Keep Your Powder Dry

by JDH on October 3, 2020

I have no idea what it means to “keep your powder dry”.  Gun powder, I assume, because if it’s wet it won’t ignite?  Baby powder, because there’s no point in putting wet powder on a baby?  Two different images, same implications.

My operating thesis is this: Trump wins the election in November, probably by a big margin, so there is no doubt about the result.  Why?

First, it’s always about the economy, and the average guy on the street perceives that Trump has tried to bring back manufacturing, and jobs, and that’s what’s important.

Second, security.  The average guy on the street sees the unrest, and riots, and doesn’t blame Trump for them.  Trump is perceived as more of a law and order guy than the other guy.

Third, Trump’s coronavirus diagnosis is brilliant.  I’m not saying he’s faking it; I assume he legitimately is infected, which proves he’s reckless, because as the President of the most powerful country in the world you should be able to create a bubble around yourself to prevent infection.  How hard would it have been to require everyone around him to wear a mask?  But, this will help him get re-elected.  Some people will have sympathy for him, but many others will say “oh well, at least he walks the walk”.

Trump has always said the virus is serious, but we should not shut down the entire economy.  There are risks, and they are risks worth taking.  Like a general who leads his troops into battle, Trump was willing to risk infection to go to meetings, and campaign, and lead.

I assume that by Canadian Thanksgiving he will be back in the White House, on the road to recovery, and he will be able to say “this was serious, I should have been more careful, but even for a 74 year old obese male you can recover, so it was worth it to protect American jobs!”  The public will rally, and he will win.

Note in my comments above I used the word “perceived”.   It doesn’t matter whether or not Trump is smart, or is actually bringing jobs back to the USA.  What matters is that enough people perceive that he is, and that’s what matters.

As for the markets, October is traditionally a “bottom” month, the month that consolidations end and new upswings begin.  So, I predict we will see a bottom in the next two weeks, probably coincident with Trump returning to the White House, so the next two weeks will present a great buying opportunity.  Hence the need to keep your powder dry.

Regardless of who wins on November 3, the money printing will continue, and that flows into stocks, so I expect to see new highs made in 2021.

I also expect to see a continued flight to safety, so gold stocks are still a “must own”, and a good value at current prices.

Check back next week and see if my predictions are correct, or ridiculous.

In the interim, keep your powder dry.