3 Trump Trades
What if Trump wins?
Who will win?
Trump appears to be pulling away from Biden in the sunbelt while looking increasingly competitive in the rust belt. States that Biden won handily last time appear to be much closer this time. Sure he will probably win New Jersey, Oregon, and Virginia but polls are so tight that he might have to spend money in states that should have been free wins. It is entirely possible that Trump wins reach states such as New Hampshire and Virginia. 300 electoral college votes look likely; 350 is increasingly possible.
So what?
In a populist era, it isn’t clear that Republican fiscal policy will be much more conservative than Democratic fiscal policy. And if Trump wins by 10% instead of 1%, then he could sweep in governing Republican majorities in both legislative chambers. I had looked to merger arbitrage as one potentially benefitting strategy, but that idea is garbled by the populist JD Vance pick for veep, a noted ally of Liz Warren and fan of Lina Khan on antitrust.
The straightforward trade: bet on Biden losing.
Deposit $850 in PredictIt and put it all on a no bet on Joe Biden on the question of “Who will win the 2024 US presidential election?” $0.28 overrates his chances. It is far more likely that either he will be replaced (in which case the bet pays off $1) or will lose the general election to Trump (in which case the bet pays off $1). I see far less than 28% chance that Biden wins both challenges, probably closer to 20% than 30%. Trump is ahead. The news cycle from Biden’s senility to Trump’s bold survival of an assassination attempt makes it unlikely that Trump will give up this lead. Democrats can see everything I see, so the better Trump does, the more likely they are to try to jettison their weak candidate. These online prediction markets are great ways to churn credit card points. The new Robinhood (HOOD) Gold Card is the undisputedly best with unlimited 3% cash back. If you’re not on the waitlist, you should be!
The leveraged trade: Fannie and Freddie prefs.
I own FNMAS, FNMAT, FMCKJ, FMCCH. If Trump wins, he’s like to privatize these companies. Prefs could double on his win and double again on privatization. Trump expressed his views on these companies in this letter:
Kids in cages: Target Hospitality (TH)
Target Hospitality (TH) received a $10.80 takeover offer from TDR Capital. This isn’t definitive, but is more reflective of TH’s value than its $9 pre-offer market price that had been beaten down for some transitory reasons. Today, such a price is the reasonably likely downside. More likely: the bidder negotiates a deal around $13 per share. And with any luck other bidders emerge. The company formed a committee and hired advisors. A deal price in the high teens is entirely possible if they can get a second bidder. As soon as there’s more than one, the negotiating dynamics change. The target can dictate contractual terms. They can relax a bit knowing that they have a decent second choice then push a bit for the best one. For background check out my friend Matt Turk on why corporate history matters with Target Hospitality.
TH ran into trouble when the Biden administration cancelled their migrant housing center in Dilley Texas. The company has been able to quantify the damage and could still get a deal done. And a Trump win could lead to better prospects for reopening the facility.
Caveat
Anything could happen. Trump could lose. While the polls have been remarkably stable, events have been volatile.
Conclusion
Trump will probably be the next president — Biden will lose (so betters betting against him will win), Fannie and Freddie will probably get privatized enriching their pref holders (common more opaque based on potential dilution) and kids can go back in cages (not a fair description, but positive for TH).
TL; DR
I own FNMAS, FNMAT, FMCKJ, FMCCH, and TH as well as a bet against Biden winning reelection; you might want to too.
