turned into bigger profit centers this year than they were last year, when volatility was much lower.
It’s really sort of amusing — if you like irony. The one thing you can predict about the most unpredictable president of our time — or possibly any time — is that the more he unsettles financial markets, the better trading desks will do.
Given our increasingly divided society, in which disagreements are turning into wars, I’m sure that we’ll soon be hearing claims that firms with big trading desks are encouraging Trump’s erratic behavior to enhance their profits. However, I don’t think that’s even remotely true.
Why? Because although Trump’s bizarre behavior is good for trading desks, it has plenty of downsides for big, diversified financial firms. Not to mention for our country.
The downsides Trump creates for those firms, which have profited mightily from the corporate tax cut that he rammed through Congress last year, just aren’t as obvious as the trading-desk upside.
For example, loan growth has been slower than expected at many firms — which you have to think has something to do with borrowers’ nervousness about what is going to happen next. Trade war? Shooting war? Who knows?
Nervousness tends to make people conservative — financially conservative, that is. That’s not good for financial firms, which profit when people and companies borrow heavily.
Then there’s all the money that Wall Street financial houses and traders could have made had Broadcom’s $117 billion hostile-takeover bid for another chipmaker, Qualcomm, gone through. That 12-digit takeover would have produced lucrative deal fees, a ton of underwriting fees and all sorts of trading profits when new securities to facilitate the deal hit the market.
But Trump, out of nowhere, ruled that Broadcom buying Qualcomm would endanger U.S. security and thus ended Broadcom’s bid. I don’t have an informed opinion on whether that takeover would have hurt our country. But I know Wall Street would have made a ton of money from it. Maybe two tons.
Another deal that Trump is attacking, AT&T’s $85 billion takeover of my former employer, Time Warner, has similar potential to create fees and trading profits for Wall Street, should the companies prevail in the suit Trump’s Justice Department brought to block the deal.
I can’t prove it, of course, but I’d sure be willing to bet that Trump’s fury at the way he’s covered by Time Warner’s CNN is a major reason for the suit. If not the major reason.
(An aside: About 2 percent of my investment portfolio consists of Time Warner shares that were part of my compensation during my days at Fortune magazine, from which I retired in 2015. However, I’ve got no rooting interest in whether the sale to AT&T goes through because I’ve begun to think that Time Warner holders might do better over the long term if the firm stays independent.)
The reason I’m mentioning AT&T-Time Warner and disclosing my personal situation is that the suit against that takeover is another example of how hard it is to do serious business when you’ve got someone like Trump running around, engaging in unpredictable acts of pique and revenge.
You can be sure that if Trump’s enabler, Rupert Murdoch, had gotten Time Warner to agree to his takeover proposal, which surfaced shortly after I left Fortune three years ago, Trump would have a different attitude toward a Time Warner sale.
My bottom line: Although trading desks do better the more erratic Trump is, our economy, our national mind-set and our giant financial institutions are probably worse than if we had a president with impulse control, which Trump totally lacks.
But boy, this is a good time to make money on a trading desk.
Footnote: Even though Tax Day has just passed, I won’t join the crowd holding forth about how Trump’s tax returns should be public, the way presidential returns since Richard Nixon’s have been. Plenty of people are already doing that.
Instead, I’d like to share a Tax Day thought from my friend Henry Dubroff, founder of the Pacific Coast Business Times in Santa Barbara, Calif.
Henry wonders whether some person or some business has deducted the hush-money payments to Stormy Daniels and other Trump accusers as business expenses. Henry also wonders whether, if such deductions were taken, what would happen should those payments be ruled campaign contributions. Which aren’t supposed to be tax-deductible.
So who knows? We may yet get to see Trump’s tax returns — just not in the way that we initially expected.