How Trump Wins

Back in 2001, I was working with Angel Publishing President Brian Hicks looking for turnaround stories.

The U.S. had just been hit with the bursting of the Internet bubble and the 9/11 recession. Alan Greenspan had cut rates, and Brian and I were convinced that the U.S. economy was due to rebound. We were looking for really beaten-down companies that could turbo-charge their recovery by refinancing debt at a lower rate. 

Of course, that's a ho-hum trade now. The Fed's low interest rates lost their effectiveness a long time ago. But back in 2001, this was a fantastic catalyst for a stock.

One of the stocks we found was an old-school packaging company called Crown Cork & Seal (NYSE: CCK). The company was in bad shape, debt was very high, and the recession was just killing the company. Bankruptcy seemed like a real possibility. Except that Crown had great assets and a solid business. All it needed to do was get its debt payments down, and it would have no problem surviving. 

Seems like we recommended the stock at $1.50. Sure enough, Crown Cork & Seal was able to refinance its debt. 

By April 2002, it was a $10 stock. I remember some readers writing in to tell us they made as much as 750% gains. Today, the company is called Crown Holdings, but the ticker symbol is the same. 

Around the same time, Trump Casinos came up in our debt screens. So we checked it out…

A Lesson in Failure

At the time, Atlantic City was the only real gambling alternative to Vegas. Casinos had been very successful but were also very beaten down at the time. Gambling is one of the first luxuries that Americans cut when the economy is in recession and times are tough. And Trump Casinos was the most beaten down of the group.

I won't bore you with a blow-by-blow account, but the entire history of Trump Casinos was really just a textbook example of overpaying. Donald Trump overpaid for property, and he overpaid for loans in the form of bond sales. He routinely sold bonds that carried 14% and 15% interest rates. 

As early as August 1990, New Jersey regulators saw the trouble brewing and warned then that “the possibility of a complete financial collapse of the Trump Organization was not out of the question.”

Trump repeatedly came close to defaulting — one time his dad bailed him out to the tune of $3.3 million. 

Trump took his casino company public in 1995, raising over $100 million when his company was literally weeks away from bankruptcy. Once public, he sold more stock and more junk bonds to raise cash. As a public company, Trump Casinos did nothing but lose money — $66 million in 1996, $42 million in 1997, and $40 million in 1998.

Beginning in 1997, his share of the Atlantic City gambling market began to slip from its peak of 30%. Revenues at other Atlantic City casinos rose 18% from 1997 through 2002, but revenues at Trump Casinos fell by 1%.

So yeah, the company was headed to chapter 11 bankruptcy for the third time. 

But before he declared bankruptcy, Trump tried to hold his investors hostage. He told them if they didn't refinance all his debt for 50 cents on the dollar, he would declare bankruptcy. They refused, and Trump went to bankruptcy court. The 2004 filing shows about $1.8 billion in debt, with an interest rate of 15%.

So, if the goal of a businessman is to simply enrich himself at the expense of everyone else, including the company itself, then I guess Trump really is a success. But if the goal is to create stable, growing businesses, then Trump has failed. ]

Trump Vodka and Trump Air

Today, there are no casinos in Atlantic City that bear the Trump name. They've been torn down or sold for pennies on the dollar. 

And the same is true for most of Trump's business ventures: Trump Steaks, Trump Airlines, Trump Magazines, Trump University… the list goes on and on…

Donald Trump has carefully groomed his image as a great businessman. But it's not really true. If all your business ventures fail, well, it means you're just not that good at business. That's how it is for Donald Trump. He's not a good businessman. And yet Trump has been able to easily and safely make millions for himself and his family.

How has Trump done this? Well, as it turns out, he is a fantastic investor. Again and again, Donald Trump has pulled market-beating profits out of the stock market. 

How did Trump choose the investments that would make him so much money? Well, you have to remember that Donald Trump made his fortune in real estate. He's a real estate guy. And the lessons he learned from real estate apply directly to stock market investing.

I've dug through Trump's filings to get the details. Over the last few years, Trump bought 45 stocks. Of those, 40 were winners. The biggest was up 199%. That's pretty good.

Tomorrow, I'm going to release a special report detailing Trump's investment strategy. It's very effective, and anyone can use it to put the odds in their favor.

So stay tuned — you're going to want to see this.

Until next time,

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.