STEPHEN FOLEY: To make money in the Trump era, it pays to practise what you might call, reality-based investing. Regardless of how the new president chooses to present events, Donald Trump's administration still has to operate within legal and political constraints.
Successful investors are going to be those who look through the headlines and the tweets and the claims being made for executive orders, and who focus, instead, on the legislative and regulatory minutiae and on the realities of creating legislation on Capitol Hill. Trading in the bonds of US hospital operators is a case in point.
This heavily indebted sector has attracted intense interest from hedge funds in the past six months, particularly from distressed debt funds that find themselves with less to do now that the energy sector has rebounded. A wave of bets against bonds issued by Tenet Health Care, HCA, Community Health, in the wake of President Trump's election, sent prices tumbling.
But reality-based investors swooped in to buy the bonds. This one's a Tenet bond, maturing in 2022, and as you can see, investors made a healthy profit if they sold when prices returned to normal. If they still hold the bond, they're getting a nice yield too.
Slogans about repealing the Affordable Care Act are all very well, but the political reality is that removing insurance for millions of Americans is going to be difficult. The collapse in hospital patient numbers that some feared after election day may not ultimately be the outcome. And the road to repeal and replace already looks longer and more tortuous than ObamaCare's opponents hoped.
Reality-based investors now appear to be in control in the health care market. Last week's executive order ordering federal agencies to relieve the burden of the law made few ripples, despite the politically explosive idea that the order might allow US citizens to avoid buying health insurance.
In reality, the order's consequences are simply unclear without further action from government. Now did you buy health care bonds? Maybe you decided not to buy US steel shares just because the president signed a memo saying that oil pipelines should be made from American materials regardless of what trade treaties say. Or maybe you bought Boeing shares that time that Mr. Trump tweeted, "cancel order," about the new Air Force One. If so, congratulations you're a reality-based investor.