Is Trump Making CEO Bank Accounts Great Again?

Donald Trump is still a week away from becoming the 45th president of the United States. Yet that hasn’t stopped him from making CEO stock options great again.

That’s the thrust of a recent Reuters story on the big gains in CEO stock option values since the billionaire businessman won the White House.

Here’s the first, and quite compelling, paragraph from the article:

Donald Trump once described Jamie Dimon as “the worst banker in the United States,” but the president-elect has helped make the boss of JPMorgan Chase & Co (JPM) $50 million richer.

Becoming $50 million richer since the election isn’t too shabby. So, if you’re a bit jealous of Mr. Dimon right now, I understand.

The story point outs that the JPMorgan chief is just one of many high-profile CEOs to run companies where the share prices have spiked since Election Day.

Reuters conducted an analysis of CEO option grants from the companies that make up the Dow Jones Industrial Average. It found that things really are great again for many of the world’s top chief executives.

Image credit: mandelman.ml-implode.com

Per Reuters:

Stock options held by Dow 30 CEOs surged in value by 23 percent to about $1 billion in 2016, with most of the gain coming after Trump’s election win.

Reuters said that the figures reflect outstanding stock options that could be exercised at the end of 2015, and not options that expired or vested in 2016.

The Reuters analysis pointed out that Jamie Dimon has seen his stock options spike in value by more than $50 million to $146 million since the election.

Meanwhile, Goldman Sachs (GS) CEO Lloyd Blankfein, a company that candidate Trump criticized harshly during the campaign, witnessed his stock options go from being worthless to being worth more than $11 million in a matter of weeks.

Again, per the Reuters piece:

Blankfein’s 322,104 outstanding options, granted in 2007 with a $204.16 strike price, were under water by $7.3 million on the eve of the presidential election. But by the end of 2016, their value had soared to $11.4 million. That was an $18.7 million swing, thanks to the Trump-inspired stock market rally and the U.S. Federal Reserve’s decision to increase interest rates, a boost for banks and credit card companies.

Now, I don’t know which candidate for president Mr. Blankfein or Mr. Dimon voted for on Nov. 8, but I do know that both are Democrats. So, I presume that means they probably didn’t vote for Donald Trump (although I can’t be certain).

My point here is not to comment on either executive’s vote. Nor is it to criticize CEO compensation in general, or to demonize those who have benefited mightily since Election Day.

Related story: The Rich Got $237 Billion Richer in the ‘Year of Populism’

Rather, I want you to realize that the reality of investing (as well as the reality of life) is that — regardless of whether you love or hate the current state of politics or the politicians in charge — you need to know that even the whiff of the proposals proffered by them can really move markets.

Goldman Sachs’ stock has soared 27% since Election Day, and JPM is up 18.2% in the same time frame.

We’ve seen that already, not just in the Dow, but also in the S&P 500, the Nasdaq Composite and particularly the Nasdaq-100, which is up nearly 4% so far in this young 2017. In all of 2016, the Nasdaq-100 was up just 5.9%.

The willingness on the part of Wall Street to, so far, buy into the Trump pro-growth, anti-regulation, lower-tax proposals reflects the optimism wafting throughout the country that we may indeed see a renewal of economic activity that “makes America great again.”

Yet be forewarned here that if a President Trump and the Republican majority in Congress fail to deliver on the agenda Wall Street has bought into, then things could get very uncomfortable for the bulls … and very quickly.

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What say you about the increase in stock options for top executives in the Dow? Do you think Wall Street will continue buying into the Trump optimism trade? I’d love it if you shared your thoughts with me, and to do so all you have to do is leave me a comment on our website or send me an e-mail.

***

Stocks finished the week slightly lower, although certain sectors (financials) helped buoy the major averages after strong earnings reports. The Nasdaq Composite closed at another record high. So did the FTSE 100 Index, which marked the UK’s 14th-straight day of gains.

• Financials were the star of the trading show Friday, as JPMorgan Chase (JPM) reported a beat on both its top and bottom lines for the fourth quarter thanks to solid performance across all its businesses.

• Bank of America (BAC) also reported better-than-expected earnings Friday morning; however, revenue came in slightly below forecasts. The one bank that failed to impress was scandal-plagued Wells Fargo (WFC). The company missed on both earnings and revenue in Q4.

• Meanwhile, on Capitol Hill, the House of Representatives passed a budget bill Friday that is a procedural step toward repealing the “Affordable Care Act.” By a vote of 227-to-198, the House approved a budget resolution that instructs committees to write plans for repealing much of the law commonly known as Obamacare. The Senate approved the measure on Thursday.

• On the security front, the TSA reported that a record number of guns — 3,391 — were discovered in passengers’ carry-on bags at American airports in 2016, up 28% from the year before. That’s an average of nine firearms per day.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “Is Trump Making CEO Bank Accounts Great Again?”

  1. Apparently Wall Street has already changed its mind about the Trump boost since his press conference. Is it possible he could still be presidential?

  2. Unintentionally. Trump is not in office yet, Obama is still in. The market went haywire because those who bought saw an opportunity to make money with the new administration coming in. People and businesses were euphoric.
    Also, the Fed raised interest rates which also made CEO’s smile, again, with a “democratic”administration.

  3. Hi Brad,
    This CEO compensation is simply disgusting! And all they are doing are coat tailing the final rally before problems set in with respect to capital markets. Should be the old buy the election sell the inauguration!!! Look, there is absolutely no question that Donald Trump will try to fix more things in Government than has been done by the last 8 presidents combined , but just him being president ABSOLUTELY WILL NOT solve the major imbalances of the world, namely the Worldwide and specifically European Sovereign DEBT CRISIS…We are absolutely overdue for a major stock market correction, which WILL ABSOLUTELY take place. A world with over $400 TRILLION in DEBT is extremely alarming, especially against a rising dollar, terrible demographics, massive overbuilding, especially in the commercial real estate sector, a shrinking middle class and most importantly, a millennium generation that is delaying family formation way into the future.

  4. the natural rule of things always come to roost when the deravatives debacle comes to fruition look out for the big fall of the big gamblers

  5. This was already set up by the cheap money caused by quantitative easing. Biggest purchaser of US stocks in recent years have been the companies themselves using cheap borrowing. Then stock options can be issued without giving the appearance of stock dilution. Meanwhile the company is left with debt and executives can continue reaming the company out from the top…in many cases as much as 1or 2 % of revenues. This is a wonderful scam if you are a in a position to essentially allocate these options with the approval of a complicit board of directors. The usually false logic logic is that such incentives are needed for competitive reasons and to retain the best people. So in one sense the biggest cause of extreme executive pay was the cheap money during the Obama Administration. This cheap money never found its way into shovel ready projects or to actually cause fundamental business development. Let’s hope Trump can do better and actually get money to go into places where it does something real for the economy. If he cannot these gains executives are seeing will go away very fast.

  6. Is this real money (and if so, where is it coming from) or just a very alarming bubble?

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