Article / 16 January 2017 at 13:00 GMT

Trump has a history of not delivering

Former managing editor, / Saxo Bank
  • Donald Trump will be inaugurated as next president on January 20
  • Trump has helped spur an equities rally on back of $1 trillion stimulus package
  • January 11 press conference provided no detail whatsoever on package
  • Investors would do well to heed the lessons of Trump's business career
  • Failure to see through projects to fruition appears to be a hallmark
  • Read more on our page dedicated to Trump's inauguration

l Just tell 'em what they want to hear. Photo: iStock

By Martin O'Rourke

For those of you minded to take a punt on the $1 trillion fiscal-stimulus package pledged by president-elect Donald Trump, it might be wise to take a quick glance at the business maverick’s history to get a feel for whether he will actually deliver.

The so-called Trumpflation trade has helped spur an equities bandwagon since his November 8 election victory that has seen the Dow Jones come within a hair’s breadth of taking out 20,000, the S&P 500 reach new highs, and the Nasdaq Composite Index go beyond 5,550.

It’s worth remembering where those indices were on November 8 — the Dow was at 18,332, S&P 500 was at 2,139, and the Nasdaq Composite was at 5,193.

You can just feel the optimism

Source: SaxoTraderGO

It's a very similar story with dollar too which has swept all before it in the last two months. Any sense of sobriety has only really emerged in the last week or so but hubris still dominates the markets ahead of Friday's big event.

USDJPY's almost inexorable path since November 8k

Source: SaxoTraderGO

A lot, then, has been invested (literally) in the new US president and his pledge to spend big, cut taxes, and sweep away regulations has drawn parallels with the Reagan era. It was not a surprise then that a lack of detail as to his plans for 2017 in his much-awaited press conference last week caused equities to retreat and a move towards safe-haven gold and bonds.

The markets are now questioning if he will actually deliver.

Trump juggernaut

It’s a fair question and one that certainly resonates with me as I’ve had personal experience of the Trump juggernaut in action. In a piece for TradingFloor in December 2015, I told a tale of meeting him when in Moscow in the winter of 1997/98 when my journalistic career was just beginning.

Trump blew in on a wave of glory promising fantastical revamps of the 3,000-plus Rossiya hotel that stood behind Red Square and epitomised the very worst of post-war Soviet architecture. It was, shall we say, the beast to Red Square’s eternal and never fading beauty.

There was also the smaller matter of the boutique-style Hotel National Moskva on the corner of Tverskaya Street, one of the Russian capital’s prime shopping streets and some 200 metres from the Kremlin.

Trump’s vision was audacious, it was all-encompassing, breathtaking even and, of course, it was going to revolutionise the hotel sector in Moscow. It also ultimately amounted to a whole pile of nothing. The old nothingness, if you will.

The cockroach-plagued Rossiya was eventually demolished in 2006 and the Moskva did eventually get its revamp but Trump’s little hands were conspicuous by their absence.


The National Moskva did indeed get its revamp, but it had nothing to do with Trump. Photo: iStock

Of course, it’s fair to point out that doing business in Russia in the late 1990s was never an easy path and it was well known that it was difficult to get anywhere as a foreign investor (or indeed a local investor) without either being ‘connected’ or willing ‘to facilitate’ the process. Given that, it might well be that once the due diligence begun, Trump realised his investment might go down a black hole and his return would never see the light of the day.

Except of course, there’s a pattern here.

Ancestral pastures

Trump’s ancestry takes him back to Scotland via his mother and it was again with much fanfare that the president-elect laid out grand plans for a golf course in Aberdeenshire after he bought a prime piece of property north of oil-rich Aberdeen more than a decade ago.

He then became embroiled in a drawn-out planning-permission battle with the local council over the next two years for the construction of a state-of-the-art golf resort.

Chair of the Aberdeenshire council at the time was Martin Ford who told the BBC’s Wake up to money programme on January 13: “He was arrogant, not terribly well briefed on the issues and he played games – he kept on pretending he hadn’t heard the questions he was asked so getting people to repeat them.”

“It was the sort of thing you saw him doing through the presidential primaries designed to put off his opponents from saying what they want to say.” (It was also evident in the way Trump would only take questions from journalists on January 11 of whom he approved with worrying implications for the freedom of the press of the US).

Ford labelled Trump a “narcissist… he seeks and requires adulation… he changes his position [and] says things that are demonstrably not true. He’s a very poor predicter of his own future behaviour and that was certainly loud and clear in Aberdeenshire. He’ll say one thing, then reverse it and then go back to his original position.” 

For the record, Trump got planning consent in 2008 for his grand-vision golf resort, but, while the course has come to fruition, a much smaller club house than projected has since materialised and a 16-bedroom hotel has emerged instead of the planned 450-bedroom hotel that was expected to create thousands of local jobs.

“It’s very difficult to know what he’s going to do next because he does not appear to know himself,” said Ford.

This is the worry for all those Wall Street bulls. The promised economic benefits to the local region in terms of job creation did not come through in Aberdeen and the investment pledged in order to help the council overcome environmental concerns has also not materialised. Is history about to repeat itself?

We’re left looking to the record of Trump the businessman. Those who might suggest there is an agenda in this article (there is — it is opinion after all) should note that we’ve not even touched on the bankruptcies that have plagued his business career bankrolled, let's add, by a small fortune when he got his whole empire rocking and rolling in the real estate sector back in the 1970s. Nor have we gone near the accusations that Trump is somehow in thrall to the Kremlin.

What then of Trump the politician? With a limitless war chest at its disposal, maybe the constraints that applied to Trump the businessman will not matter so much as a politician. There are different constraints of course of a political nature, and the realities of power in a global macro environment may also limit his actions.

But actually, all of these points are largely irrelevant. It’s the fact that he consistently says what he wants his audience/constituency to hear without regard to the consequences that is the pertinent factor here. (Brexit flag-wavers might also want to take note of this after he 'pledged' to put Britain first in the queue for a trade deal this weekend).

They want growth? Promise them growth. They want jobs? Promise them jobs. Mannah from heaven? Well, let’s throw some of that in too. And if it's a return to the gunfight at the OK Corral that they desire, give them the nod and the wink that the good old days are coming back too.

Those who’ve punted on the Trumpflation trade are already at the crossroads. Will he put 'his' money where his mouth is or will it crumble before our eyes?

There are only so many promises you can keep, after all.

Grand vision, superb golf course, great hotel and spa but this is at St Andrews in Scotland and most definitely not to be confused with Donald Trump's efforts north of Aberdeen. Photo: iStock

Martin O'Rourke is managing editor at Saxo Bank
Patto Patto
Good article Martin .......a nice touch being able to include your own experience with The Donald.
Martin O'Rourke Martin O'Rourke
Thanks Patto. Enjoyed writing it :-)
Krunil48 Krunil48
Thanks Martin for your article and the previous one on Donald Trump, it is an interesting story. There appears to be a lot of debate about where he made his money or whether it was inherited from his father and his business success which makes it difficult to know the truth except that he is obviously very wealthy now. My point in issue (not that I was a clinton supporter mainly because I did just not like what I saw as her miserable and smug atitude) is as to where the 1 trillion of investment is going to come from if the US already has huge debt. Excuse my niavete but does he intend to 'print' this money or borrow it and if so will markets be prepared to lend that money and at what cost to US interest rates? He intends to lower taxes at the same time and to forcast an increase in growth that will deliver the taxes to pay for this investment? It is a strategy, I guess, but the question is whether it will work. Perhaps markets are forcasting that they believe to some extent, it will?
Martin O'Rourke Martin O'Rourke
Hi Krunii48, everything you raise here is entirely pertinent. I wouldn't pretend to have the answers and Ford's observation that Trump is virtually impossible to predict suggests we're in for the proverbial roller coaster.
Krunil48 Krunil48
This comment has been redacted
Martin O'Rourke Martin O'Rourke
Sadly I think you've hit the nail on the head and it is the injustices that spilled out of the great financial crisis with not enough of those responsible for it fueling the anti establishment wave we now see. And as you say, the more vulnerable will pay...
fxtime fxtime
The market fear index (the VIX) used by option traders throughout the World seems to be acquiring a new monicker....The Trumpdex as a fear measure value. The VIX is also a measure of potential wild moves appropriate !


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