Investors are not known to track the sale of books. A 384-page biography about a long dead US president is selling fast.
A Man of Iron by Troy Senik is a biography of former US President Grover Cleveland that was published last year. It is one of the best-selling history books on Amazon. The book’s success is not because of reverence for Cleveland, who died in 1908.
It may be because Cleveland is the only president to have served a non-consecutive term. He was president from 1893 to 1897. He lost in 1896, but returned to the White House in 1901.
Donald Trump wants to match Cleveland. He is seeking to regain the White House next year.
The probability of the former president Trumping Biden in 2024 are now 36%. This is the highest it has been since Biden took office.
Cleveland’s second term provides a useful guide for Trump’s second innings. There is little in common between the policies of the two men. Cleveland was a Democrat who championed free trade. Trump wants to increase tariffs. Trump disputed Biden’s win in 2020. Cleveland was gracious in defeat. He held the umbrella over his opponent Benjamin Harrison during the inauguration.
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But, the approach may be similar. If Cleveland’s presidency is a guide, investors should brace themselves. Trump is likely to be more dogmatic in his second term. He would seek to implement policies that he failed to enact in his first term. Cleveland was determined to get his pound of flesh in his second term.
What does this mean for the stock market?
Trump has vowed to extend the wall to keep Mexicans from entering the US. Biden tried to roll back Trump’s plans for a wall. His administration may try to deport over 11 million illegal aliens.
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There are companies that would gain from these policies. Private prisons are beneficiaries. The US has the highest number of prisoners in the world, as a proportion of the population. The official prison system would not be able to handle the mass arrests and deportation.
The Geo Group is a private prison real estate trust. It is one of the largest providers of detention services in the US.
US Immigration and Customs Enforcement (ICE) has long-term contracts with Geo. The federal government accounts for more than 50% of Geo’s revenue, with ICE alone representing a sixth of that.
The undocumented aliens are detained for an average of 36 days at the cost of US$140 ($188) a day per bed. Geo provides these beds. Over 11 million people may have to face the judicial process before they are deported.
Geo’s revenue could receive a boost from deportations. At 9x FY2024 earnings, Geo seems to have decent value.
The winners from the wall proposal would be suppliers of building materials. The wall could cost up to US$25 billion, at least a fourth of which would be for cement. The shares in US-listed cement company Cemex are enticing. The company has a large presence in Mexico, which could be an asset with the wall revival.
Trump has a radical tax agenda. There are reports that he is planning a flat corporate tax rate of 15%.
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The flat tax rate could have a major impact. Illegal aliens would not be all that is repatriated. Companies would be encouraged to repatriate overseas profits. There could be a repatriation tax holiday of 10%. US corporations are stashing US$3 trillion of cash overseas, which is nearly a sixth of the country’s GDP.
Apple has over US$100 billion in cash reserves overseas. This is about two-thirds its total reserves.
The income tax cut from 35% to 15% would be a godsend to Apple. It may boost the net profit margin of the world’s largest corporation by a third.
Trump has vowed to be isolationist in foreign policy. The country has spent US$6 trillion ($8.2 trillion) on wars since 2001. If military spending is cut, including aid to Ukraine and Israel, defence stocks could come under pressure. The share price of RTX Corp (formerly known as Raytheon) has doubled since the invasion of Ukraine. This producer of weapons could be under attack.
Cleveland’s biography is rich in detail on the late 19th century. Investors should not ignore it. It could guide them in the mid-2020s.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era. He does not hold any position in the stocks mentioned in this column. This column does not constitute investment advice of any kind
