Trump's Wallet

If Donald Trump were a stock—symbol DT, not totally inappropriately—it would be climbing a wall of worry. The more people speak ill of DT, the higher it goes. The more they say that DT has peaked and that he cannot possibly be nominated, the higher his poll numbers go.

By implication, once the last doubters throw in their last doubt and concede that DT cannot lose his campaign will begin to decline. By the principles of contrary investing, the more optimistic people are the more likely a stock is to decline. See America's most beloved stock, AAPL over the last few months.

For now, the DT levitation has been based on more passion than reason. DT’s supporters have been saying that the great DT will be able to do everything that he says he will do. Why? Because he says so. After all, he builds tall buildings—see Howard Roark, if you will—and that means that he is a colossus who can run the world. Cf. Valerie Jarrett. If that’s not enough for you, then you need some more energy drinks.

Anyway, before we all drown in emotion and passion—never a great idea, Narcissus—we should try to quantify the DT stock rise. We should monetize DT. After all, sometimes everyone hates a stock because the company really is worthless, and vice versa.

Happily, Holman Jenkins crunches the numbers on DT in the Wall Street Journal. He offers more reason and less heat. We are very grateful.

If you love DT beyond reason, consider that this post has a trigger warning.

Anyway, Jenkins suggests that the Trump campaign has monetary limits:

But unless we miss our guess, our long national nightmare-cum-sketch comedy show actually has a termination date. It will end the moment campaigning begins to threaten Mr. Trump’s finances and business interests.

So far, Trump has done extraordinarily well with free media. As long as he gins up ratings, the television stations cover him. Each of his seemingly outrageous statements has generated a few news cycles, where people just kept talking about DT. DT has not been spending any money on media buys, for staff, for anything, and the stock kept going up.

Jenkins explains:

Mr. Trump has gotten extraordinarily far based on free media plus a degree of self-funding that might come from petty cash. But he hasn’t shown even the willingness to spend the $44 million that Mitt Romney spent on his failed 2008 effort. Running for president is expensive—a billion-dollars-plus expensive, even with a party behind you, and it’s not clear that even with the nomination Mr. Trump would have the GOP behind him in any meaningful sense, its foot soldiers, its donors, its super PACs.

In other words, does DT want to spend over $1,000,000,000 in cash to fund a campaign? Does he have that much free cash lying around? Keep in mind, assets are not cash. And liquid assets are not the same as assets that would have to be liquidated.

Jenkins crunches the numbers:

But not only has he not dipped into capital, lending his campaign a mere $1.8 million through the third quarter. His capital is not as deep ($10 billion) as he lets on. Forbes and Bloomberg News put his wealth at $2 billion to $4 billion. And assets that he could reasonably convert to cash are even less. Bloomberg puts the figure as low as $70 million, less than what several candidates in the race (Bush, Clinton, Cruz) and their super PACs already have raised.

How can DT raise that kind of cash? Would he be willing to sell properties or to mortgage them?

Jenkins says he would not:

He won’t want to liquidate major holdings. He won’t want to sign his name to nine-figure mortgages. 

But, running for president is a very expensive proposition and it involves a complex national organizational structure. If most of the party and the traditional Republican donors are not on board, the organization will have to be built from nothing.

But, Ross Perot did it. But then again, what purpose did the Perot campaign really serve?

Jenkins says:

Running is about to become a lot more expensive. When the campaign goes national after Iowa and New Hampshire, Mr. Trump would have to spend money on TV ads. To participate in widespread primaries and a convention fight he would have to hire staff. Mr. Trump, from day one, has likely never been down with any of that.

Of course, it’s possible—because anything is possible—that DT will continue to defy the laws of gravity and the laws of campaign financing, but how plausible is it that he would start running around raising money when he has built his campaign on the premise that he is so rich he doesn’t need to raise money.

As for campaign organization, he has done pretty well up to now without one. Why not imagine that DT has changed the rules of politics and that he can run a campaign on free media time and hot air?

And then there’s the brand, the DT brand. What happens, Jenkins opines, when DT’s business interests start to go south? What happens when people no longer want to do deals with the world’s self-proclaimed greatest dealmaker because they do not want to be associated with some of his intemperate and vitriolic remarks? If the assets start to lose value, how easily will DT be able to liquidate them or borrow against them to run a presidential campaign?

Jenkins answers:

Already Mr. Trump’s Middle Eastern business interests are under assault. He lost a few U.S. deals early on due to his slurs on Mexican-Americans. Now a handful of Silicon Valley biggies—the CEOs of Apple, Facebook and Google—have ventured criticism without mustering quite the courage to mention him by name.

What happens when important business partners start letting Mr. Trump know, publicly and noisily, they think he’s doing serious damage to the country? By Mr. Trump’s own inflated reckoning, most of his net worth resides in the value of his name.

Jenkins thinks that DT will not be able to stay the course:

We could be wrong but the Trump effort is probably self-liquidating. Expect a glorious, “I’ve got better things to do than hang around with you losers” exit just about the time he would have to start spending real money to keep going.

To be fair, before all the DT supporters start getting seriously discommoded, for all I know and for all he knows, Jenkins could just be one more step up the wall (or is it a ladder) of worry. Perhaps his negative assessment of DT is a sign that Trump’s stock is going to keep going up.