That’s it. I’m done. Finished. Had enough. I quit.
Now before you write in to our customer service begging me to stay (as I assume you would) I should probably add that I’m not quitting Port Phillip Publishing.
Far from it. In fact I don’t think there’s been a more exciting time to be a part of the most extraordinary financial publisher in Australia.
What I am quitting is trying to predict the outcome of global politics. It’s too hard, too unpredictable. Too convoluted, cantankerous and crazy. It’s not my bag, so I quit.
I’ll be frank with you. On Wednesday I put my neck on the line and said Hillary Clinton was going to win. I had some pretty good reasoning behind my view — or so I thought. And I said what I thought.
I was wrong. Oh boy was I ever wrong.
She didn’t just lose, she was hammered pillar to post. Yes, the final result was kind of close between Trump and Clinton. But she massively underperformed her predecessor (Obama) and Trump massively outperformed his (Romney).
We should also point out that Clinton is still in front in the overall popular vote.
That’s right, overall she’s got more votes than Trump. But thanks to the US Electoral College system, Trump is the President. Clinton is now the fifth person to win the popular vote and not end up as President. Unlucky.
To be fair though, not all the vote counting is done. There’s still a heap of votes to count, so Trump still could win the popular vote too. Either way it matters little; President-elect Trump is here.
The year of long odds winners
The father-in-law of a mate of mine theorised that if Trump could win, then perhaps Scotland would beat England in the latest World Cup qualifier. I suggested it was as good as a sure thing…
After all, if we look back this year there have been some long-odds underdogs that have surprised everyone.
Early in the year, Leicester City Football Club won the English Premier league. This might mean little to you, but at the start of the season they were at 5,000-to-1 odds of winning.
Then of course there was Brexit. We all know how unexpected that was.
Of course the Western Bulldogs won the AFL Grand Final. They were the first team to win it from eighth spot on the ladder going into the finals. At the start of the season they weren’t flag contenders and carried the odds of 16-to-1.
Even 120-to-1 least favourite, Lasqueti Spirit, won the VRC Oaks just over a week ago. Bolting from the front the unexpected win was the victory of the Spring Racing Carnival.
Trump was even at 150-to-1 with Ladbrokes to win the Presidency early on in the race. Many bookies even paid out on Hillary early. They were that confident in her winning — ouch!
Imagine that accumulator multi-bet… A $1 accumulator on, Leicester, Brexit (Leave), Western Bulldogs, Lasqueti Spirit and Trump would have returned of more than $9.32 billion.
That’s right, those five outcomes would have turned $1 into $9.32 billion!
But hindsight is a wonderful thing, isn’t it? And I’m pretty sure no bookmaker in the world would have paid out that multi — it would bankrupt most of them. But long odds and imaginary winnings teach us one important lesson. 2016 is the year you don’t write off rank outsider upset.
As such, I’ve given up on trying to predict political outcomes or professional sports results.
Sticking to what I’m good at
The good news is I’m not giving up on picking stocks. Luckily for me, picking stocks that can outperform the overall market is a lot easier than predicting the voting patterns of countries or the ups and downs of professional sports.
Now, on the face of it companies might appear to be unpredictable. In reality they often follow reasonably predictable patterns. They operate on quite normalised standards when you think about it. They are mostly structured the same. They all have to follow set reporting rules. They spend money (or should do) on research and development.
Some of them invest in their long term growth. Some focus on short term opportunities. But they all are responsible to grow the company and the share price for shareholders.
That makes them somewhat predictable. And if you have sufficient knowledge of the industry they operate in, then you can make far more educated predictions of their direction.
Of course you also have to consider the ‘macro’ factors that come into play. Whether the UK is part of the EU single market still does matter. The President of the US still does matter. It all matters — but only to a certain extent.
Great companies are great companies no matter what else might be going on. Companies often last far longer than any President does. They also are able to weather economic storms far better than some countries do.
That’s why it doesn’t matter how many times I get it wrong predicting an election or referendum. When it comes to my job, what I’m good at — picking stocks — it only matter whether I get those right or wrong.
In my weekly update for Revolutionary Tech Investor this week I said that, regardless of the victor, two of my military-focused stocks would benefit.
‘Both Clinton and Trump favour increased military spending. That’s a tick for [stock #1] and [stock #2], both of which have big, longstanding deals with the US Department of Defense.’
The very next morning stock #1 was up over 7.5%, and stock #2 was up over 2.5%. Interestingly after the Trump victory there were plenty more stocks in our buy list that were tearing up the price charts. Five of them were up double digits within the day’s trading.
Thank god I’m better at picking stocks than predicting presidents!
Admittedly I’m still a little surprised at how big the gains in our stocks have been in the last two days. Trump was supposed to put fear into the markets and cause big losses. But I guess he was also supposed to lose.
Over lunch last week with Kris, Bernd and another of our colleagues, James, I said, ‘You know what would be funny? If Trump ended up actually being pretty good.’
We’ll he’s surprised us at every turn so far. What’s not to say he’ll do it again?
And maybe I’ll be right for once.