Tilting Against the World – Failed Business Practices

Stick with me today; it’s a long blog, but it also a wake-up call to those millions of Americans who actually think Donald Trump is an experienced and mega-successful businessman. Goldman Sachs reminded me, when Trump claimed massive business success, that he would have been so much richer if he simply took his sizable inheritance (and daddy’s “business loan”) and merely invested those sums in a DOW average mutual fund.

Despite the fact that any dog could get rich buying Manhattan real estate in the 1970 and 80s and doing nothing with it, Trump claims specialized real estate business prowess. Yet there are thousands of lawsuits surrounding Trump business operations and a disproportionate share of related bankruptcies and failed business (see above picture), everything from a defunct airline, a real estate “university” that settled a fraud claim with a multimillion dollar payment, bankrupt casino operations and a vodka that is no longer poured anywhere, to name a few.

His real estate expertise against Chinese billionaires, who know the market, was a disaster for him. His bullying arrogance just hit a wall. It was 1994, and Donald Trump had over-borrowed and, facing a bank call on his loans, he reached out to Hong Kong financiers to bail him out of imminent financial collapse. The New York Times (5/30/16) summarizes what happened, even before Trump was nominated by the GOP:

“‘I beat China all the time,’ Mr. Trump declared in a speech the day he announced his candidacy. ‘I own a big chunk of the Bank of America building at 1290 Avenue of the Americas that I got from China in a war. Very valuable.’

“Mr. Trump does have an investment in the building, an office tower near Rockefeller Center. But court documents and interviews with people involved in the deal tell a very different story of how he ended up with it… It began when a group of Hong Kong billionaires, including one who has been called the Donald Trump of China, helped rescue Mr. Trump from the verge of bankruptcy by investing in one of his properties in Manhattan…

“To strike the deal, Mr. Trump had to attend elaborate dinner parties featuring foreign foods he did not want to eat. He delayed the closing because of Chinese spiritual beliefs and hunted around New York for a ‘feng shui’ master to help with the building décor, instead of indulging his tastes for marble and gold, according to former associates of Mr. Trump who were involved in the deal

“But when his Hong Kong partners sold the property without his support, Mr. Trump waged a bitter, long-shot legal battle against them. And far from winning his share of the Bank of America building, according to court documents, he had to settle for it after losing in court. In the end, Mr. Trump’s alliance and eventual rivalry with some of Hong Kong’s richest men proved to be a tale of Mr. Trump at the extremes. It showcased his unflagging confidence in his ability to turn a bad financial situation around. But it also underscored his willingness to destroy a fruitful relationship with aggressive litigation.

“Their partnership began in 1994, after the collapse of the real estate market left Mr. Trump deeply in debt. He could not afford to make the bank payments on a 77-acre swath of land near Lincoln Center known as Riverside South, let alone to develop the property.

“In need of cash, he agreed to meet with intermediaries from a consortium of Hong Kong billionaires who were willing to buy the land, assume Mr. Trump’s debts and pay him 30 percent of the profits, as well as fees for helping to manage the development of the site, which they agreed to finance. It was by far the best offer he received

“The Hong Kong partners were wary of Mr. Trump’s well-earned reputation for litigiousness. But for more than a decade, Mr. Trump avoided conflict with them. Indeed, he often deferred to them. Chase Manhattan Bank, which held Mr. Trump’s mortgage, initially scheduled the closing of the deal during China’s Ghost Month, during which some believe the spirits of the dead roam the earth.

‘The Chinese told me that we would have to wait until after the fifteenth of September to close the deal,’ [Abe Wallach, Mr. Trump’s executive vice president of acquisitions and finance at the time] wrote in a chapter of an unpublished book he is writing about his years with Mr. Trump. ‘Trump went apoplectic.’ But he said that Mr. Trump went along… [The deal closed…]

“Instead of accepting his share of the proceeds, Mr. Trump sued his partners for ‘staggering breach’ of fiduciary duty in a lawsuit that demanded $1 billion in damages. Mr. Lo [one of the primary investors], who felt that Mr. Trump should have been appreciative of the deal he had received, called the lawsuit ‘a shock.’… And when the Hong Kong partners sought to invest the proceeds from the sale in Bank of America buildings in San Francisco and New York, Mr. Trump sought an injunction to scuttle the deal.

“The judge ruled against him. Instead of receiving the cash he wanted, Mr. Trump had to accept a 30 percent share in the profits from the two Bank of America buildings, tied up in a partnership that is slated to last until 2044. But today, Mr. Trump counts that legal defeat as a victory.”

Today, Donald Trump seems to have declared a tariff war against the rest of the world. That our economy is in the hands of an egotistical incompetent should scare most of us… but most Americans simply lack the sophistication to understand the failings of man who dramatically underperformed the marketplace based on money he just inherited or borrowed from his father. Trump is great at marketing success and skills he has never had. His biggest successes are bullying and spinning failure to look like a big win. His gullible base, willing to back a rogue Washington outsider at any cost, has bought into that fake persona hook, line and sinker.

Trump’s recent announcement of a new trade agreement with Mexico… well… it just isn’t remotely yet a trade agreement. What looks like a power play is supposed make Canada desperate to negotiate, has a huge catch. Despite Trump’s attempt to cast the deal as a non-NAFTA bilateral deal between the U.S. and Mexico, the Congressional mandate under which he is operating only empowers him to remake the NAFTA agreement, which cannot happen until Canada signs as well. Further, while broad strokes of a possible detailed agreement were generally negotiated, there is a lot of missing specificity that would be needed to have an enforceable agreement. A lot of stuff has to happen first! “The evaluation from Goldman Sachs economists was… polite: ‘We do not expect the revised terms to have substantial macroeconomic effects in the U.S. if they do take effect.’” Los Angeles Times, August 29th.

Not that what was agreed in broad strokes was so good anyway: “The contours of a ‘very special’ and ‘incredible’ deal with Mexico that Trump announced Monday [8/27] remain preliminary and are subject to Congress’ approval. However, the deal may meet neither of Trump’s main goals, industry experts and analysts say. If anything, the deal, which now needs Canada to sign on, could do the opposite. And that may come back to bite the president politically.

“‘It will cost us jobs,’ was the blunt assessment offered by Mickey Kantor, who shepherded NAFTA into existence when he was then-President Clinton’s trade representative. ‘Why we’re doing this is mainly to fulfill a political philosophy rather than create jobs.’” LA Times. For example, Americans looking to buy a new car anytime soon, above the rather massive increase in the costs of steel and aluminum under Trump’s 25% tariff against most of the world, if the Mexican trade agreement comes into effect, they can add additional costs to consumers because of automotive component manufacturing agreements (as to increased wages required to paid in Mexico and how much has to made in which country). But wait, there’s more.

Just about every nation in the world is a signatory to the World Trade Organization, an internationally dispute-resolution/regulatory body generally constructed to encourage free trade, a long-time GOP fundamental policy. But the WTO just ruled that the U.S. special tariff on Canadian supercalendered paper – mainly used in magazines, catalogues, corporate brochures and advertising inserts – had no justifying “national security interest” for the United States and generally violated WTO treaty requirements. Trump’s response?

“‘If they don't shape up, I would withdraw from the WTO,’ Mr Trump said in an interview with Bloomberg News… The WTO was established to provide rules for global trade and resolve disputes between countries.

 “Mr Trump says the body too often rules against the US, although he concedes it has won some recent judgments.

“He claimed on Fox News earlier this year that the WTO was set up ‘to benefit everybody but us,’ adding: ‘We lose the lawsuits, almost all of the lawsuits in the WTO.’

“However, some analysis shows the US wins about 90% when it is the complainant and loses about the same percentage when it is complained against.

“Mr Trump's warning about a possible US pull-out from the WTO highlights the conflict between his protectionist trade policies and the open trade system that the WTO oversees.” BBC.com, August 31st. Without the WTO, America’s place in the global economy would definitely be in jeopardy, no matter how much Trump thinks otherwise.

In the end, American consumers will be the biggest losers, a paltry number of new jobs will be created in arenas like steel and aluminum manufacturing which will never employ a mass of workers, while a lot more Americans in other fields (like automotive manufacturing, sales and maintenance) will lose theirs. Think Trump is even close to level of competence of genuinely self-made billionaires, from Warren Buffet, George Soros, Bill Gates, Jeff Bezos or Mark Zuckerberg? Insert gales of laughter.

I’m Peter Dekom, and the buffoon emperor in the White House is absolutely without a stitch of credible clothing surrounded by “experts” who share his dress code.