Trump’s first week has given everyone a sign of things to come for the next four years. He has imposed a massive travel ban preventing tourists from 7 countries to enter the US, blasted the Mexican President, hung up on the call with Australian PM and prayed for Arnold Schwarzenegger’s Apprentice show ratings at the National Prayer breakfast. While people around the President are left to clean up the mess, we could well expect more from the President in the weeks and months to come.
We find it more surprising that his behavior has others around him also behaving amatuerishly as well. At his Senate confirmation hearing for the Treasury Secretary position, Steve Mnuchin deceived the Senate Finance committee members of his former bank’s aggressive foreclosure efforts that sparked the mortgage meltdown in 2007 and 2008. Likewise, Tom Price at his confirmation hearing for Health Secretary, lied about an investment that was part of an insider deal only available to a few. Peter Navarro, head of Trump’s National Trade Council, clearly needs a refresher course in economics after claiming that Germany was keeping the Euro artificially low to exploit the US and other EU countries, when in fact, the value of the Euro is determined by the European Central Bank, not Berlin. Following that comment, Navarro promptly announced the proposed Trans-Atlantic Trade and Investment Partnership dead. A few days back, Trump killed the Trans-Pacific Partnership agreement. And then there is Ted Malloch, Trump’s choice to be ambassador to the European Union, who, last week on BBC, predicted that the euro would collapse and compared the EU bloc to the Soviet Union.
Trump, even has leaders of other nations behaving erratically. After his controversial order on building a Wall along the Mexican border, Israel’s PM – Netanyahu tweeted saying “President Trump is right. I built a wall along Israel’s southern border. It stopped all illegal immigration. Great success. Great idea.” Now, Mexican PM has to cancel a meeting with Netanyahu as well, much like his meeting with Trump.
Future Wealth’s View
There is a concept in business strategy called “Groupthink” which is a psychological phenomenon that occurs within a group of people, in which the desire for conformity in the group results in an irrational or dysfunctional decision making outcome. Numerous articles on business strategy highlight the problems with Groupthink and how in striving for unanimity, people override their motivation to realistically appraise alternative courses of action. In their desire to be as audacious and arrogant as the President of United States, cabinet members and world leaders appear to be rationalizing their irrational and sometimes untruthful behavior that borders on incompetence. Given this backdrop, at Future Wealth, we view a sound investment strategy for the long term to be even more important. Next time, the stakes could be much higher, with grave consequences for the financial markets.