Want to trade around Trump's Twitter account? Bravery is required.
Trying to cash in on the president-elect’s words, high-speed traders are working on a system “to bet against the companies Trump criticizes and for those he praises,” Politico reported last week. Wall Street traders are trying to pounce on retail investors' overreaction to Trump's tweets, and then buy before the battered shares bounce back.
Some are already working Trump’s tweets into their computer trading algorithms.
“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Trump tweeted on Dec. 6.
Trump was, again, only partially correct in his assertions. There are to be two new Air Force One planes, not one, and the $4 billion budget is the subject of some discussion — in short, the price hasn’t been set yet.
Boeing shares dropped nearly 1 percent — erasing about $1 billion of the firm's overall value.
Is reacting to Twitter wise for retail investors?
"It's nuts," said Kevin Tierney, with KJT Investments, with offices in New York and Philadelphia. Tierney owns Boeing, one of the president-elect's recent targets for criticism on Twitter, but the money manager isn't bothered by Trump's Twitter barrage.
He still owns Boeing for fundamental investing reasons, but warns that Trump has signaled that government contractors need to negotiate cheaper deals with suppliers. The stock has since recovered from the Trump Twitter-inspired sell-off.
That aside, "I wouldn't own a public company that derives more than 30 percent of revenues from the U.S. federal government - period," Tierney added. Boeing sells only a small percentage to government buyers, and most of its customers are commercial airlines.
"We don't do that kind of quick trades in and out," agreed Jack Vogel, with Alpha Architect robo-advisor in Broomall. "It's not investing, it's trading."
Vogel and his firm worry more about the Treasury market at this stage.
Alpha Architect's normal asset allocation for a 60 percent stocks, 40 percent bonds investor is now 30 percent U.S. stocks, 30 percent international stocks, 20 percent intermediate-term Treasury bonds, 10 percent REITs (real estate investment trusts), and 10 percent commodities.
Due to long-term trend rules, their allocations as of Dec. 1 were 30 percent U.S. stocks, zero percent international stocks, zero intermediate-term Treasury bonds, 5 percent REITs, and 10 percent commodities.
"We are out of international stocks, bonds, and half out of REITs due to trend," he added. The 55 percent not invested is currently in cash and/or money markets.
"Not all investors like trend rules, but we use these for our clients in most managed accounts," Vogel said.
Twitter wars aside, the speed at which news is disseminated now in financial markets is changing the landscape for money managers.
"The financial advice industry is now experiencing its Uber moment," noted David Kotok, chief investment officer at Cumberland Advisors, with offices in Vineland, N.J.
Electronic trading and computer algorithms make large numbers of active managers -- especially among active mutual funds -- redundant. Technology, new rules, and poor performance by active mutual funds "all combine to propel us into the new era of financial services," Kotok added. "The days of the transaction broker/financial advisor are now numbered."
Prudent Management Advisors said that Twitter is the least of Trump's priorities though it's a fascinating way for him to talk with Americans directly.
More important are the "basic economic contradictions at the core of many Trump’s economic policies that will need to be resolved," PMA wrote.
During a speech in 2014, Stephen Bannon, Trump’s chief strategist, said the president-elect is a hyper-capitalist who wanted to take capitalism to the inner cities and stop protecting large firms when they get into trouble.
"Cutting corporate tax rates and easing regulatory burdens while threatening CEOs and interfering in their capital and labor decisions is like putting air in your tires while locking the steering wheel," PMA told clients.
New SEC chief in Philly
The Securities and Exchange Commission last week announced that Sharon B. Binger, director of the Philadelphia Regional Office, will leave the agency at year's end.
G. Jeffrey Boujoukos, the Philadelphia office's associate regional director for enforcement, will be the new regional director.
Boujoukos joined the SEC's Enforcement Division in 2009 as regional trial counsel in the Philadelphia office. He has been associate regional director for enforcement in that office since March 2014. Before the SEC, Boujoukos was an associate and later a partner at Morgan, Lewis & Bockius in Philadelphia. He graduated from Lehigh University in 1989, and from Temple University School of Law with honors in 1992.
Binger had headed the Philadelphia office since February 2014, overseeing a staff of more than 150.