OK, the headline is click bait, but I reckon it’s justified because, if I’m right, this could well be one of the most important stories you will read all year.
Last night Elizabeth (one of Australia’s best financial journalists) and I were having a drink at the Kittyhawk in Sydney, when it suddenly dawned on us: the REAL reason that Donald Trump is running for US President.
He’s long the Mexican peso!
True, this is no more than a theory, but it seems to be the only logical explanation as to why he’s running for President while at the same time apparently doing everything he can, through his behaviour and utterances, to lose the election.
Because if (when) he loses, he’s going to make one big stinking pile of money.
One big stinking pile
It’s also true that, for this theory to stack up, you have to make some pretty big assumptions – for example, that Trump is not the douche bag he appears to be, and that he’s running for sound (if opportunistic) business and financial reasons and not (or not just) because he’s a narcissistic, power-hungry, attention-seeking sociopath.
The theory is based on the fact that, as a number of financial commentators are pointing out, Trump’s standing in the US opinion polls is inversely correlated to the peso’s value against the US dollar. In other words, every time Trump seems to be gaining in the polls, the peso weakens relative to the dollar and vice-versa, as this chart shows:
Mexican Peso Capital Economics graphic
(My source: http://www.valuewalk.com/2016/09/mexican-peso-trump/)
There are two reasons for this, one general, the other specific: the general reason is that Trump, if elected, would be (based on his policy rhetoric to date) a much more protectionist President than his recent predecessors. This will be a negative for the US’s trading partners, especially vulnerable ones like Mexico.
The specific reason is that Trump has threatened to build a wall between the US and its southern neighbour – and that, if it were ever to become a reality, would be a BIG negative for Mexico. Of course, the threat is probably no more than preposterous blather, designed purely to drum up populist support. But preposterous blather or not, it adds to the downward pressure on the peso every time Trump gets a good run in the polls.
So let’s assume that Trump has structured his whole tilt at the White House as a USD/MXN play (stay with me here) and is using the peso’s current weakness to line his pockets with the currency. All he needs is a couple more lame-brain debates with Hillary and a few more snipes at Alicia Machado for his polling to tank and the peso to rise and, hey presto, he’s in the money.
Depending on how big his position is, his payoff when he finally (we hope) loses on November 8 could be in the tens or even hundreds of millions of dollars. The Art of the Deal, all right. Thank you and good night, America.
Of course, this is all pure speculation, but it should be enough to motivate some US investigative journalists (if there are any left) to take a look (please?). At the very least, sensible US voters should be demanding that Trump publish not only his tax returns, but his foreign currency holdings, too.