VRA Update: Trump's Pattern Change. It's Time for Insurance

Because pattern/trend analysis is such an important investing concept for active (and passive) investors, it's time that we address the politlcal elephant in the room...the possibility that the Donald Trump of the campaign trail may not be the same Donald Trump that we now have as President. The possibility that a pattern change is occuring...

Remember, $3 trillion in US stock market gains have occured since 11/8, with much of the credit going to our newly elected president. It's not called the "Trump Rally" for nothing. Plus, as you've heard me cover many times, the first year of a new presidency is when all sorts of bad things tend to happen; the Civil War, both World Wars, Vietnam, plus 9/11...each of these started/took place in a new presidents first year. Add to these, 10 bear markets and 8 serious recessions...with each starting in year 1. 

No, I am not off the Trump train. But I'm also not a blind follower, of anyone. And, hypocrisy may be my least favorite personality trait, period.

First, we saw Thursday nights military strikes in Syria. Whether you support the launch of 59 tomahawks against an airbase in Syria or not is not really the issue...at least not for me. The Trump that I remember casting a vote for repeatedly attacked then President Obama for his own involvement(s) in Syria. I'm sure you've seen the tweets and remember his many warnings, like this one: "why would we get involved in a war in Syria, a country that has done nothing to America? Is it worth starting World War III with Russia over? Huge Mistake!!"

Hypocrisy. There can be no other word for it.

BTW, according to multiple media reports, the airbase that we struck, as our primary target, is once again (mostly) operational, meaning that the $90 million or so we just spent on tomahawks may have had no real effect whatsoever.

Second, if the attack was a one-off, it might make some sense...new sheriff in town and all. But that now appears NOT to be the case. On CNN's 'State of the Union" this morning, UN Ambassador Nikki Haley just stated that "regime change in Syria is one of the Trump administrations top priorities in Syria." Exact quote.

But, just one week ago, Haley said "the US was no longer focused on getting Assad out." That's a very fast policy change, and again, not at all what we heard from #45 on the campaign trail. 

Pattern change. 

Regime change means US boots on the ground, and lots of them. A major military action like this will likely require more than 100,000 US troops in Syria, and that number may be low. In fact, late last night, one of the most instinctive and well-informed journalists around, Mike Cernovich, broke a story that reported the die may already cast and that "Trump is being manipulated (by Flynn’s replacement, McMaster) into sending 150,000 US troops into Syria". You can find his reporting on Twitter @cernovich. BTW, Cernovich was the first to break the Susan Rice “spying” story. He also broke a number of important election-impacting stories, so he's absolutely someone to pay attention to. 

Is this what we want, as a nation? Do we want to remove "another" countries leader? Most of us remember the disastrous consequences of removing Iraq's Hussein and Libya's Gaddafi, all too well. Let’s also keep this most important point in mind; Assad has been (effectively) fighting our sworn global enemy, ISIS, and doing so at great cost. Assad might also be the only thing standing between the complete slaughter of non-Sunnis in the country, including Christians.

Once again, regardless of whether US action in Syria is the right course of action or not, is this the Trump that we voted for? Personally, I can tell you that this is most certainly NOT the Trump that I voted for.  

Third, we've just learned that Trump has ordered a Navy strike group (4 ships) to the Korean peninsula, sending the most direct threat/message possible to North Korea and it’s unhinged leader, Kim Jong Un. Reports are that North Korea will continue testing, likely this week, their nuclear weapon capabilities, something that Trump and Secretary of State Tillerson have repeatedly stated "will not be allowed to continue."

You get my point. Right or wrong, these are not the actions that Trump promised us, most certainly not in his first 100 days.

As I've shared recently with VRA Subscibers, what we are witnessing appears to be a significant "pattern change", as it relates to Trump. Whether we're talking investing or politics, when a well-established pattern changes, we must be on alert. Trump's well-established pattern for close to two years was "winning", and doing so by standing his ground, against all comers and against all odds.

First, we saw Trump lose his incoming National Security Advisor, General Mike Flynn (also one of his most important and respected allies, during the campaign). A VERY big loss. Second, Trump's rough health care bill defeat. This was a monster of a political loss, as Trump made healthcare reform and the "repeal and replace" of Obamacare, one of his most important campaign platform staples. It was the healthcare defeat that really caught my attention, especially when just 48 hours before the vote was to take place, Trump stated "just watch, it's going to pass" in his most confident braggadocio. But with something like 17% support, the vote had to be pulled, never even making it to the floor. That's not just a loss...that's an embarrassment of a loss. 

And now…military action in Syria…and possibly even North Korea.

Pattern change.

All combined, this is why we added “insurance” to the VRA Portfolio on Friday, by purchasing our favorite voaltility ETF. The VIX could be ready to have another monster move higher. And yes, increased military action and geopolitical instability will almost certainly be a positive for our precious metals and energy positions. We are well positoned...for several bad/worst case scenarios.

Should global tensions continue to build, we could easily see $20/barrel added to the price of oil and more than $100/oz added to the price of gold. Even these figures could be on the low side.

One final point, and it’s one I’ve made many times before. If we are destined to have another major war (God help us all), one important action should be required first; the draft must be reinstated…but with one important caveat. The first to be drafted will be the children of our elected officials (both state and federal). Then, following boot camp, send them directly to the front lines. 

Let’s see how many in congress would still approve of ramped up US military intervention(s)…much less, world war.

Until next time, thanks again for reading...

Kip