Populism, Nationalism, Trump and Emerging Market Opportunities to Double Money
Populism is the description of the state of a country. Populism exists when the common person becomes dissatisfied with normal government, establishment and is characterized by wealth disparities. Often disguised bad actors take hold. These actors take advantage of common people for exploiting certain opportunities.
Populism is characterized by: increased nationalism, protectionist ideas, attack on immigration, closed trade policies, and diverts attention to foreign countries / economies / government.
Populism leaders heavily attack governments. These leaders usually command presence through a marginalized minority. The minority is typically over thirty (30) percent (%) of the population. Does this person sound familiar?
I know who you are thinking about.
But did you know certain people who fit these characteristics are historical figures? I will do a quick rundown for you. A great chart I picked up from Bridgewater Daily Observations illustrates these figures. Below is major policy positioning at the time coupled with conditions of each individual’s rise to power.
What I find very compelling about this situation is all leaders come to power during times of 1) Weak Economy, 2) High Income Inequality and often 3) Political Paralysis.
Today’s modern Populist Leaders (i.e. first President Obama then Donald Trump) both were products of very weak economies, high income inequalities and political paralysis. While many will dispute my inclusion of President Obama…he was Populist. President Obama dealt with the collapse of the housing market, campaigned on rich needing to pay their fair share and dealt with political gridlock.
Donald Trump was picked for a more extreme position. Donald Trump was picked to attack the establishment. President Obama was picked to “change” the establishment. When change failed attack ensued.
Both have strikingly similar platforms despite their vast differences.
So where is the opportunity to earn money? This could very well turn to a government assessment article and state of the union. I get it.
So here it is.
A very simple way to double your money. Here is a way to be a smart person who takes advantages of market gaps. This is what I am currently doing with my own funds.
Look at the charts below:
These are the US equity indexes between the stock market crash and the real estate collapse time periods. One was a depression and another a recession. Both hold very similar trends. Despite the weak economy the most aggressive accepted asset class makes a rally? That is quite odd isn’t it? How can companies’ values be increasing when the entire country is bottoming out? This article is not about investing in stocks. This article is about taking advantage of a certain government security.
Look at another chart below:
The similarity is striking. During times of collapse and recession the wealthy do take most income and most wealth. Seems FDR and Obama were right.
Interesting let’s continue.
At the same time the foreign born population increases during the collapse / recession.
Three positively correlated events. Remember I told you a Professional Entrepreneur understands “markets”. You cannot just be a deal person. You actually have to understand what is happening around you.
These three characteristics reveal compelling facts.
The three characteristics of a struggling country spur populist leaders who floor Federal Reserve interest rates to near zero.
When interest rates go to zero the price of something called a US Treasury STRIP goes up. If you do not know what a US Treasury STRIP is I can educate. A US Treasury STRIP is a United States Treasury Bond that has been stripped of all its interest payments. It pays nothing and is a promise from the United States Treasury to pay you the money it states (the face value). The payment is made on the maturity date. The maturity date is the time you must wait until the United States Treasury pays you. This is considered the safest investment in the entire world. This is hardly a risky strategy. As the interest rate begins to climb holding a US Treasury that pays you no interest begins to look very unattractive. The price begins to tank. A US Treasury STRIP that was maturing in 20 years once sold for about 69 cents on the dollar back in 2016. Now the Price quote is 57.881 cents on the dollar (effective today). This means three years ago the price dropped by a margin of about 12 percent.
In 2016 the federal interest rate hovered near zero to 0.25%. Now the Federal Interest Rate is at 2.50%.
Imagine if the interest rate goes to pre 2007 levels of 5.00%? We should expect another drop of at least 10 points. A healthy fluctuation of interest rates ranges 5.00% to 10.00%. That was the range from about 1985–2008. Basically 23 years.
Before that the Savings & Loans crisis occurred which hiked the interest rates to nearly 21%.
The rates for a STRIP at the time I’m sure would have been as low as a penny on the dollar.
Here’s the catch. I believe another crisis is coming. I believe student loans will bubble as massive defaults occur and banks call loans due. This is the same situation that happened in the 1980’s. Innovative Peer to Peer financiers have come about as a result of bank’s unwillingness to fund student loans. The student loan debt is nearing 1 trillion. Walk into a bank and ask for an unsecured student loan of $40,000 with a credit score of 560. Also mention that is for one year of school. Tell them you need another $120,000 in total for each subsequent year. Also mention you have no job. Don’t forget to list your degree as a non scientific, non technical, non professional degree in business administration. You will be laughed out the building.
The only reason these programs exist is the federal government’s guarantee for subsidies. The banks are being tied back into it through institutional loans to Public Companies like SOFi. As the federal government dries up on its guarantees (future loans not current or outstanding) the loan market will collapse. Peer to Peer lending will have customers defaulting and their new blood will run dry.
When this happens banks will watch these companies stocks plummet and cut their positions by calling loans due. This will trigger a massive call on outstanding student loans. The Savings & Loan crisis will come again. Most people are refinancing out of government arrangements into the private sector. Read the contract. There is no forever extension with a private lender. There is no forbearance.
As this occurs banks will deal with defaults. The Fed will hike interest rates to prevent irresponsible lending. When this happens banks will stop offering loans at their current rates.
It is at this time US Treasury STRIPs will hit rock bottom.
If you pay $0.01 for something worth $1.00 in twenty (20) years how much did you make?
Let’s do some math under this illustration. It’s basically a multiple of 200x your money. So every year until maturity you made 10x your money guaranteed by the full faith and credit worthiness of the United States Government.
The emerging market in investing is watching the interest rates rise, seeing populist regimes assault our governments, watching high risk stock prices surge (biotech, cryptocurrencies, tech stocks) and then taking advantage of a boring unconventional promise from the government at rock bottom prices.
At the US STRIPs current price you make roughly 42.119% guaranteed on your money in 20 years. As interest rates begin to inch up the certainty of return will also happen. At the 5% rate (which is the low end of normal) rates should over around the mid 40’s. As the rate comes to the middle of the road it should hit the high thirties. Making 200% on your money over 20 years is a good investment. Having it guaranteed by the US Government is a great way to play odds. I play odds. There is certainty in this market. Make sure you pay attention to it as well.
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com