But why do investors have to respond to Trump's tantrums? Why don't they collectively just ignore him?
Basically, if Trump threatens to take some action against Amazon that may hurt its value as a company by 10%, and investors believe there is a 50% chance of Trump following through with this threat, the investors will (theoretically) collectively lower the price of the stock by 5%.
A price on a stock market is determined wholly by future outlook, which a president's negative tweets can affect, hence why some companies with high earnings expectations in the distant future cough Tesla cough have ridiculously high price/earnings ratios on their shares.
P/E ratios don't tell the whole story, e.g. AMZN has a high P/E ratio because they aim for low profitability by reinvesting in growth, similar to Netflix who's still taking on debt to build out its inventory.
When a companies growth and revenue has stagnated their P/E ratio then becomes a strong indicator for market value / share price.
There could possibly be a more optimistic pricing in the markets if we factored in, just as a random example, that people are more timid to short rather than buy, as a short can easily result in a loss higher than the entire value of the position. An interesting read if you'd like to go down the rabbit-hole of that ideology would be anything on the concept of 'Adaptive Markets' by Andrew Lo. Rather than the common physics/maths-based approach to market behavior, it focuses on a more biological one, and thus includes these 'emotional inefficiencies' that may be present in market pricing.
More seriously, there's a lot of uncertainty affecting the US political and economic prime movers that's not priced into the market, for reasons I don't understand. You could have knocked me over with a feather when a con man with his own private parking spot at bankruptcy court won the Presidential election and markets went up.
Put the goat behind the wheel of a tank with a brick on the gas pedal, and I think you may start to see why there's a degree of real fear behind what otherwise would be off-kilter ranting from a surprisingly loquacious ungulate.
But as soon as one person doesn't ignore him and start "panick selling", everyone else loses.
The President is the leader of the USA. You cannot ignore him.
When Trump / Jeff Sessions announced that they were going after marijuana, marijuana stocks fell. Trump announces tariffs on Aluminum, users of aluminum fell (ie: Ford). Making Aluminum and Steel 25% more expensive in the US has long-term effects you cannot ignore.
You CANNOT avoid Mr. Trump or his tariffs. You can't dig your head into the ground and "ignore him". When Mr. Trump decides to do something, it has cascading effects on the rest of America.
Mr. Trump controls the FBI, the DEA, the FTC, the FCC, the USPS. Directly. Mr. Trump can add and remove policies from these great agencies without even asking for anything from Congress. Pure, unilateral power of the executive order.
You CANNOT ignore this power. Its how America works.
Mr. Obama encouraged taxes to benefit solar-manufacturers and electric car companies. This caused those stocks to go up, and investments into green-energy to flourish. Sure, there were some failures (see Solyndra), but I think it was overall a net-benefit to the USA.
We're now manufacturing advanced Solar Panels that are better than a lot of other countries (although China is still manufacturing them cheaper...). And Tesla greatly benefited from the tax-break on electric cars.
That's the sort of thing a President is SUPPOSED to do: use his powers to lead the nation. Trump is using his powers to turn us against each other.
We all know how the big tech companies pay basically zero tax by elaborate international tax reduction schemes.
https://twitter.com/realDonaldTrump/status/98080078331370291...
21, as much as you might like, YOU do not determine the course of this discussion. Mr. Trump's tweet has more relevance. The focus of the discussion is therefore on the relationship between the USPS and Amazon, and how it would affect the USA.
If Mr. Trump decides to start tweeting about fixing the double irish with a dutch sandwich loophole (see: https://www.investopedia.com/terms/d/double-irish-with-a-dut...), then I'll support it. Alas, that is not what Mr. Trump is talking about today. Neither you nor I determine the course of the national discourse. Only Mr. Trump has the power of the bully pulpit.
I'm not sure what's you point here. This is what the US president does (unlike other countries) - has a lot of power to directly intervene in many places. This is what voters expect from him, and this is the issue on his mind.
Amazon is not the only one abusing the USPS. Chinese companies like AliExpress do the same thing all over the world, taking advantage of national post services to ship a 50 penny screw free from China to UK for example.
https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...
My point is that Mr. Trump is not talking about the double irish with a dutch sandwich loophole. He never has, and probably never will. Mr. Trump had an opportunity to fix it in last year's tax overhaul. But he turned a blind eye to the well known tax issue.
Therefore, your earlier statement:
> We all know how the big tech companies pay basically zero tax by elaborate international tax reduction schemes.
is... well... I agree with it. Companies shouldn't be abusing the double irish with a dutch sandwich loophole. But our President is ignoring the issue. And therefore, neither you nor I can do anything about it.
Actually we could do something about it. People don't want to buy from companies which use child labour or which destroy the environment.
Thus you have all tech companies painting themselves as green as possible.
We are already seeing a trend in people demanding that companies support the "local economy". I think it's just a matter of time until they will demand for them to also pay "local taxes".
And then you'll see this page appear on the Internet: https://www.apple.com/taxes/, just like this one which exists today: https://www.apple.com/environment/
If Mr. Trump were complaining about Alibaba or even doing something about it, maybe then I'll chime in on that discussion. Otherwise, it seems kind of irrelevant to the greater discussion that our President is putting forth.
Unless you think that Mr. Trump, the FCC or the other powers that be are actually doing something about the Alibaba thingy? Or that Mr. Trump even cares about this issue at all: http://a.abcnews.com/images/Business/abc_donald_trump_made_i...
The only reason Mr. Trump is talking about Amazon is because Jeff Bezos owns Washington Post, and Mr. Trump doesn't like the articles that WashPo are running. When Mr. Trump stops using Chinese labor, and his own company stops abusing these same rules... then maybe I'll trust that he's taking the issue seriously.
If your point is that you support tariffs on China for unfair practices, then I agree with you. The part where I stop agreeing with Mr. Trump is where these tariffs start to affect US Allies (ie: Canada, Australia, UK), or close US Trading Partners (Europe, Mexico, etc. etc.).
Because I'm interested in human psychology, kind of as a hobby. I find it fun to observe how people become incredibly righteously indignant on what they think is a principled basis "But he turned a blind eye to the well known tax issue" and then do the very same thing. Donald Trump cherry picking = bad, you = ok.
I also find it interesting to interact with people who think they can read minds: "The only reason Mr. Trump is talking about Amazon is because Jeff Bezos owns Washington Post, and Mr. Trump doesn't like the articles that WashPo are running."
> If your point is that you support tariffs on China for unfair practices, then I agree with you. The part where I stop agreeing with Mr. Trump is where these tariffs start to affect US Allies (ie: Canada, Australia, UK), or close US Trading Partners (Europe, Mexico, etc. etc.).
I support fairness + pragmatism. China was given extremely favorable tariff treatment as they were developing, but they are now far, far beyond the development phase and it is well past the time that tariffs are normalized, as well as other unfair advantages fixed (free worldwide shipping subsidized by mostly Western postal services, like USPS).
But to listen to the typical fresh out of school HN expert armchair economists, current tariffs are "just right", as if they never change, and never need to change to accommodate changing conditions. In other words, they are incredibly ignorant of history (such as Obama's similar actions....where were the dire Smoot-Hawley warnings then?), but even worse, their emotions related to the topic seems to have disabled their plain old common common sense.
> I also find it interesting to interact with people who think they can read minds
Normally, I'd continue discussing this with you. But I've been literally banned when I "return the favor" here on YCombinator. The mods really don't like aggressive discussions in this area. Therefore, this is where the discussion ends.
I've made a personal promise to the mods to not escalate towards personal attacks anymore on this site to keep my account active, and therefore I'm unable to reciprocate your subtle personal attacks against me.
Personally, I strongly disagree with this policy, or at the very least believe they are going to need to revisit it soon due to the bizarre nature of discourse on recent topics - so many people refuse to engage in intellectually honest, non-deceptive discussion.
Unsurprisingly (based on the somewhat snarky tone of my comment, but absolutely and objectively justified imho), I am of the opinion that you were yet another of these people. Disagreeing on politics is one thing, refusing to engage on points of contention but instead moving the topic back to a preferred talking point, as politicians are famous for, to me is a depressing change in the level of discourse on HN.
Perhaps I've done this myself to a degree? Maybe, but it wouldn't be out of malicious intent, it is out of frustration.
Thanks for "a" reply at all, my spirits are lifted. But, I would be curious to know the perspective from your side of the political aisle, not about the topic we're disagreeing on, but whether HN has changed in the ways I'm describing. It may be less easy to notice if you don't hold opinions contrary to the norm, but no harm in asking.
EDIT: Ah yes, nice to see I got my obligatory downvote.
The theory is that:
Companies with international operations didn't repatriate funds because the U.S. because the U.S. was not competitive. Now it is.
It's worth noting this is not limited to Tech companies, XOM paid nearly 0% for decades, and, based on the returns that we have seen, we believe that Trump's family business may have paid 0% taxes for > a decade as well (because it had a deductible loss).
https://www.usatoday.com/story/news/politics/2018/03/07/trum...
Mr. Trump has the power to do this. And he did, just a few weeks ago. Mr. Trump is realizing the extent of his powers and is beginning to use the office of the Presidency with efficacy.
[1] http://abcnews.go.com/Business/key-facts-us-steel-aluminum-i...
My neighbors are all up in arms over this. They blame Amazon entirely for this woman’s troubles. On our FB group they’re talking about boycotting Amazon entirely.
Personally, I think both the USPS and the carrier negotiated their contracts poorly.
I'm not saying that the Justice Department would take the case to court (still less that they would win). But the stock market may care about such possibilities, because if they happened, Amazon's share price would take a hit - a bigger hit than it takes just from Trump whining about them.
If Mr. Trump wants the USPS to screw Amazon over, he has the power to do so. Its clear that Mr. Trump doesn't care about the long-term survivability of the USPS anyway, so he certainly has the power to "weaponize" the USPS and change its terms to become anti-Amazon.
On the contrary to your post: it is the JOB of investors to pay attention to the US President, as well as the powers he has... to keep your investments safe. Its your 401k retirement at risk here. Therefore, it behooves you to move your money to safer pastures if the President is making threats.
No, he can't. There are laws in place to prevent the USPS from changing the price based on who is shipping. The USPS is Net Neutrality at its best.
Uh huh.
Let me get more specific then.
https://www.scribd.com/document/254642175/Amazon-USPS-Sunday...
What is preventing Mr. Trump from tearing up this contract for Amazon Sunday Deliveries?
Hint: absolutely nothing. Mr. Trump can destroy the USPS's revenue AND hurt Amazon at the same time if he so wished. I guess destroying the contract will take 30 days, but in any case, Mr. Trump can make "Sunday USPS deliveries" of Amazon goods incredibly more expensive in just one month.
Mr. Trump may need to fire a few Post Office directors, but Mr. Trump doesn't really seem to care too much about the turnover of this organization he's running.
> "There are laws in place" is literally dismissing anything he can do; because its clear he's gone over the law before (the travel ban), he'll do it again, and again, and again, until the law has no foundation left to stand on.
And he lost on the travel ban, twice. In fact, when you look at what he has done that are against the law, he gets smacked down. He does not win on such things.
> Hint: absolutely nothing. Mr. Trump can destroy the USPS's revenue AND hurt Amazon at the same time if he so wished. I guess destroying the contract will take 30 days, but in any case, Mr. Trump can make "Sunday USPS deliveries" of Amazon goods incredibly more expensive in just one month.
There would be complete shitstorm if he did that since USPS makes money on the Amazon contract. Trump does not rule in a vacuum and even his shills in Congress would come down on him if Amazon packages stopped being delivered. Plus, Jeff Bezos can put messages at the start of every Amazon Prime Moive/Show asking for Amazon customers to call their Congress person to complain. Little message on Amazon.com on why there is no Sunday delivery would be a shitstorm to Congress. Trump might be the President but Jeff Bezos has millions of US voters using his website every day. I also guarantee that more people like Amazon.com than Trump.
Erm, Trump doesn't seem to care about the number of shitstorms he causes.
If anything, Trump (and his base) are HAPPY when they get shitstorms. "Drain the Swamp", "Snub the coastal elites", etc. etc. If Trump wanted to prevent shitstorms, maybe his Cabinet-level officials wouldn't leave every 3 or 4 months.
Trump doesn't care about Congress or laws. He just does whatever he can do. Sure, the courts smack him down sometimes, but the power of the Executive Order means he truly can hurt Amazon (to the detriment of greater America) if he really wanted to.
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There are PLENTY of powers Mr. Trump can do. The Justice Department can investigate Amazon for antitrust. So can the FCC. Heck, the FCC just got rid of net neutrality (due to Mr. Trump's most recent appointee). Demonstrating the power over the Internet that Mr. Trump wields.
USPS is just the most obvious way (IMO) that Mr. Trump can hurt amazon. And it seems to be the one that Mr. Trump's tweets are focusing on.
It's also worth pointing out that judicial remedies to Trump's wrongdoing are retroactive; they occur only after Trump has acted. In the meantime, before the courts get to act, real damage is done to actual people. It's a case of act now, ask questions later.
You mean, eventually, after God knows how many people got kicked out.
https://www.vox.com/2017/6/29/15892378/muslim-ban-work-visa-...
"There are laws in place" is literally dismissing anything he can do; because its clear he's gone over the law before (the travel ban), he'll do it again, and again, and again, until the law has no foundation left to stand on.
Please correct me if I’ve been reading too much fake news :).
Edit:: a cursory Google search seems to indicate that the President can indeed limit immigration [0].
[0] http://www.latimes.com/politics/la-na-pol-travel-ban-legal-a...
He barked a lot about tariffs too, and eventually actually followed through.
So it's not just Amazon but any potential future target that may take a hit.
Mr. Trump is directly attacking Amazon, and is saying that he wishes to change USPS rules to extract more money from the Amazon deal.
Its not "emotional" to sell Amazon stock after this tweet. Its common sense. Mr. Trump clearly has the power to hurt Amazon, and he's threatening them.
So as an investor, why SHOULDN'T I sell Amazon in light of this news?