Capitalist Investor

Should You Listen to Billionaire’s Threat of Cashing Out of the Market if Harris Wins? Ep. 289

• Strategic Wealth Partners

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In this episode of the Capitalist Investor, Tony and Derek dive into a controversial headline from Fox Business involving billionaire hedge fund manager John Paulson's alarming statement on shifting to cash if Harris wins the presidency. With Luke on assignment, Tony and Derek explore the potential economic impacts of Harris's proposed tax policies, including increased corporate tax rates and a 25% unrealized gain tax on high-income earners. The hosts provide their insights on how these policies could affect the average investor and discuss investment strategies like active management and election-proof stocks. Don’t miss this engaging discussion and feel free to share your thoughts and questions at info@swpconnect.com.

1. John Paulson’s Alarming Headline
The episode kicks off with hosts Derek and Tony delving into a startling announcement by billionaire hedge fund manager John Paulson. Paulson, known for being a Trump fundraiser, warned on Fox Business that he’d move to cash and gold if Kamala Harris were to win the presidency. The hosts express concerns about the potential ripple effects of such headlines on the average investor. While Paulson can afford to shift to cash, the average retiree cannot. Tony emphasized the principle of "time in the market is better than timing the market," arguing that knee-jerk reactions can result in missing out on both the market’s peaks and valleys.

2. Potential Economic Policies of a Harris Presidency
Derek and Tony also scrutinize the possible economic policies of a Kamala Harris presidency, notably her unclear stance on various issues. Derek points out her proposal to increase corporate tax rates to 28%, something that the hosts believe would be devastating for the markets. Tony further noted that higher taxes on the wealthy could end up leading to job cuts and reduced economic growth. Both hosts agreed that such economic policies could cause at least a 10% market correction.
3. Active Management Versus Index Funds
In the middle of their discussion, Tony highlights the importance of active management, especially in volatile political climates. He argues that while the last few years have been relatively easy for index fund investors, times are changing. Active management, he believes, will shine through by identifying "election-proof" stocks. Tony cites companies like Cameco and General Dynamics as examples, explaining that both are likely to remain strong regardless of who wins the election.

4. 25% Unrealized Gain Tax Proposal
One of the more controversial topics discussed was the potential for a 25% unrealized gain tax on individuals earning over $100 million. Tony warns that such a tax could be a "death strike" for the stock market. By taxing unrealized gains, individuals like Elon Musk would be forced to liquidate a significant portion of their holdings, causing market turmoil. The hosts question the foresight behind such policies, stressing that the repercussions would extend beyond the wealthy and impact the market at large.

5. Conspiracy Theories and Political Wealth
In a lighter yet thought-provoking segment, the hosts delve into a conspiracy theory regarding the enrichment of politicians. Tony muses about how many politicians, despite their relatively modest salaries, end up becoming incredibly wealthy through real estate and lucrative stock investments. He hypothesizes that if high taxes on the wealthy were implemented, even rich politicians could be privately lobbying against such changes to protect their own assets.

The episode is a rich tapestry of financial insights, political analysis, and market strategies, making it a must-listen for anyone looking to understand the multifaceted impacts of the upcoming elections. As always, Derek and Tony encourage their listeners to send in their questions and show ideas to further explore these compelling topics.

Hello and welcome to this episode of the Capitalist Investor. As always, you have me, Diamond Hands D, and Tony the tiger. What's going on, man? What's up, man? Luke's on assignment. Yep. Yep. Always somebody's on assignment. It's rare to see the three amigos around here anymore. Absolutely. But we, but we got our, we got our soldiers. And that's me and you today. Absolutely. Today's conversation, I'll call it an alarming headline on Fox Business the other day about he was on Liz Klayman, his name's Paul, or John Paulson, about he's a multi billion, you know, he's a billionaire hedge fund manager who said he's going to cash if Harris wins. That's the headline. And, man, what a, what a scary headline. And here, and here's why. This is why. This is very scary to me, because you already have a handful of skittish investors worried about the next president, particularly Harris, because she, you know, the things that she's been talking about are, you know, in, you know, increasing taxes. No, there's not a lot of clarity on her policies. I can go on and on. Right. Then there's all this uncertainty. The market normally doesn't like that. And what this hedge fund manager came on and said, I'm going to cash and gold. Yep. Like, man, like, I've. I've heard that a lot in the past. You know, when people are just, like, terribly scared, like, I'm going to go to gold and cash. Right. And this is such a bad headline. He can afford to do that. He's a billionaire. The average investor, the average retiree cannot afford to do that. The old saying, time in the market is better than timing the market because not many people get it right, very rarely right. Because, yeah, you're gonna probably miss the top and you're gonna miss the bottom. So you're probably back to where you started because when you hit the bottom, you're too scared to get in. Exactly. And you're like, hey, I'm trying to eke out every last percentage point on the top. Like, it just doesn't work. And I feel like a, like. And I even got an email about this. That headline alone can tip some of these investors over the edge of, like, going from invested to cash. And I'm worried about that. Again, I don't run a dictatorship. I don't tell you what to do with your money. But, you know, the conversations that are created are sometimes unwarranted. So. Yep. So I think you hit the nail on the head there. That is the headline. You don't want to turn on the, on the tv and see. Yeah, that was alarming. You know, it should be noted John Paulson is a Trump fundraiser. You know, so he is. I don't know if. Well, this is my point. So he obviously has political affiliations, but I think it's pretty clear he's a hedge fund manager. It seems to be a very clear choice. And I'm not trying to sway people politically here, but when we're talking about economics and we're talking about the market and how it's going to react to different types of presidents, I don't know how you couldn't have this reaction if Harris was elected. And something we talked about quite a bit at one of the little deep dives we did the other night, the tax policy, especially the corporate tax rate, trying to take that up to 28%, I believe that would be horrible for the markets. And, you know, the. You watched the debate, maybe you didn't. It was very hard to watch. Hard to watch. But, you know, like, the, you know, Harris is like, you're making all these tax cuts for your rich buddies. No, I don't view it that way. Right. I could be wrong. I'm not. I'm not gonna sit here and, you know, stand on my tower. But, like, the way I look at it is that when you penalize the rich with taxes, they don't change their lifestyle. Exactly. And when they don't change their lifestyle and taxes go up, that means they're going to find other places to cut so that they can live their lifestyle. And if they are a business owner and taxes go up, that means they might just start cutting, you know, people, that's how you lose jobs, because they have, you know, especially if they're like, you know, publicly traded companies, or maybe they're privately, you know, or not privately, but, like, maybe pe firms own them. You know, like, there is always people looking at the bottom line, and when taxes go up, the margins shrink. How do you open up the margins again? You start cutting prices, and there's only so much things most companies run lean on technology and people and things like that. So when you squeeze them even harder, it's gonna really ruin the economic growth of. That's my lens. That's the lens I look through. Yeah, absolutely. Yeah, that's definitely going to happen. So. And while, while we're sitting here at all time highs and, you know, if a policy like that were to go through, it would. Is not a political stance to say it would be, it would be extremely detrimental to the markets. You know, just that move alone. If tomorrow they passed that tax increase, 28, 28% corporate tax rate, I think you see the market go down at least, at least 10%. Yeah, there'd be correction, at least. And so what this really drives home is that the last several years of investing have been, I'll call them, relatively easy. You invest in the index funds and you're going to have a high allocation to the mag seven. If you're an active manager, you're saying, wow, these stocks are defying gravity. Like, so if I invest in them, I'm actually gambling, because they don't, they don't fit. They might fit the macro theme and maybe the fundamental theme, but they don't fit the technical theme, the technical analysis theme, which our investment team has that three prong approach. Just because we love an area and love a stock does not necessarily mean we're going to invest in it. And I feel that we are on the cusp of where I, active management is going to start shining through, where if you hold an index fund, you own the winners and the losers. When you are actively managing around what is happening on a macro fundamental and technical lens, all three lenses, that is where you start trying to identify as many winners as possible. So another conversation I had with our investment team is like, you know, what do we like? Well, we're trying to identify as many election proof stocks as possible. So two companies that come to mind are Cameco, which is a uranium miner, which, uranium is the engine for nuclear power, and nuclear power is a bipartisan energy source. Both sides are on board for it. So there's, you know, again, we start taking a look at the macro and the fundamentals. It makes sense. Another one is general dynamics. They are a, you know, a defense creation company. They make bullets, airplanes, things like that, for military, but they also make private jets. But they can't make ammo. Like, they can't make ammo fast enough. Right? Because we do have a lot of geopolitical tensions going on. 70% of their revenue comes from the United States government. So we're going to continue this as geopolitical tensions stay high. That is a stock that is most likely going to continue to do well. And if the economy stays well, that means the rich are still being rich and they're going to continue to buy private jets, too. So that's the other side of their business. I know you ordered it. When does your private jet come in? You know what? I'm, I'm working on the color. You know, I. We can't get the color right. So it's still. I'm still waiting for delivery, still designing. The decals for the side. That's right. Well, you know, I think the last thing I'll mention, too, on this article, because he mentioned it in the interview, the 25% unrealized gain tax on people making over $100 million is also a death strike for the stock market, where. You know, again, it's taxing the rich. Exactly. And I understand the theory behind that. But have you thought about the repercussions, other than the quick payday, that the government would realize. Exactly. Which was never going to make it back to the people anyway. But that's a different topic. But, yeah, 25%. I mean, just think about it. Like, you know, Elon Musk, for example, if he is 70% owner of Tesla and this law gets passed, he's essentially going to have to liquidate 25% of his holdings, which is three quarters of the company. So just save the taxes on stuff that hasn't even been realized yet, and. All of those shares are dumped into the market. That's going to cause Tesla stock to plummet and. Yep. Because you gotta liquidate something. I doubt he can get a loan for all that money. Maybe he can. And that's. Or leverage it or something. I don't know. Like, wow, that's the. That's. So. That's the crux. So that's. That's what keeps me up at night. Right? Like, who would even propose this stuff? Like, you can't be that smart. Or you're hoping people are dumb, if that's your proposal. Really, honestly? Cause you're. You're just hoping people see that. Like, oh, yeah, let's get the rich people. But when you don't understand that it's going to sink the stock market. Well, think about this. So, conspiracy theory. Let's do it. You read all these questions, or you read all these articles about how all of these politicians have gotten very rich, being politicians. And how did they get rich? Real estate and lucrative stock picks. Lucrative entities that they, probably, the normal person doesn't have access to. Right. Um. They'd be hit, too. Do you think they're st. You think some of these people that have. Make 200 grand a year as a politician yet are worth $200 million? Do you think they want to liquidate $50 million or whatever they have? Yep. They do not. They'd have to sell houses and liquidate private holdings. Yeah, that's what this guy was saying. It would sink every market. You'd be, you'd be, you know, like I doubt, I think she'd have, I think the politicians, the rich, the really rich ones would have a back door, you know, or like a closed door back of the office meeting with her and say you're not doing that. Yeah, for sure. Anyway, that's my conspiracy theory. All right, well, we shall see what happens. We'll obviously be talking about this stuff all the way up through election day. So if you guys have any questions or comments, show ideas, hit us up at info@swpconnect.com and we'll talk to you next time. Sadeena. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.