Dear Investor:

Imagine that you are reviewing the prospectus of Donald Trump and reviewing his 10-K filing. Then ask yourself if the following story is a one-off or part of a troubling trend in the investment landscape under Trump’s leadership…

Kodak Scandal as a Metaphor

In late July of this year, President Trump made an announcement that took almost all investors by surprise. Using the Defense Production Act, an obscure government agency would provide a $765 million loan to Eastman Kodak (read more here). The loan would assist the legendary maker of camera film launch a venture called Kodak Pharmaceuticals to help the fight against COVID-19.

Like its Rochester NY neighbor, Xerox, Kodak has felt the brunt of technological and business innovations that attracted customers away from its products. Kodak’s stock had traded as high at $106 in the mid-1970’s and as high as $60 in the late nineties. However, in 2012 Kodak filed for bankruptcy. Since then, Kodak has tried to focus on other product lines as well as manufacturing some materials for pharmaceuticals (read more here). The loan and new venture were widely viewed as a boon to American manufacturing.

With the news of this windfall government loan, Kodak’s stock, which traded the day before the announcement at $2.62 per share, rose to a high of $11.80 on the day of the announcement. The announcement was a great windfall for investors…especially Eastman Kodak executives receiving stock options the day before the loan announcement.

Three inevitable announcements followed: 1) the Securities and Exchange Commission (SEC) announced an investigation into possible insider trading (read more here); 2) U.S. International Development Finance Corporation, the government lender, announced that the loan was being reviewed and placed on hold as President Trump sought to distance himself from the whole affair (read more here); and 3) a special committee hired by Kodak’s board of directors cleared its executives of any wrongdoing (read more here).

I have two questions for investors:

1. How do you think such a good thing could turn so quickly into a bad thing?
2. Were you really surprised?

Perhaps the most surprising element of the Kodak stock scandal is that the SEC even announced an investigation. There may never have been an investigation were it not for a call for action by U.S. Senator Elizabeth Warren (here). Under the leadership of Jay Clayton, whom Trump nominated as chair, the SEC is charging the fewest number of individuals with insider trading since the 1980’s (read more here).

For investors, the Kodak Pharmaceuticals saga of self-dealing is a metaphor into how Donald Trump has had an impact on the integrity of the financial services marketplace (read more here). Just a reminder: insider trading and self-dealing represent theft from investors (and taxpayers).

Why Joe Biden Makes Sense for Investors

For most of 2020, it has felt as though Donald Trump is trying to address the twin challenges of the COVID-19 pandemic and our economy’s collapse by trying to fit a magical square peg into an elusive round hole. Our economy is not going to recover and continue its growth until the pandemic is controlled. No matter how many times President Trump has claimed that the pandemic is under control (see here), the pandemic is not under control. No matter where you live, most people in this country agree with that assessment. Donald Trump asks us to hold our breath for a vaccine, which he insists is imminent, contrary to what his top scientists report (see here).

Joe Biden has an actual plan (here) to contain the pandemic, restore people’s confidence, and open the economy while we await the rollout of an effective vaccine, which could happen next year.

Some investors may say, “…but the stock market!”

I understand that a lot of investors are hesitant to vote for Democrats, whom they consider to be anti-business. The reality for investors is that their portfolios have performed well under both Democrats and Republicans. Here’s how the Dow Jones Industrial Average has performed during the past three presidential administrations (my calculations):

• Obama first term: 173% increase
• Obama cumulative: 249% increase
• Trump first term: 141% increase

Your portfolio has been doing well under Donald Trump. But it also did very well under Obama (and Biden) — and without the self-dealing we have come to expect under Trump.

Conclusion

As an investor looking over the prospectus of Joe Biden and Donald Trump and their 10-K filings, where would you invest your vote?

Please invest your vote in Joe Biden. Thanks for your consideration.

*****

The author served as Director of Communications for the Pennsylvania Department of Banking and Securities from 2008-2018. His opinions do not necessarily reflect the policies and views of the department or those of the administration of Pennsylvania Governor Tom Wolf.