The Anarcho-Capitalist muses: Forest Trump? Donald Trump's Dubious Status as a Business Master

Having never watched a single episode of "The Apprentice" I cannot comment first hand on its insipidness. Even those of us who don't see the point of watching Trump's proteges embark on nonsensical and pointless errands are still inundated with enough second-hand accounts of them to see the great myths of our business and consumer ethos being perpetuated onto an unsuspecting populace.

In the great ponzi scheme of "conventional business wisdom", a new generation is being groomed to accept "Trumpenomics".

Frankly, I find it amazing that Trump is held up to the world as some sort of "Business Guru", worthy of a gaggle of shameless hacks to pander to his whimsical snipe hunts in hopes of being accepted into his "inner circle".

John Kenneth Galbraith once wrote in A Short History of Financial Euphoria (and I paraphrase, not having my copy at hand)

"Whenever a 'new method of making money' is discovered or touted,closer examination usually reveals it to be some form of highly leveraged debt instrument".

Here we have Trump the Chump's business methodology down in one sentence. All of the apprentices can learn the sum total of "The Master's" business accumen transmitted to them as follows:

Borrow more money than you need to make interest payments on the money you have already borrowed, use the money left as collateral to borrow more money. Repeat.

This is the simple methodolgy around which a body of work and a cult of adoration is based.

Would you hire this man to run your company?

Trump Hotels vs. Dow Jones, Nasdaq & SP500 1996-2004
The veracity of The Master's business acumen can be plotted against the long term chart of Trump's flagship business venture: Trump Hotels (DJT:NYSE), which displays a steady decline from its peak north of $30/share in 1996 down to its present value as a penny stock: $2.26/share at time of writing.

Trump's reputation as a "bucking-the-trend" maverick is well fitting in this context, having staged an orderly downward progression through the headiest years of the greatest equities bull market in history, retreating into the single digits during the blow-off top of 1999-2000 and halving its value again more than once since.

The fundamentals of Trump Hotels are a financial train wreck. The company is quite simply hemorrhaging money, more than $100 million in the last three years. The adoring toads may point out that the losses narrowed the last three years, from $37M to $25M to $11M. This type of performance "plays well"on CNBC, for example. What would be glossed over is that the short-term debt has expanded in roughly the inverse ratio to the narrowing of the loss: from $27M to roughly $30M then more than doubling to a hefty $67M MRY.

Add in the long term debt (over $2 BILLION) Trump Hotels' Total Debt-to-Equity ratio is a mind boggling 327.47/1 versus a sector average of 0.8/1. In other words, the other players in this sector have more assets than debt. Trump doesn't, not by a long shot.

Other key ratios versus sector averages are equally telling: No P/E ratio for the last 5 years contrasted with a sector average of 28.61 MRY and 47.89 last five years (that means the majority of his sector has been making money, not a lot of it, but more than NOTHING for the last five years), the price-to-book is more than triple the sector (12.12 vs 4.00) and Trump Hotels sales declined -5.77 last year against a sector whose sales grew 14.96.

At the end of the day, Trump and his Trump Hotels venture is getting creamed by the competition in every conceivable department (except possibly, shameless self-promotion). Apparently Trump has his apprentices selling lemonade in the inaugural episode to get them "back to basics". Here's a basic I hope Trump gets back to, for the sake of his shareholders: earn some profits.

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