The Establishment Strikes Back

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The Establishment Strikes Back
Image source: CNBC Video Screenshot

Donald Trump, the Capitol and the military-media-industrial complex.

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Q3 2020 hedge fund letters, conferences and more

The Establishment Strikes Back

In the week since January 6th's Capitol Offense, President Trump has been deplatformed by Twitter (TWTR), Google's (GOOG), (GOOGL) YouTube, and Facebook (FB). Salesforce (CRM) has cut off his campaign's email service; Shopify (SHOP) and GoFundMe have cut his organization off as well. Trump-supporting Senator Josh Hawley has had his book contract canceled by ViacomCBS (VIACA) subsidiary Simon & Schuster, and Hallmark demanded Hawley return their previous political contributions to him. Meanwhile, Amazon's (AMZN) AWS division and Apple's (AAPL) app store put the alternative social media platform Parler out of action.

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In addition, Walmart (WMT), Amazon, Morgan Stanley (MS), Dow (DOW) and AT&T (T) announced they were cutting off donations to Republicans who challenged the certification of the electoral vote. The ostensible reasons for these companies' actions were to defend democracy and protect against violence. Let's consider the more likely rationale and its investment implications.

Defending Democracy

Deplatforming an elected President and exerting corporate pressure on legislatures may seem like an odd way to "defend democracy", but this is the argument establishment types on both the nominal left and right of center have been making.


Former CIA agent and 2016 Presidential spoiler candidate Evan McMullin offers one example of that above. Also, none of these corporations took issue with legislators objecting to previous elections.

Preventing Violence: Trump Called For A Peaceful Protest At The Capitol

The other ostensible reason some of these corporations have given for their actions is preventing violence, but this strains credulity as well. For starters, President Trump explicitly called for peaceful protest in his speech on January 6th (you can read the transcript of the speech here to see for yourself), and, reportedly, meta data indicates the rioting at the Capitol started twenty minutes before Trump's speech ended.

Considering that Trump spoke a mile and a half away from the Capitol, at the Ellipse, it's likely these initial rioters didn't hear any of it anyway.

Also, if social media and other companies were concerned about preventing violence, they wouldn't have supported the perpetrators of the civil unrest last year, which included the worst rioting in America in a half century. And they would have censored Democratic politicians such as Speaker Nancy Pelosi, Senator Kamala Harris, and Representatives Ayanna Pressley and Maxine Waters who arguably incited violence last summer.

Trump Capitol

The More Likely Rationale

President Trump ran on three broadly popular policies that are opposed by America's bipartisan establishment: balancing trade, restricting immigration, and avoiding more military adventurism abroad. The point of anathematizing Trump (and possible successors such as Hawley) is to restrict the range of acceptable politics to exclude those positions.

Trump CapitolThe meme above illustrates the principle.

It's notable that the media have elevated Karl Rove and Liz Cheney to attack Trump.

Their goal seems to be to make neoconservatism the right edge of our political Overton window. So our leaders can debate whether to bomb Iran or just sanction it, and whether dentists should pay a top income tax rate of 35% or 40%, all while agreeing on the need for more immigration, and unilateral free trade.

Investment Implications: Go Woke, Go Broke?

"Go woke, go broke" is the theory that if corporations pursued left-leaning policies, they would ultimately hurt their businesses, and so they would be discouraged from doing so for too long. This isn't quite correct, as Mike Cernovich noted recently.

Prospects For Government Action

On the plus side for Woke Capital, the apparent neutering of Senator Josh Hawley (whose canceled book was titled "The Tyranny Of Big Tech") means Silicon Valley likely won't have to worry about antitrust action in the near future.

On the con side, this is likely their high water mark internationally, as foreign governments won't want to risk having done to them what Silicon Valley did to Trump.

Twitter got a first taste of that this week, with Uganda shutting it down ahead of that country's election.

An Objective Assessment

As the popularity of the saying "go woke, go broke" suggests, people have the tendency to confuse what they want to happen with what will happen. We want companies that do egregious things to fail. That doesn't mean they will. At Portfolio Armor, we use an objective method of analyzing securities that takes our emotions out of the equation: we gauge options market sentiment (If you're interested in the nuts and bolts of this, we broke down an example of this analysis with a small cap stock here). It's worked fairly well recently. For example, here's the performance of our most recent top names cohort to finish its six month tracking period.

options market sentiment

Note that Shopify (SHOP), one of the companies that took action against Trump this week, was one of our top names back in July. A couple of other companies mentioned above for taking action against Trump and other Republicans this week, Amazon and Twitter, were top names of ours in recent months. What is options market sentiment saying now about them, and other companies that took actions to "defend democracy" this week?

Hallmark is a family-owned company, and GoFundMe isn't publicly traded either. Of the other companies, our gauges of options market sentiment aren't particularly bullish on any of them now. Whether that's due to their recent actions, general market conditions, or other factors, I don't know, but it's striking nevertheless.

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