Donald Trump September 8

Asia is Trumped!
What it Means
How to Protect Your Portfolio
Asia is Trumped!
What it Means and How to Protect Your Portfolio
truewealthpublishing.asia
Table of Contents
About Truewealth Publishing ...................................................................................... 2
Introduction ................................................................................................................. 3
The Rise of Donald Trump .......................................................................................... 4
Why Trump Blames China .......................................................................................... 7
Trump and the Bad TPP Deal ................................................................................... 8
Asia: A Major Victim of Trump ................................................................................. 12
Will Donald Trump Turn the U.S. Into an Emerging Market? ................................ 14
Trump vs. U.S. Treasuries ......................................................................................... 18
Donald Trump Gave Us a Very, Very Good Reason to Buy Gold ............................. 21
Trumps Six Best Investment Strategies ................................................................... 24
How to Protect Your Portfolio From Donald Trump ................................................ 27
Asia is Trumped!
About Truewealth Publishing

Welcome to Truewealth Publishing. Were taking the mystery out of finance and investing so that you are empowered and informed to make your own investment decisions.
Our aim is to help people just like you who are tired of the market noise and who are
ready to build true wealth now. We can help you stay away from investments that will
hurt you, and find the ones that will grow your portfolio so that you can educate your
kids, take care of your family, and live the life youve always wanted.
We live in a world with too much information and not enough solutions. And this problem is compounded by too many people who are eager to help you invest your money in
a way that will line their pockets instead of yours.
We are independent analysts and writers who cut through the hype of the mainstream
financial media, and self-serving private bankers, to give you real insiders insight. We
have no hidden agenda. Well never try to sell you a brokerage account or insurance
product. We dont want to manage your money.
We think that the best person to make decisions about your money is you... an informed
and educated you. And we want to give you the tools to make those decisions... for starters, with this Insider Report and our Truewealth Asian Investment Daily.
The Truewealth Asian Investment Daily is a free daily e-letter that opens the curtains on
the most important and interesting investment, economic and business news and ideas
in Asia and the world. We talk about what it all means for markets, and for your money.
Well also talk about opportunity and risk. And along the way well tell you what some of
the smartest people in finance and investment are thinking... and sometimes well provide investment ideas as well.
To sign up for the Truewealth Asian Investment Daily, you can click here, or visit our
website at www.truewealthpublishing.asia.
You can also sign up, or ask us your questions or thoughts, by dropping us a line at feedback@truewealthpublishing.asia.
Once again, welcome. And thank you for joining us. We hope this is the start of a long
and profitable relationship.
Kim Iskyan
Founder, Truewealth Publishing
Singapore
Asia is Trumped!
Introduction
One loud American man is sending waves throughout the entire financial world.
Hes not a central banker. Nor a Wall Street insider. He used to be a TV star. And he
doesnt currently hold political office.
His incendiary language is causing the stock and bond market to change course with
every word that comes out of his mouth. His opinions know no boundaries especially
his opinions on Asia.
Some are absurd. Some are sensible.
Regardless of what you think of him, his rhetoric is causing political and financial
wheels to spin faster. And once these wheels get going, they will have major financial
consequences positive for some and negative for others.
Everyone is asking what if this man takes political office. But weve gone a step further
and played out every potential scenario. Including the damage hes already done.
This report will address some of these scenarios and will guide you through the financial
storm thats coming... regardless of whether he takes political office. This report will also
show you how to insulate your portfolio from these potential disasters and how to turn
a profit.
If you havent figured it out, were of course talking about U.S. presidential candidate
Donald Trump.
Trumps name has been displayed all over world headlines for the past year and a half. If
he wins the U.S. presidential election and moves in to the White House, the worlds financial markets will react swiftly and harshly. There are (and will) be major winners and
losers because of his candidacy.
Asia stands to be a major loser if Trump wins the election. Trumps anti-globalisation
stance works against the macro trends and policies that made Asia into the powerhouse
it is today. And Asian investors would be wise to diversify their portfolios regardless of
whether Trump becomes president. (Well show you why in a moment.)
But before we dive deep into some of Trumps opinions on certain world issues and their
consequences we need to quickly recap how weve gotten to where we are today.
Asia is Trumped!
The Rise of Donald Trump

Donald Trump has defied all odds since announcing his candidacy for U.S. president on
June 15, 2015.
It was considered a joke by most media pundits. Betting websites pegged his odds of
winning at 10 percent. He was running against favoured establishment candidates like
Marco Rubio and Jeb Bush (brother of former U.S. President George W. Bush and son
of former U.S. President George H.W. Bush).
Yet, he handily beat the 16 other Republican candidates in the Republican party primaries regardless of (or because of) inflammatory rhetoric against many ethnicities and
races, and women.
Trump and Asia
Hes taken a hard stance on a wide range of policies. Most relevant to Asia are his claims
that the region specifically China is a main cause of Americas problems. He thinks
Asia has stolen Americas manufacturing jobs.
He also thinks China has been intentionally manipulating its currency lower, in order to
make its goods cheaper to the world. As a result, he wants to place massive import tariffs
on Chinese goods to make U.S. goods more competitive.
This could bring the two countries closer to a trade war, where theyd put tariffs or quotas on each others imports and exports. That wouldnt be good for anyone.
Meanwhile, hes also threatening to reduce or remove the U.S. military from some areas.
For example, he wants to reduce the U.S.s long-standing military commitment to South
Korea. Six decades after the end of the Korean War, the U.S. still maintains 28,500
troops in Korea.
But under a Trump presidency that number could fall and South Korea would at the
very least have to spend more money on its military. In his words, How long will we go
on defending South Korea from North Korea without payment?
Trump also wants to abandon NATO or at least make other countries contribute equal
amounts of money and troops.
For investors, Trumps stance on China and the rest of Asia could result in enormous
disruption. Trumps overall approach is worrisome from a policy angle but also because of the enormous uncertainty that his unpredictability creates.
You see, markets hate uncertainty. By definition, the future is uncertain. But investors
and the rest of humanity have certain expectations of what the future will look like.
But a loose cannon like Trump as president of the United States makes global financial
markets anxious because of his ever-shifting perspectives and his unpredictability
(which is part of the source of his appeal to some voters).
(In a bit, Ill explain an important indicator on Trumps probability of winning and his
impact on financial markets.)
Asia is Trumped!
A Trump presidency would have clear economic impacts on countries like South Korea,
which would need to increase their existing defense spending. But theres also the issue
of how historic tensions in the region would play out in the vacuum created by a less-involved U.S.
But its not just Asia that will be a major casualty although it will be the biggest one.
Trumps other controversial ideas
Trump wants to ban all foreign Muslims (over 1 billion people) from entering the U.S.
while simultaneously keeping Mexicans and other South American countries citizens
from entering the U.S. by building a wall along the U.S.-Mexico border.
Heres what many dont fully understand: Decades worth of global relations economic,
financial, geopolitical could all be jeopardized from a Trump presidency. Some people
think thats a good thing.
The sorts of extreme policies that Trump advocates and the sorts of things he says
havent filtered up to the mainstream political conversation in the United States. Until
now. And now that theyre here, theyre not going away, regardless of whether Donald
Trump wins the U.S. presidential election.
Trumps popularity is clearly a sign of the people revolting against the political establishment. And its not just the U.S. thats fed up by the hollow promises politicians have
made for decades.
Take the United Kingdoms vote to leave the European Union on June 23. It was
thought to be certain the U.K. would remain within the E.U. One odds-maker had Remain odds at 93 percent certainty.
Anti-establishment candidates and movements are gaining popularity around the
world. Trump is just a reflection of these movements. Hes channeling the discontent of
Americans, in a similar way that politicians in many European countries and elsewhere
have.
But today, Trump is slumping in the polls. His chances of becoming the next U.S. president are dwindling. With the results of Brexit this past June, it wouldnt be smart to definitively write off the possibility. And just like the polls and odds-makers with Brexit,
politicians and the mainstream media are out of touch with what the people really
want. After all, Hillary Clinton Trumps primary opponent is the epitome of establishment.
So with the possibility of Trump becoming the American president, we need to analyse
what the consequences would be. And what they already are.
You see, even though Trump is no longer favoured to win, some of his policies and attitudes are and to some degree, have already become a part of the Republican base.
These include his xenophobic views regarding immigration, free trade, and globalisation.
So whether or not he becomes president of the United States no longer matters. The
damage has been done. The wheels have been set in motion.
Asia is Trumped!
And sooner or later, one politician or another will follow through and enact some of
what Trump has proposed. Well discuss what those implications are below.
Well start with his overall stance on free trade. Its his way to Make America Great
Again.
Asia is Trumped!
Why Trump Blames China

Trumps Make America Great Again message has continued to play well with a large
swath of economically and politically alienated American voters.
A major part of the foreign policy angle of his campaign has been to accuse China of
stealing American jobs.
A big element of his message is that the U.S. needs to keep more of what, in his mind,
belongs to it. So hes critical about what he views as an imbalance in the relationship between the two countries. The argument goes that China is taking American jobs, not following the rules of international trade, stealing commercial secrets, and manipulating
its currency to gain an economic advantage.
For Trump, the problem partly dates back to China joining the World Trade Organization (WTO) in 2001. He claims Americans have suffered the closure of more than
50,000 factories, and the loss of tens of millions of jobs, because other countries havent
followed WTO rules.
And China has been a big part of this. (Trump does tend to exaggerate, so the figures he
uses arent very reliable.) Counterfeit goods, the theft of intellectual property and lax labour and environmental standards are all part of his complaint against trade agreements in general.
Trump doesnt like the TPP
Hes also been a major critic of the Trans-Pacific Partnership (TPP).
In October 2015, the U.S. government signed the TPP along with 11 other nations, including Japan, Australia, New Zealand, Malaysia, Singapore and Vietnam. The TPPs
goal is to make it easier for the participating countries to trade with each other by removing trade tariffs and lowering importing and exporting costs between members.
Some people think that the TPP was orchestrated by the U.S. in part to keep China from
overtaking it as the number one economy in the world.
But in Trumps eyes the TPP is a terrible deal for the U.S.
China isnt actually a signatory, but he expects them to somehow join through the back
door and totally take advantage of everyone. Trumps views on this bring Southeast
Asia into the spotlight as well.
So if Trump does get into office, expect him to either renegotiate the terms of the TPP,
or even try to scrap it entirely. The signatories in Southeast Asia, hoping to increase
trade and grow their economies, could be the big losers in Trumps ongoing issues with
China.
Asia is Trumped!
Trump and the Bad TPP Deal

Last November, U.S. presidential candidate Donald Trump called the TPP a horrible
deal.
Trump called it, A deal that was designed for China to come in, as they always do,
through the back door and totally take advantage of everyone.
Trump might be on to something. China will be able to take advantage of one of the biggest free trade deals ever. And its going to do it through the back door as China isnt
part of the TPP.
The TPP started to be negotiated back in 2006. The 12 signatory countries account for
approximately 40 percent of world GDP and 25 percent of global exports. The World
Bank estimates the agreement could raise GDP by an average of 1.1 percent in each
country by 2030.
But the TPP isnt popular in the U.S., or with either of the people who are candidates to
be the next president of the United States. Donald Trump has said hell scrap the deal.
Hillary Clinton, who negotiated the TPP when she was the top American diplomat, has
said that she wants to improve the deal, and will likely try to change it.
In order for the deal to be approved in the U.S., it needs to be debated and passed in the
U.S. House of Representatives and in the U.S. Senate. President Obama hopes to have
the deal approved by Congress before the end of the year. But because its an election
year, the deal may not be approved until after the November elections.
Recent estimates suggest that China will miss out on US$46 billion in investment and
trade per year because its being left out of the TPP. But the reality is that China has established several free trade agreements (FTAs) that will allow it to grow without the TPP
and, most critically, some of these deals are with countries that are part of the TPP.
Chinas back door to the TPP
In fact, over the past decade China has developed FTAs with nearly all members of the
TPP. In 2006, it signed free trade agreements with Australia and Chile. In 2008, New
Zealand and Singapore signed FTAs with China. In 2015, China and ASEAN (Association of South East Asian Nations), which includes TPP members Malaysia, Vietnam and
Brunei, struck a trade deal.
What this means is that China has its own side deals with at least 8 of the 12 TPP members. These arrangements arent as comprehensive as the TPP, by any stretch. But they
are a solid foundation. And because of these, Chinas exclusion from the TPP matters
less than it would otherwise.
Besides this, the TPP of course does not exclude China from investing in TPP members
companies. Under the terms of the TPP, a third-party country can invest in, and be involved in the business transactions of, a business located in a TPP member country.
This could help explain why there was a 353 percent increase in Chinese investment into
ASEAN countries during the TPP negotiations (from 2006 to 2014).
Asia is Trumped!
A good example of this is the surge of Chinese investment in Yun Zhong Industrial Park,
in northern Vietnams Bac Giang province. So far, China has invested nearly US$1 billion in this one industrial park. And eight of the thirteen companies set up there are
from China.
Chinese Investment in ASEAN Soars

10
9
8
US$ billion
7
6
5
4
3
2
1
0
Source: ASEANstats
www.truewealthpublishing.asia
China is also involved in trade deals involving multiple countries that could nearly
match the TPP in size.
Chinas other deals
For instance, China is a leading member of the Regional Comprehensive Economic Partnership (RCEP). This is a trade agreement between the 10 ASEAN countries and the six
countries with which ASEAN has existing FTAs this includes China and TPP members
Australia, Japan and New Zealand. This deal is still being negotiated.
China is also developing the One-Belt, One-Road initiative, which is an effort to recreate
a modern-day Silk Road. The proposed infrastructure would more tightly connect the
continent of Asia to Europe and parts of Africa. Its estimated that it will end up costing
about US$8 trillion. It will allow China to trade more easily with the majority of the
worlds population.
To help fund its efforts, China established the Asian Infrastructure Investment Bank
(AIIB). The AIIB is designed to rival the World Bank (headquartered in Washington
Asia is Trumped!
D.C., and widely viewed as a tool

of the west). By having a big pool
of funds to direct lending to needy
countries, China anticipates that
it will be able to significantly expand its reach. The AIIB has 57
signatories, including a range of
traditional U.S. allies. (The only
major countries that havent
signed are the U.S. and Japan.)
China isnt too worried about being left out of the TPP. Its many
trade agreements with the very
countries included in the TPP
keep it insulated from the negative effects of the deal. And it will
likely benefit from it via the back
door just like Trump and other
opponents of the deal have been
saying all along.
Trump isnt just taking aim at
China and the TPP. Hes also
called for nixing NAFTA the
U.S. free trade agreement with its
North American neighbours Canada and Mexico. He called
NAFTA, the worst trade deal in
the history of the country.
The Economic Intelligence Unit,
which looks at how political risk
affects investment, warned that
Trumps hostile attitude to free
trade, and alienation of Mexico
and China in particular, could escalate rapidly into a trade war.
This again highlights Trumps
anti-globalisation, or protectionist leanings.
It is why we need to dig a little
deeper into Asia being a major
victim from Trumps opinions.
Why a Mass Murder in Florida Matters

A Lot to Asia
On June 12, 2016, a deranged gunman murdered
49 people in an Orlando, Florida nightclub. During
the shooting, the gunman (an American born in
New York) pledged allegiance to radical Islamist
terror group ISIS. He had been investigated by the
domestic U.S. intelligence agency for possible links
to ISIS.
Following the Orlando shootings, Donald Trump

renewed his calls for a ban on Muslim immigration, and expanded it to cover all countries that
have had some history of terrorism.
Trumps fortress-America policy stance resonates
with the U.S. population.
A poll earlier this year found that 43 percent of
adult Americans supported a temporary ban on
Muslims who are not U.S. citizens from entering
the United States.
The brand of xenophobia that large segments of
the American population are subscribing to
through Donald Trump doesnt equate trade
with China with Islamic terrorism. But it does cultivate a mentality that excludes anything that isnt
American (as defined by Trumps supporters).
And in that way, a gunman in Florida with possible
links to foreign terrorism represents a big threat to
trade with Asia and to Asias economic growth.
The underlying discontent of a large number of
Americans that Donald Trump has succeeded in
harnessing isnt going to go away even if theres
no President Trump. He has created space for
other opportunistic politicians to follow his path.
And Trumps policies his attitudes toward Asia
are relatively mild compared to other things hes
said are becoming mainstream.
Then its a matter of time before theyre enacted.
This is something to keep a very close eye on, because everything stays the same until everything
changes, all of a sudden.
Asia is Trumped!
10
Asia is Trumped!
11
Asia: A Major Victim of Trump

Asia has been a major beneficiary of Americas appetite for things.
Today, some countries in Asia Singapore and Hong Kong in particular thrive because they are at the centre of the global trade web. As shown below, trade accounted for
400 percent of Hong Kongs total economic output in 2015, and 326 percent for Singapore. That compares to a still-high ratio of 132 percent for Malaysia, and just 28 percent
for the U.S.
Total Trade as a % of GDP (2015)

400%
326%
134%
132%
86%
Hong Kong Singapore
Malaysia
Thailand
Source: The World Bank
Germany
41%
28%
China
U.S.
But things are going to change fast for Asia.

Remember, it doesnt matter whether Trump becomes president or not. His policies and
opinions have been planted among the Republican base.
Meanwhile, the anti-globalisation stance isnt just a Republican one. Left-wing socialist
Bernie Sanders, who contested the Democratic nomination for president, is also opposed to TPP. He believes American workers should come first as well. The massive support for Sanders pushed Hillary Clinton to want to re-work the TPP. (The irony here is
that when she was Americas chief diplomat, Clinton negotiated the TPP herself.)
Sanders has pulled Democrats farther left (socialist) as Trump has pulled Republicans
farther right (conservative).
So, if U.S. tariffs on goods from Asia increase, the entire relationship breaks down. Production would (in time) shift either to other countries (presumably those favoured by a
President Trump) or to the U.S. both of which would hurt Asia.
So far, weve only focused on Trumps impact on Asia and emerging markets. But developed countries (Europe and Japan) are impacted as well.
Asia is Trumped!
12
Asia is Trumped!
13
Will Donald Trump Turn the U.S. Into an Emerging Market?

Developed markets and emerging markets have long been on opposite sides of the investment world. Few investors realise it, but thats no longer the case. And the shift
could completely change how markets value risk and stocks with big implications for
your portfolio.
Let me explain.
It used to be that in developed markets (like the U.S., Europe, and Japan), things were
comfortable and easy, and there werent many surprises. Politics didnt matter much to
share prices. Economic growth was slow and steady, and stock returns were unspectacular but predictable.
Markets were well regulated and easy to trade. Of course you could be a victim of bad
brokers. But if you were a little bit careful, and a little bit lucky, you could avoid the
landmines.
And then there were crazy emerging markets (like most of Latin America, Africa, and
much of Asia), the wild west (or east) of investing, where anything could happen. Bad
politics could erase years of market gains in a matter of moments. Emerging economies
grew faster, but were a lot more volatile.
Stocks could boom one year, and stumble into the graveyard the next. And if there was
no rule of law, you could lose everything to corrupt government officials, or on the stock
of a company that never existed.
Since emerging markets were a lot less predictable than developed markets, they were
viewed as much more risky. So for years theyve traded at a lower valuation (like the
price-to-earnings ratio) than developed markets.
That means that for every dollar (or ruble, or peso) of earnings, investors pay less in an
emerging market than they do in a developed market. The graph below shows the differences in P/E ratios in different markets over time (the gray area shows how much
cheaper emerging markets are than the S&P 500).
Asia is Trumped!
14
30
50%
25
30%
20
10%
0%
15
-10%
10
-30%
5
2010
EM discount vs DM
P/E Ratio
Developed vs Emerging Markets P/E ratios
-50%
2011
2012
2013
EM discount vs DM (rhs)
MSCI Europe (lhs)
Source: Bloomberg
2014
2015
2016
S&P 500 (lhs)

MSCI Emerging Markets (lhs)
But two things are happening that are turning the idea of developed and emerging markets upside down so much so that soon the distinction wont even matter anymore.
How emerging and developed markets are changing
A lot of companies that are listed in developed markets most notably, the U.S. and
London, along with Hong Kong arent American (or British or Hong Kong) companies.
Thanks to globalisation, General Electric and Vodafone and HSBC, and hundreds of
other big listed stocks, get a lot (if not most) of their revenues from emerging markets.
That, and/or theyre dependent on demand in emerging markets.
So, to say these stocks are part of a developed market just because theyre listed on one
misses the point of the nature of the underlying business. For a lot of companies in a lot
of markets, this line between developed and emerging market companies hardly exists
any more.
Thats one reason why theres less of a dividing line between emerging markets and developed markets. The bigger reason is politics.
When I worked for a political risk consulting company a few years ago, we would talk
about how an emerging market was one where politics mattered to markets. That meant
that personalities (that is, the people in power) were bigger than, and more important
than, the institutions those people headed up. Whos president, what the parliament is
doing, what kind of people are making policy all of that could be the difference between making or breaking a market.
In contrast, in developed markets, institutions (like the judiciary, or a countrys constitution, or the civil service) are supposed to matter more that specific personalities. Its
Asia is Trumped!
15
the institutions that keep things rolling, day after day, regardless of whos in power. The
system survives, and the people at the top dont really have that much of an impact on
most of what goes on.
Today in emerging markets, politics still matter a lot like in Brazil and South Africa
and Malaysia and Russia. Who the president is and what crazy things hes doing can
completely change the business and investment environment.
And bad government can destroy the stock market for years. (Or rarely a good government can transform a country in a positive way.)
Why developed markets are starting to look like emerging markets
The big change is that developed markets are looking a lot more like emerging markets
when it comes to politics. From Germany to Japan to the U.S., politics in many developed markets are a lot more polarised than theyve ever been before. Different sides
dont want to talk they only want to yell. And after a while, a strong personality harnesses one part of this polarisation. Thats what can threaten institutions. And thats a
big risk.
A few decades ago, politics in developed markets might matter only because of their impact on specific policies or sectors. But in recent years, and now, personalities are becoming bigger than the institutions they inhabit (or which they hope to inhabit). If personalities can change those institutions for the better, its a good thing. But its a big risk
as the history of many countries in emerging markets has shown.
Markets dont like that kind of uncertainty. Political risk is a big reason for the valuation
gap between developed and emerging markets.
A main reason that a lot of people invest in emerging markets is that they think that over
time, the valuation levels (like the P/E) of some emerging markets will rise. As share
prices rise, the discount to developed markets would close.
But the opposite could happen: The valuations of developed markets could fall, and
close the gap with emerging markets by dropping to their level. Or that discount could
remain the same, as valuations of both emerging and developed markets fall as political risk across all markets rises.
As listed companies become more global in nature, and as politics in many developed
markets become more personality-based, that just might happen.
So, what does this all mean for global financial markets?
Well, to get an answer, we can take a look at whats considered the safest asset in the
world: U.S. Treasuries.
Asia is Trumped!
16
Asia is Trumped!
17
Trump vs. U.S. Treasuries

U.S. Treasuries are considered the safest asset in the world. They are considered riskfree. (Although, as weve explained, they are not really risk-free.)
When investors are nervous about the future of certain financial markets (stocks,
emerging markets, corporate bonds), they seek shelter in U.S. Treasuries. A foundation
of finance is that since the U.S. government can print more money or raise taxes when it
needs more cash, the chance of the American government defaulting on its loans is almost nil.
So savvy investors look to U.S. Treasury bond yields as the best way to monitor the state
of calm or nervousness in financial markets.
Today, the market signals theres a real possibility Trump may become President although odds-makers say otherwise. As a result, investors around the world have pushed
yields lower. (When yields on bonds fall, their price rises, and vice-versa see here for
more about how bonds work.)
In the graph below, the red line shows the odds of Trump winning (the odds are higher
as the line falls). (The graph reflects a two-week delay between the updated odds and
Treasury yields.)
Last October (2015), the probability of Trump winning the election (according to odds
comparison site oddschecker.com) stood at about 10 percent and 10-year Treasury
yields were at nearly 2.4 percent.
But in July, Trump won the Republican nomination, and his chances of winning the
presidency hit a high of 30 percent. The 10-year Treasury yield hit record lows at close
to the same time. Since then, Trumps chances have fallen to around 15 percent (see our
piece on prediction markets here). And yields have recovered, but are still close to record lows.
Asia is Trumped!
18
Why this relationship exists

Why is there an inverse relationship between Trumps odds of winning the U.S. presidential election and 10-year U.S. Treasury yields?
At first, this might seem strange. A few months ago, Trump floated the idea of making a
deal with creditors if the U.S. ever has problems paying back its debt. Even though he
later clarified his comments, Trumps business practices (and in particular, his liberal
use of American bankruptcy laws) should give pause to investing in American assets in
the event that Donald Trump becomes president.
This suggests that investors might sell rather than buy Treasuries if the odds of a
Trump presidency increases. And this would cause Treasury yields to rise.
But more to the point, many well-placed observers have expressed concerns about the
stability of the global macroeconomic and geopolitical environment in the event of a
Trump presidency.
In this case, the safety of Treasuries and the ability of the countrys central bank to do
whatever it wants to pay back debt beats concerns over Donald Trump.
Even though an American politician is a big source of concern and potential instability,
the antidote for investors is to buy U.S. Treasury bonds. Thats how Treasuries have
become a hedge against Donald Trump becoming president. (That, and the bond market
is otherwise broken see what we wrote here.)
But Treasuries may not be the best place to put your money. Instead, we think theres a
better place to invest. And profit handsomely.
Asia is Trumped!
19
That place is gold.
Asia is Trumped!
20
Donald Trump Gave Us a Very, Very Good Reason to Buy Gold

In May, Trump suggested that the U.S. government might consider negotiating a partial
repayment with creditors. That is, a U.S. government led by Donald Trump might see
U.S. government debt as repayment-optional.
According to the New York Times, Trump told CNBC, I would borrow, knowing that if
the economy crashed, you could make a deal. He added, And if the economy was good,
it was good. So, therefore, you cant lose.
What weve called the fantasy that debt issued by the U.S. government is risk-free
just took a small and dangerous step to being proven true.
As Bloomberg explained, Trump was suggesting that he might use his business skills to
reduce Americas debt burden by pushing creditors to accept write-downs on their government holdings.
Trumps history with debt
When he was a businessman, Donald Trump declared bankruptcy four times. In American business, declaring bankruptcy which often leads to paying creditors only part of
what you owe them is widely viewed as just another tool in the toolbox of capitalism
its not viewed as a catastrophic personal and professional failure, as it is in other parts
of the world.
In that sense, Trump the businessman viewed debt repayment as optional. He could
make a deal when his company crashed. But if the company grew it was good and
debtors could be paid. In any case, the company couldnt lose. But creditors could, as
they would wind up getting back a lot less on their loans than they thought they would.
As the New York Times explained, Such remarks by a major presidential candidate
have no modern precedent. The United States government is able to borrow money at
very low interest rates because Treasury securities are regarded as a safe investment,
and any cracks in investor confidence have a long history of costing American taxpayers
a lot of money.
The price of U.S. Treasuries barely moved when Trump made the comments in May.
This suggests that traders and markets see little chance of Trump breaking the sanctity
of the risk-free promise of U.S. Treasuries. This is stupid and ridiculous and never going to happen, said one banker quoted by Bloomberg.
But not long before, the chances of Donald Trump becoming an actual U.S. presidential candidate were viewed in similarly dim terms. Dozens of political analysts were absolutely convinced that Donald Trump was not going to become the Republican presidential candidate (a list of some of these confident assertions is here). So writing off
Trumps unique vision of the U.S. Treasuries market is a dangerous idea.
Asia is Trumped!
21
When Treasuries have been threatened before and what happened

Although the U.S. making good on its debt is viewed as sacrosanct, there have been
some close calls. In August 2011, partisan infighting in the U.S. Congress nearly resulted
in a default on U.S. government debt. During the episode, one-month Treasury bill
yields climbed to a 29-month high. That means that as U.S. government debt was
viewed as riskier, investors demanded a higher yield to hold it and bond prices fell.
(For bonds, the yield increases when the price falls, and vice-versa.)
Historically, in times of uncertainty investors and traders sell their higher-risk assets,
and flee to safety. Usually this means U.S. Treasuries the risk-free asset. But when
U.S. Treasuries themselves are the subject of uncertainty, theres another asset that has
traditionally been a safe haven: Gold.
In the summer of 2011, as the political dispute that led to the standoff over U.S. government debt simmered, the price of gold soared 25 percent from early July through midAugust. The next month the price of gold hit its highest levels since 1980.
10-Year Gold Price

2000
1800
1600
USD/oz
1400
1200
1000
800
600
400
2006 2007 2008 2009 2010 2011
Source: Bloomberg
2012 2013 2014 2015 2016

It wasnt a coincidence that the price of gold spiked as uncertainty over the notion of
risk-free became a topic of debate. As weve written before, there are lots of good reasons to own gold and Donald Trump just gave investors another one. If Trump becomes president, and there is a greater-than-zero chance that he still views U.S. debt as
subject to a deal, the price of gold will soar.
Just because Trumps opinion on U.S. debt is viewed as ridiculous, it doesnt mean all
of his financial views are misguided.
Asia is Trumped!
22
After all, no one becomes a billionaire without at least some business acumen. So even
though weve run through all the negative ramifications from Trumps proposed policies he does provide some well-rounded investment strategies. Weve extracted some
of the best below.
Asia is Trumped!
23
Trumps Six Best Investment Strategies

A possible future president of the United States knows how to get what he wants. And
hes told us how.
In 1987, Donald Trump wrote a book called The Art of the Deal. In it, he outlined what
he says are his 11 key negotiation strategies.
These arent quite investment tips but they are strategies focused on improving investment outcomes. Here we focus on six of the tactics that Trump lays out that are most
relevant to investors, and to understanding what a Trump presidency might look like.
1. Think big
I aim very high, and then I just keep pushing and pushing to get what Im after.
Sometimes I settle for less than I sought, but in most cases I still end up with
what I want.
Aiming high while investing can be a good idea, as long as it doesnt lead you to
take on too much risk. What we can learn from Trumps tactic is to have investment goals whether theyre long term, short term or something in between.
Have a financial plan and (Trump recommends) be ambitious.
2. Protect the downside and the upside will take care of itself
I always go into the deal anticipating the worst. If you plan for the worst if you
can live with the worst the good will always take care of itself.
Investors should also plan for the worst-case scenario. The next economic crisis
will be the one no one sees coming. You can protect your portfolios downside by:
Diversifying spreading risk around by investing in different asset classes.

Limiting your borrowing using too much leverage will only make any
losses you have to deal with worse.
Hedging whether using cash, gold or a combination of other non-correlated assets.
3. Maximise the options

I never get too attached to one deal or one approachI keep a lot of balls in the
air, because most deals fall out, no matter how promising they seem at first.
You also shouldnt get too attached to one stock or one asset class. If the investment is not working out, sell it and move on. If you like to own gold or real estate,
learn more about other options, like the stock or bond markets. Then when gold
loses its luster and real estate prices sink, you will be comfortable with some
other types of investments.
4. Enhance your location
Perhaps the most misunderstood concept in all of real estate is that the key to
success is location, location, location First of all, you dont necessarily need the
best location. What you need is the best deal.
Asia is Trumped!
24
Real estate investors can take those words to heart. But so can stock market investors. Consider markets or stocks that are being overlooked by other investors,
or avoided altogether. Thats often where youll find the most attractive investment opportunities, or the best deals.
You can also enhance your location by owning stocks outside your home market. It will provide some diversification and can help you earn better returns.
5. Fight back
In most cases Im very easy to get along with. Im very good to people who are
good to me. But when people treat me badly or unfairly or try to take advantage
of me, my general attitude, all my life, has been to fight back very hard.
If you have been taken advantage of by a less than scrupulous investment advisor
or personal banker, one option is as Trump suggests fighting back. One way
to do this is to raise your complaint to the local financial services regulator. For
Singapore, thats the MAS, and in Hong Kong, its the SFC.
6. Contain the costs
I believe in spending what you have to. But I also believe in not spending more
than you should.
Investing involves risks that are out of our control. We can limit them, but not
eradicate them. But what we can control is costs.
One way to do this is to open a discount brokerage account and save yourself
the expense of a broker. (Click here for our guide to opening a brokerage account
in Singapore, and here for the Hong Kong version.)
You can also keep your costs down by investing in low-cost index products. These
products, including exchange traded funds and index funds, track a stock index
like the STI or the Hang Seng. Plus, they perform better than most professional
money managers at a fraction of the cost. Saving money on investment fees is
one of the easiest ways to boost your investment returns.
These strategies have served Trump well. Applied carefully, theyre mostly investment common sense.
But, even though we can use some of Trumps strategies to help our portfolio, we
may also need to protect our portfolio from some of his other ideas.
Asia is Trumped!
25
Asia is Trumped!
26
How to Protect Your Portfolio From Donald Trump

A lot of Asias economic growth over the past few generations has been built on the back
(and pocketbook) of the American consumer.
Asian economies first Japan, then the so-called Asian tigers, then China, and now Vietnam and other emerging economies in the region have been a major beneficiary of
Americans endless hunger for things. But factories in Asia can only continue to feed the
monster with cheap stuff if the U.S. allows it.
If tariffs in the U.S. on goods from Asia increase, the entire relationship breaks down.
Production would (in time) shift either to other countries (presumably those favoured
by a President Trump) or to the U.S. both of which would hurt Asia.
No one knows whether the more noisy threats by candidate Trump would become actual
policy. The logistics and cost of moving production elsewhere, if it would no longer be
economically viable in some parts of Asia, would be enormous. And politicians in the
U.S. and everywhere else often dont follow through on their campaign promises.
But in the U.S., its about more than one mans threats. The rise in popularity of Donald
Trump reflects an underlying discontent amongst a large number of Americans that isnt
going to go away. Whether or not there is a President Trump, he is creating space for a
wave of opportunistic politicians to follow his path.
And then its a matter of time before some of these policies are enacted.
So for now, its important to properly diversify your assets.
Two ways to hedge a Trump Presidency
As noted above, one of the best ways to hedge a Trump presidency if the relationship
between Trumps chances of becoming president and U.S. Treasury yields continues is
to buy U.S. Treasuries.
A one-click way to buy U.S. Treasuries is through the iShares 20+ Year Treasury Bond
ETF (New York Stock Exchange; ticker: TLT). Its up 17 percent over the past year, and
just over 17 percent since the beginning of the year.
But buyer beware. Yields can fall only so far. They are already extremely low and may be
poised to rise. And a sharper reversal (thanks to higher U.S. interest rates, or lower
chances of a Trump presidency) could trigger a sharp fall in Treasury prices, and TLTs
share price.
Thats why I encourage everyone to hold about 3-5 percent of their portfolio in gold. But
theres nothing wrong with holding more.
Gold is one of the best forms of money. Its good portfolio insurance, and its a great
hedge against the degradation of fiat (that is, paper) currency by the worlds central
banks. Its not correlated to most other assets. And for the first time in many years, its
also a good investment (it usually isnt).
Asia is Trumped!
27
It would be wise to hold some physical bullion. But you can also buy gold through the
SPDR Gold Shares ETF (New York Stock Exchange; ticker: GLD). It can also be purchased on the Singapore exchange using code O87; or code 2840 on the Hong Kong
Stock Exchange. Its one of the easiest ways to get exposure to gold.
You can access our 22-page guide that provides everything you need to know about gold
here.
Asia is Trumped!
28
2016 Truewealth Publishing Pte Ltd. All Rights Reserved. All content made available to
you through our services are subject to and protected by copyright, and other intellectual
property laws of Singapore and international treaties.
Legal disclaimer: The insight, recommendations and analysis presented here are based on
corporate filings, current events, interviews, corporate press releases, and w hat we've
learned as financial journalists. They are presented for the purposes of general information
only. These may contain errors and we make no promises as to the accuracy or usefulness of
the information we present. You should not make any investment decision based solely on
what you read here.
Asia is Trumped!
29
Asia is Trumped!
30

Donald Trump September 8

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Donald Trump September 8

Uploaded by

Copyright:

Available Formats

Asia is Trumped!

About Truewealth Publishing

The Rise of Donald Trump

Why Trump Blames China

Trump and the Bad TPP Deal

Chinese Investment in ASEAN Soars

D.C., and widely viewed as a tool

Why a Mass Murder in Florida Matters

Following the Orlando shootings, Donald Trump

Asia: A Major Victim of Trump

Total Trade as a % of GDP (2015)

Hong Kong Singapore

Source: The World Bank

But things are going to change fast for Asia.

Will Donald Trump Turn the U.S. Into an Emerging Market?

Developed vs Emerging Markets P/E ratios

S&P 500 (lhs)

Trump vs. U.S. Treasuries

Why this relationship exists

That place is gold.

Donald Trump Gave Us a Very, Very Good Reason to Buy Gold

When Treasuries have been threatened before and what happened

10-Year Gold Price

2012 2013 2014 2015 2016

Trumps Six Best Investment Strategies

Diversifying spreading risk around by investing in different asset classes.

3. Maximise the options

How to Protect Your Portfolio From Donald Trump

You might also like