[Editor’s note: When I wrote this back in August 2015, I had no idea that the Republican party would fail to stop Trump from winning the nomination. I stick with my initial assessment of his candidacy. The real reason Donald Trump is running for President is money. He also loves the fame that comes with it, but that is only a sideshow compared to the main focus of the Donald, shoring up his brand dependent net worth.]
Though the polls put in the front of the pack, Donald Trump does not want to be President of the United States. At the very least, he knows that’s not a realistic possibility. The real reason Donald Trump is running for President has everything to do with money. He wants nothing to do with “making America great again.”
His net-favorability rating within the GOP is a terrible +4%. Though a many Republican voters like him, an awful lot can’t stand him. What’s his angle? The Donald is rational businessman. After all, he amassed a fortune of 10 BILLION DOLLARS (his all caps not mine). So how could someone who was smart enough to become so rich and take advantage of every bankruptcy law in the book multiple times say such stupid things? How could he get to where he is today while make such stupid comments, such as “Mexicans are rapists” and “McCain is not a war hero.” Well it turns out you only need to look as far as his net worth to know.
What Makes Up the Donald’s “$10 Billion Net Worth”?
His position in cash and public stocks, ie stuff that is not affected by whether Trump is the most loved or hated man in America, comes in at around $300 million. That means the other 97% of his self-reported fortune is in something else. And what is that something else? It’s commercial and residential real estate, licensing fees, and random side projects like the Miss USA companies.
For a variety of reasons, the business partners walking away from Trump don’t matter nearly as much as the potential millions of eyeballs he is getting right now in this presidential campaign. Let’s go into each category and suppose how a drawn out presidential battle could impact each one of his net worth categories.
Trump’s Real Estate Assets
How do you value a giant tower overlooking Central Park? Well the first thought is to look at the discounted cash flow of the rents of the building. Would these rents be higher or lower if Trump’s name was even more well known throughout the land? I went to the tower once for a friend’s party, and the rooms are really nice. His companies do a good job of attaching his name to luxury and selling that image of success, which rich people thrive on. So if he runs for President and says a bunch of inappropriate things who cares? As long as the wealthy people that love a prestigious address keep paying their lease payments he can say as many outrageous things as he wants.
What about the corporate clients that he has? Won’t they try and seek other places to rent if Trump continues to say outrageous things that could hurt their brands? Not so, most people don’t even realize that Nike has a giant store in one of his buildings, and unless the Social Media police start publishing companies that have lease agreements with the Donald the publicity he gets from having his name out there and having his properties more well known than anyone else creates more competition for his vacant units. This translates into more money from lease payments, which makes the units worth more. The real reason Donald Trump is running for President is to increase the value of leases and his other assets.
A trick I learned in bond trading was when a bond got put out for the bid by a well known client, that bond got much better bids than lesser known customers. If you were a well known client across Wall Street, the price execution on the trade would sometimes be so good people would call you and ask if we could sell their bonds for them and take a commission. If you were a random off the run shop and you put out a list of bonds for bidders to buy, you might get ignored or get really bad bids.
The More Attention He Gets, The Better Price He Can Get When He Sells His Assets
The same is true in real estate. If you put a giant tower on the market, or even a few units, the fact that you have a famous brand will cause you to get the best bids. This reality means that his assets are likely to trade at a premium to their book value because of the “good will” that his brand generates (good will is an accounting term, think of it as the price difference you pay for Coca Cola vs the exact same drink not in a Coke can).
Trump has benefited enormously from price appreciation in the NYC real estate market. He loves to hit Kasich, saying he got lucky that they struck oil in Ohio. Trump actually is the lucky one. His highly mortgaged buildings have enjoyed a massive price increase because of millionaires and billionaires around the world desiring a penthouse address in Manhattan. The absurd real estate prices in New York are similar to the surge in real estate driven by Chinese nationals in Vancouver and Toronto.
He was in the right place at the right time. If these real estate values ever come back down to Earth his net worth would take a big hit. Regardless, it’s very unlikely tenants try to pull out of leases or rich people seek another tower for their $10 million condo because he make a bunch of stupid comments. That means the value of the free publicity for this part of his empire is enormous. The real reason Donald Trump is running for President is to bask in this free airtime. He might have enough name recognition that after this election, even Trump Steaks will be a winner.
The Licensing Fees
The Trump Taj Mahal is a perfect example of how Donald could benefit from 1000 name drops an hour on Fox News over the next 12 months. It underscores the real reason Donald Trump is running. His namesake building in Atlantic City had to declare bankruptcy multiple times because no one is coming to the Las Vegas of the East anymore with all the new casinos in surrounding states. He doesn’t own a stake in the building anymore, but his name is attached to it in a lucrative licensing fee.
To put it in context how much he needs people to care about him and visit the Taj Mahal, the $2.4 billion Revel casino was sold recently for about $80 million after the casino market in Atlantic City collapsed. If the Taj Mahal was sold in this market it would fetch a pitiful number. That means he needs a bunch of seniors to walk by the board walk and walk into his building to blow their Social Security money on the slots in order to have this deal make him money. Without publicity to generate visitors, his gaming assets have very little value.
In total these licensing fees are worth around $300 million according to Forbes . He puts the value at over $3 billion, which could actually be true if he’s able to bring in the Tea Party as loyal Trump brand consumers. The real reason Donald Trump is running for President is to establish a core group of loyal followers who will gladly part with their wallets for his benefit. Think about how many hotels there are in NYC. What if Trump only appealed to disaffected, angry white guys. There are enough of them to make a great living off of for the rest of your life.
One estimate put voters identifying as “Tea Party” at 24%. Think of the possibilities for a man that gets the majority of his wealth by selling his name. He can offend as many people as he wants. If Macy’s and Van Heusen walk away from selling Trump branded merchandise it doesn’t matter to him. His licensing value goes sky high if he’s able to claim the mantle of the extreme populist conservative. Out of the many presidential candidates, no one was espousing these views. As the lone birther style candidate in the race, he can differentiate his product, ie his brand, and bring in a whole host of people that will be loyal to him for fighting the good fight.
The Tea Party, Brought To You By Donald Trump, Inc. provider of all your pro-american needs
Consider his vast array of golf courses. There are a bunch of businessmen in the country that don’t particularly care for foreigners or President Obama. Will they be more or less likely to use a Trump branded golf course after he calls the President a bunch of names and insults every minority and veterans group in existence? They won’t care. In fact, as long as they don’t get Cecil the Lion style assassinated on social media for their behavior, they will probably opt to support the Trump course than go to another.
What about all the Trump neck ties and shirts that Macy’s is dumping? Would you rather have a deal with Macy’s where your merchandise ends up at Ross after it doesn’t sell (I bought a red Trump tie there once for $5 because it was the cheapest I could find) or would you like to have a gigantic megadeal once the hoards of Tea Party folk become brand loyal and buy everything you produce to make a statement. Perhaps a line of Trump branded Confederate Flag merchandise would be very appropriate for him.
The numerous luxury hotels and buildings that place his name on the facade will have fewer vacancies with a well targeted brand loyal audience to stand behind them. The value of the licensing will be higher because more revenue will be generated. So the value of running for President in this category is unequivocally positive.
Trump’s Random Assets
Being such a wealthy man, Trump has his hands in a lot of cookie jars. The Miss USA and Miss Universe pageants will likely be hurt from people like Emmitt Smith and Flo Rida pulling out of the judging and sponsors backing away from advertising, but this category is a very minor part of his net worth. Why would he care about an asset that’s worth $10 million when he could enhance the value of assets that are worth billions? The real reason Donald Trump is running for President is to drastically increase the value of his larger holdings. He can accomplish this feat by getting more media attention, which raises the brand value.
He has a couple other weird ventures like buying up mega residential properties and reselling them to other super wealthy people, owning a fleet of helicopters, and even developing a winery. Any of these will have their value enhanced by brand loyal consumers flocking to them.
The Real Reason Donald Trump Is Running Is to Become a $10 Billion Man Through Inflation of His Brand’s Value
By most independent accounts, he is not currently worth $10 billion. However, after months of massive free publicity, his assets, which derive their value in large part from his name recognition, will go up in value. Another part of this strategy needs to be creating a new group of brand loyal Tea Party consumers that will view him as a reliable anti-Obama, anti-immigrant personality.
To stay in the news, Trump needs to say the wildest things, and absolutely refuse to apologize no matter what. The crazier the better; it helps him differentiate his product and get an even more passionate fan base that he can milk for all the money he can get out of them. He knows extreme unapologetic statements get the 24 hour cable news networks and the Social media world buzzing. How could any decent human being not apologize for insulting veterans! That’s a valid question. The answer is that if he apologized it’s no longer news. That’s why people apologize because the news story isn’t as interesting so it dies.
How do we know Trump Is a Self Interested Troll?
According to one conservative writer, “Donald Trump has been a conservative for about 10 minutes.” The facts would seem to support this. He donated the big amounts to Hillary Clinton’s campaign in the past and in 2006 when the Democrats had a high probability of winning the House and the Senate, he poured money into the Democratic political committees to be ingratiated with the powers to be. If that’s not enough for you, he also donated over $100,000 to the Clinton Foundation.
Also, if you look to his comments in the past, it’s pretty clear he isn’t a Tea Party guy. In 2008, he said that President Bush was evil. In 2012, he told Newsmax that the Republican Party was going to continue to lose elections if they continued to say bad things about and be unwelcoming to people of color. Is he trying to lose then? Because the Trump that spoke to the reporter in 2012 would say yes he is trying to lose.
Look at how former Treasury Secretary Hank Paulson had to deal with his enormous wealth from Goldman Sachs. The Donald could actually be setting up a win-win here. Through a tax loophole meant to encourage rich guys to serve in public life, Paulson was able to defer capital gains taxes on his assets. He put the money into government bonds or mutual funds while he served. This loophole only applies if you hold an executive branch position. In other words, Senator or Congressman wouldn’t qualify, but President would. Donald could take his billions in real estate and offload a bunch of it. Meanwhile, he doesn’t have to pay a dime of capital gains taxes potentially for the rest of his life.
Trump Running For President Is a Win-Win for Him Personally
So if he loses the Republican nomination by saying a bunch of racist and offensive statements, he gets tons of free publicity. He also earns the undying love of a part of the Tea Party movement. He can then run as an independent. He would receive even more free publicity and solidify this political group’s loyalty to him. Moreover, he would deliver the White House to the Democrats. In fact, he seems to prefer them based on his campaign donations anyway. If he wins the Republican nomination, he has the potential at the ultimate job where he gets a ton of tax benefits. He could leave office with his brand even more elevated than it already is. This is definition of a win-win. This is the strategic mind that kept a fortune of over a billion dollars while filing for bankruptcy multiple times.
Trump plans on using voters and appealing to the most extreme elements of the electorate. He can pump up his net worth to the fake $10 billion level he claims he already has. He a self interested egomaniac and a smart one too. Even so, his promises to ‘make America great again’ will make his wallet great again. At least the next six months of watching him eat pork leg in Iowa are gonna be hilarious.
Think I’m full of it and that Donald Trump is for real? Do you agree with me that this is more than an ego trip; it’s a financial one? Do you think he legitimately wants to be President? Comment below!
Update 3/7/16: Real Reason Donald Trump Is Running for President
Wow! I did not expect when I wrote this article that we would be sitting here. Donald Trump is the front runner for the Republican nomination. I figured it was time to look back at what I wrote.
Trump Has Set Up a Win-Win Situation by Following the Chick-Fil-A Strategy
Forbes outlined a highly profitable way to run a business is to develop a following of “raving fans.” This is the Chick-Fil-A strategy. The founder’s support of traditional marriage in public remarks a few years ago was a great business decision. In a highly fractured and competitive market like fast food, you should not be competing in the same way as McDonald’s. The job of the golden arches is to go after everybody and try to appeal to the widest audience possible. Chick-Fil-A can get fabulously rich by getting strong brand loyalty from the kind of people who would be more likely to eat there after hearing statements that align with their own socially conservative values.
Trump Just Needs a Passionate 30% of America
I am from one of the towns in America where both Chick-Fil-A and Donald Trump are insanely popular. After the anti-gay marriage comments, hundreds of people lined up out the door at our local store. They waited quietly to buy a chicken sandwich and to send a message to the traditional mainstream media. They wanted cultural elites to know that they will vote with their wallet regardless of what other people think.
Now let’s consider Trump. He has a floor of support of about 30% in almost every state. He is enormously popular among white working class voters. Even with this loyal following, he is still very unpopular amongst the general electorate. He has a favorable rating of 33% and an unfavorable rating of 58%. His net unfavorable rating is a staggering minus 25%. He still has very little chance of winning the White House. In fact, Mitt Romney’s speech against Trump underscores this probability. The remaining three candidates for the GOP nomination are unlikely to drop out gracefully. The threat of a contested convention with someone like Cruz, Kasich, Rubio, Romney, or Ryan emerging as the party’s nominee is actually a strong possibility.
Merchandising Opportunities Galore, Even Without Any Major Corporate Partners
Trump only needs to keep a fraction of the millions of people who are voting for him as customers. If he does, it will mean billions of dollars to his bottom line. He could start Trump Flags, an outfit exclusively dedicated to the selling of Confederate memorabilia. Few other national companies would mass produce this kind of product now. With universal name recognition, he could charge much higher prices and get fantastic profits throughout the South. He could probably even open up department stores or mall chains in heavily white, uneducated areas. He would have massive sales. Of course, China and Mexico would make all the products for maximum margins.
You can call Trump an unintelligent business mind, but he is a PR genius. Perhaps one of the best who has ever lived. He can command attention like few others in modern America. The real reason Donald Trump is running is so he can milk these people for all they’re worth. In the process, he gets his massive ego fed and has a chance at the most powerful office in the land. Even the non-business oriented Clintons have turned their post presidential experience into over $150 million. Imagine what someone could do with solely monetary designs with such a powerful office.
Trump Wins With a Third Party Run, GOP Nomination, or Presidential Election Win
The real reason Donald Trump is running is because he cannot lose. If the Republicans screw him over at the convention, he can claim fraud. He will run with complete political cover for a third party. If wins the nomination and loses, he can blame the Republican establishment. He will say they didn’t get behind him abandoned his loyal white working class voters. If he wins, he can take advantage of the massive tax loophole I outlined above. He will offload a lot of his ridiculously overvalued real estate into tax sheltered wealth preservation vehicles tax free.
Any publicity is good publicity, and the real reason Donald Trump is running is to get a lot of it. He is receiving millions of dollars in free advertising. There is scarcely a person in America or abroad now who has not heard his name.
Time will tell whether the Donald can take over the GOP. He is willing to throw verbal xenophobic and nationalist grenades all over the place in order to line his pockets. Just watch as his fake $10 billion net worth becomes a real $10 billion net worth. That is the real reason Donald Trump is running for President.
UPDATE 7/1/16: REAL REASON DONALD TRUMP IS RUNNING FOR PRESIDENT
One of my favorite morning activities is reading FiveThirtyEight’s Significant Digits news roundup. One of June 30’s featured stories says it all about what is motivating Mr. Trump.
So in the month of June, when we are less than 150 days away from the presidential election in early November, a billionaire spends absolutely nothing promoting his own sagging electoral chances for the most powerful office on Earth.
This behavior is not coming from a man who wants to be President. He has allowed Hillary Clinton to define him even more over the past several weeks. After firing his campaign manager, a candidate who wanted to win would have granted dozens of image softening interviews with female journalists. He would spend low eight figures of his money every month from now until the election. All he would have to do is spend 0.25% of his supposedly $10 billion net worth to match Clinton’s spending. Hillary wanted to earn a huge amount of money over the past few years precisely because of this moment. She wants to be President and has wanted it her entire life. Donald Trump does not care.
Say you had $500,000 in net worth and ran for President. If you could be competitive by spending $1,250 each month for four months, would you do it? Of course you would! Such a small figure means nothing compared to the incredible honor of serving your country as its leader. Here’s my theory. The vast majority of Trump’s wealth resides in large illiquid property holdings. He does not have hundreds of millions he could spend tomorrow if he needed to. Therefore, he is holding back on spending any money partly because he lacks the ability to come up with enough cash to deploy without taking on more debt on his holdings.
Additionally, Trump decided to go to his golf resort Turnberry for a few days late in June, IN SCOTLAND. Instead of campaigning here in America, building up a staff, raising money, and deploying ad resources to try to change the current narrative, he’s off at some grand opening thousands of miles away. The real reason Donald Trump is running for President is for the ridiculous exposure his brand now commands, even for corporate events for his small time golf resort.
8 thoughts on “The Real Reason Donald Trump Is Running for President”
You’re probably right, Travis, but you may be underestimating consumers’ choices. When Trump raised his hand at the debate last night, you could hear definitive boo’s. As the grandson of two hardcore Fox News viewers, I can tell you that that wing of the party has very malleable views, subject to whatever the sentiment is on TV. Aside from Drudge and Time, the outlets saw the outing as a disaster for Trump, especially because he attacked Fox News’ darling, Megyn Kelly. Murdoch’s efforts to blunt Trump’s rise are well documented, and Fox has been playing that “I won’t commit to the nominee” soundbite over and over. If Fox turns on him, sayonara to that small but loyal base you were describing. He will still be outspoken, but so is Glenn Beck, and look how well his brand is doing right now. Regardless, the publicity’s probably helped Trump like you described, but I don’t think he could have expected all of this.
I would have to agree with you sir, The Donald is in it just for the money and doesn’t really mean those awful things he mentioned, but how sad is it when the amount of people following him really enjoy what he Is says as the truth? Talk about the populas showing their true colors
The real test will be if he loses does he retract a bunch of his statements to regain former business relationships. Then we will know for sure.
IMO he is simply a “Red Herring” helping Hillary win the White House. God Forbid. She will make bamma man look like a kidde.
Could be. But when you’ve got so much tied up in your brands value and are constantly overstating net worth to forbes, I think his reasons for running depend on increasing that brand value amongst an highly loyal consumer base.
Coincidentally, some of the fringe assets I mentioned above like the Trump beauty pageant Miss Universe were sold at a high valuation as a result of the publicity he got from the ‘Mexican rapist’ comment. I imagine the book sales for his failed publication ‘The Art of the Deal’ have surged as well. This presidential campaign is the gift that keeps on giving for Mr. Trump.