There is certainly no love lost between billionaire Mark Cuban and alleged billionaire Donald Trump. Cuban has consistently and brutally taken shots at Trump in ways designed to infuriate the Republican candidate. But behind Cuban’s mockery of Trump, there is clearly a very real fear. If Trump wins, the economy is in big trouble.
Heading into the lion’s den, Cuban joined Fox’s Neil Cavuto for a discussion on what an economy might look like if the election goes to Trump. The short answer: Expect your 401k to take a massive hit. Cuban said he’s so worried about the stock market’s reaction to a Trump win that he’s actually “hedging” his equity and bond positions in order to not lose millions in the ensuing chaos.
— FOX Business (@FoxBusiness) September 6, 2016
What does hedging mean? As Investopedia explains:
Portfolio managers, individual investors and corporations use hedging techniques to reduce their exposure to various risks. In financial markets, however, hedging becomes more complicated than simply paying an insurance company a fee every year. Hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements. In other words, investors hedge one investment by making another.
However, the rest of us don’t have the time, knowledge, or ability to micromanage our meager investments the way a billionaire like Mark Cuban might. Whereas Cuban is frantically hedging for the inevitable downturn, the rest of America is likely screwed.
In a real warning to America, the U.K. recently gave the world a prime example of what can happen when a country gets wrapped up in anti-immigrant hysteria and makes an appalling decision to cut off its nose to spite its face. Brexit, the vote to pull the U.K. out of the European Union, evaporated trillions of dollars from the English economy in an instant. Voters woke up the next day to find that their pensions, portfolios and individual investments had cratered. They also realized with growing terror that the group of nativists they voted for had, in less than 24 hours, already walked back the promises they had made to them about funding schools and hospitals.
America faces a similar crossroads. And with the race tightening, it’s clear that many voters haven’t learned the lessons from their English cousins across the Atlantic. Will Trump build a wall? No. Will he stop crime? No, of course not. But will he send a shockwave around the global economy as the world learns that the oldest on-going democracy in the world voted for a bigoted former reality television star? You can bet on it. Cuban certainly is.
Featured image via screenshot