The Trumpanomic Effect: Part One

Now that the election is over and we know who the president is going to be, it is time now to analyze what I think will be one of the largest impacted areas of a Trump administration.

The economy.

As an investor I am now spending considerable time evaluating some of the promises that President-Elect Donald Trump made during his campaign as they apply to economic considerations. And what I see is enough to make me literally salivate. Of course, he is not yet in the White House, and the House and the Senate need to be onboard with any plans the Trump administration may lay before them. But there is a positive here if you have not noticed.

The republican party, and even some of the most staunch never Trumpers within the republican party are all now clearly and openly rallying in favor of the president-elect.

Seeing Ted Cruz moving in and out of Trump tower negotiating with both Trump and Pence and other members of the transition team, and hearing Cruz now speak to the American people about his now positive views on what Trump will offer is one thing. But Mitt Romney has also apparently moved on over to the Trump train as well, even after virtually calling for the election of Hillary Clinton early on in the campaign.

It's one thing that the GOP controls both the House and the Senate. It's entirely another that they are in support of the president-elect, and by all accounts, appear to also be entirely onboard with much of his agenda as well. Even Ted Cruz specified that Trump's overwhelming defeat of Clinton and the GOP win over democrats, despite what all thought would be considerable odds, defined a clear mandate by the American people that they want the campaign promises to be fulfilled. And if the GOP wants to maintain their power, they are going to have to deliver on that mandate or face their ouster come the next round of mid-term elections.

So, when it comes to the economy, it looks like we may see the ratification of a good number of some of the ideas that Trump offered to right the listing economic ship. And from an investors perspective, this means we may see some very interesting positive developments in the stock market going forward.

And by the way, it's not just the stock market that will benefit. If Trump can get done what he wants to do—especially in the first 100 days—of course American workers will see massive benefits as well. It's really not rocket science to understand that the underlying factor of more Americans working, even making higher wages, coupled with other factors are the benchmark of a strong economy.

Think of the impact of the middle class and my point is proved. When the middle class is vibrant and strong the economy flourishes. When the middle class is in jeopardy, the economy slips and falls.

One thing that seems clear to me is that if Trump can get done even half of what he advocated for during the campaign, we are going to see massive upswings in jobs, and even massive upswings in median income across the United States. I honestly believe that a whirlwind of economic growth is right around the corner, and if the economic policy put forth by the Trump administration looks anything like I think it will, we are headed for long term growth that may even make the undeniable success of Reaganomics pale by comparison.

In the following series I will outlay some of the factors that I think will spur on this economic growth, and the reasons I think they can be powerful enough to potentially uplift the American economy in very short time. I don't think we're looking at four or more years to see results here. I think we will begin to see results, actually, after just two years into the Trump administration. And in some ways if I am to be totally honest, even two years may be a conservative estimate.

Why?

Because if the American people can see the light at the end of the tunnel, and if there is a positive attitude toward what our economic future holds, this will reflect very early on (and in some cases is already being evidenced a mere 10 days after the election results) in how Americans react to it. Things to watch with abided attention are the U-6 unemployment figures, consumer confidence figures, retail sales, and the housing market—particularly housing starts as opposed to depletion of existing inventories.

My shortlist advice? You better have some cash lying around to toss into the markets, and I will be telling you where I will be putting a lot of mine, because waiting too long may well put you miles behind the curve once this thing really gets going.

I told you all along that Trump would win, and win big, and laid out all of the reasons I saw that coming. Now am I going to tell you that the economy is the next big winner, and will lay out all of the reasons why I see that coming as well.

What The Heck Is A Daily Consumption Rate?

When you think of how money is spent, there are two ways of looking at it. The obvious way is thinking of it in terms of how much money you spend directly when you pay for something. The other way is thinking of it in terms of how the the things you spend money on are consumed. The rate of consumption ultimately determines how much something actually costs.

Think of your consumption rate as an electric meter. Each and every second an amount of power is being consumed, and as a result the meter is turning and accounting for the consumption. In a given year you may pay an ultimate amount for the energy you use. But the cost is not in the total. The cost is in the rate of consumption. Paying attention to the rate of consumption is the key to understanding how far the money you ultimately spend will go. It is also the key to determining how you can slow down the rate of consumption. In other words, if you don't understand why something is costing more, you will never understand how to make something cost less.

The daily consumption rate is nothing more than a system of cost averaging. The trick is in keeping the average as low as possible. How do you that? If you take advantage of short term savings on the buying side, and pay attention to how you consume things, you will ultimately save money on the consumption side.

In the simplest of terms let's take a pound of pork to provide an example of what I am driving at. You can buy a pound of pork for $3.00 when you need it for a pork dinner. Or you can wait until a pound of pork is on sale for $2, and buy five pounds of it instead of just one, and freeze what you will not immediately consume. Your average cost of a pound of pork has been reduced by $1 per pound, and while the direct cost was more because you bought more, the actual cost considering time depreciation has reduced significantly the actual average cost you will pay for your pork over time.


How long you can make something you buy last, of course, also greatly impacts how much you ultimately spend on something. Let's take my 2001 Ford Explorer Sport Trac as an example. In 2003 I bought my truck for roughly $20,000 if you take into account the interest I paid for the loan I took out. If I would have kept my truck for just five years, my daily consumption rate would have been $10.96 per day. Because I have kept my truck for 12 years, my daily consumption rate for a vehicle has been reduced to $4.57 per day.

Granted, there are other costs associated with owning a vehicle to account for such as gas, insurance, and maintenance. But the simple concept behind the math remains the same. The overall cost of something is determined not just by how much you paid for it ultimately, but by how long you have made it last, or ultimately how you have consumed it over a specific time period.

Let's go back to that pork example for a moment, shall we? There is total consumption and partial consumption to account for.

If I buy a pound of pork for $2, and I eat only 3/4 of a pound of it, and throw away the other 1/4 pound, I have effectively increased the cost of my pork by 25%. My $2 pound of pork has now cost me, in effect, $2.50 per pound because throwing something away and not using it is the same as consuming it even if I did not eat it entirely, or use the leftover pork to incorporate it into another meal. I will have to buy more pork to make up the difference. Using the electric meter example, whether or not I am in a room to see the light, the meter will turn regardless and the cost of my lighting in a room I am occupying will cost me more. My daily consumption rate is being increased by how I am consuming my energy.

When you begin to think of money spent in terms of consumption rather than in terms of what you spend at the register, suddenly you find that money becomes more and more plentiful. And for those who like to make the argument that they cannot afford to save, perhaps what they are failing to pay attention to is their daily consumption rate. If you ate a pound of pork a day on sale, there alone you'd find you'd have saved $365 on pork in a year. Apply the daily consumption rate concept to everything you buy and consume, and the total savings become enormous.

Playing Broke To Save Money

There are a ton of tips and tricks on how to stretch your dollars and of course, save money. And believe me, I employ a number of them. I am as miserly as they come, and quite frugal as well to boot. Of course some have another name for me.

Cheap.

Go ahead and have your fun, I say. I am laughing all the way to the bank, and when I really want to have a little extra money for something, I can have it.

So what's one little trick to saving money and having money? It's time to return to the days of make believe like when you were a kid. Only for this play, instead of pretending like you are Warren Buffet or Bill Gates, or perhaps the man who trumps all of their massive wad of cash, you play broke. That is, you severely limit what you have on hand for money, and make it damn difficult to get money in a pinch.

When I was in the Navy one of the things I did, and I'll admit that back then I was still not as good with my money as I am now, but I did still think about. It was a work in progress, shall we say? I made my money hard to get. I left very little funds right up front and accessible, and made sure that the rest was socked away into a savings account at a bank that was 30 miles from where I lived, and that I had no ATM access whatsoever to.

This meant that in order to get access to any of that money I had to physically get into the car during bank hours, and drive 30 miles to make a withdrawal.

That took a little bit of thought. It required a little bit of planning. And that meant that 90% of the time the money stayed at the bank just because it was too much of a pain in the ass to get at. I found other ways to get what I wanted. Or I simply went without.

These days I don't resort to bank accounts miles away. In lieu of that I keep most of my money in my brokerage accounts, and most of that is tied to a stock. It's still accessible. But again, far less accessible than if I could just walk up to an ATM machine and draw it out.

I have to think about a tax implication of selling shares of stock, or have to wait a couple of business days for funds to be transferred to my checking account from my cash account. Especially if I sell shares I have to wait a couple of days for the transaction settlement, and then have to wait a couple more days to transfer the funds. Often times I don't even resort to doing that.

Again, just like before, I find other ways to get what I want. Or I simply go without.

The one thing I have learned over the years is that if you make money too easily accessible it gives you far too much freedom to simply give in, and take it. And 90% of the time it is simply something squandered on, on an impulse. Like New Year's resolutions are rarely followed through on, saying in the moment "I will deal with it later" is a sure way to ensure that it never gets dealt with. And time and time again you will simply find yourself going through more and more cash.

Playing broke is sometimes painful and frustrating, I will admit. But at the end of the day it just seems to make sense to me. When I really want the money for something I know it is there. I can enjoy skipping a fish fry today, for example, to better be able to afford a fishing trip I'd rather do tomorrow.

At the end of the day it is about having security and freedom. But not the freedom to frivolously spend. Rather, the freedom to spend wisely.

Besides, the best part is that when you get tired of playing broke and need a break back to the wondrous reality that you actually have money, it's right there, and you can go wild if you want and still not break the bank.

Joyous really. And perhaps, in some ways, quite brilliant, however conceited that may sound.