Trump's Strutting Around Like A Peacock Today, But Will He Be A Feather Duster Tomorrow?

Sunday morning, Nevada's most respected political commentator, Jon Ralston, writing for the Reno Gazette-Journal, pointed out what anyone watching the political circus unfolding in the Republican battle over the 2016 presidential nomination already feels in their gut, namely that Trump's domination of the polls is a consequence, as well as proof, that American-- or at least right-wing-- politics is collapsing in on itself. Trump, he wrote,

is a perverse apotheosis of the dumbing down of campaigns, one perhaps hastened by social media, as one critic argued recently, although the velocity of the plummet pales in comparison to the ferocity of its impact. Trump, like those who would tear down Nevada’s new educational and economic structure, appeals to a Validation Culture, where visceral appeals are paramount, where activating cable news watchers who seek confirmation and not information is the Holy Grail. Trump’s is the Made-For-Twitter campaign (“Look, I have 4 million followers!”), where 140-character insults and boasts replace hard work and acquired knowledge. When the inevitable blowback comes, the Trumplodytes take to social media to defend him and attack his interlocutors.

He doesn’t need to study. He doesn’t need to know much about anything except himself. All he needs to do is tell people-- or enough people-- what they want to hear.

Just as politicians-- and demagogues-- have done through the ages.

That Trump is crass and classless is beside the point; that he has no ideological moorings or substantive foundation is the point.

Or, perhaps, an even more salient point is this one: The Trumplodytes don’t seem to care. It is too facile to call them stupid; it is unerring to call many of them ignorant.

In some of them, their benightedness almost is forgivable as their frustration with the status quo has led them to abandon all hope. But many of these Trumplodytes are ripe for The Donald’s plucking as he appeals to their fears and insecurities to stoke a fury that even he will not be able to control.

That the elected elite have, to a great extent, asked for this is unquestionable. From Washington to Carson City, legislators acting like partisans instead of statesmen have turned many voters from inveterate cynics to hostile agitators. They are looking for someone outside of the homogenized political class, and Trump fits the bill.

Or so they think.

Trump has donned the mantle of political incorrectness, insisting he says what others are afraid to say. But his act is bluster masquerading as bravery, bombast masking cluelessness.

All vaudeville shows, though, eventually wear thin. Trump’s inconsistencies, his revisionism, his narcissism eventually will cause his implosion.

Right? Right?

The saddest spectacle in all of this has been to watch the other GOP contenders behave as mimics. Part of this is our (the media’s) fault because we don’t give much attention to a disquisition on how to defeat ISIS but we highlight when Trump says, “I’ll be so good at the military your will head spin.”

Yes, we have to cover him because he’s the front-runner. But how much culpability do we have for elevating him to his present perch and then keeping him there?

Even as Trump's popularity among GOP voters soars, Ralston seems to think Trump is implausible. Palin may actually believe he's inevitable. New York's Conservative Party already issued a statement that if he's the GOP nominee, they'll endorse him too. Recently Chris Isidore at CNN Money took a look at Trump-- a big part of whose rationale for why he should be president is that he's the world's greatest businessman-negotiator-builder-etc.-- and his serial bankruptcies. Luckily for him the Republican base voters backing him don't care about that kind of stuff and will ignore it. Normal people, though, may tend to take it into account.

Donald Trump brags about how well his businesses have fared in bankruptcy. And in fact, no major U.S. company has filed for Chapter 11 more than Trump's casino empire in the last 30 years.

"I have used the laws of this country ... the [bankruptcy] chapter laws, to do a great job for my company, for myself, for my employees, for my family," he said during the first Republican presidential debate on August 6.

Trump claims that successful businesses file for bankruptcy all the time. At the debate he said "virtually every person that you read about on urge front page of the business sections, they've used the [bankruptcy] law."

But the facts don't back that comment up.

Despite high profile examples, including General Motors, Lehman Brothers and most of the nation's major airlines, fewer than 20% of public companies with assets of $1 billion or more have filed for bankruptcy in the last 30 years, according to data from Bankruptcy.com and S&P Capital IQ.

Trump has never filed for personal bankruptcy. But he has filed four business bankruptcies, which Bankruptcy.com says makes Trump the top filer in recent decades. All of them were centered around casinos he used to own in Atlantic City. They were all Chapter 11 restructurings, which lets a company stay in business while shedding debt it owes to banks, employees and suppliers.

He makes no apologies for having much his debut wiped out. "These lenders aren't babies. These are total killers," he said at the debate. "These are not the nice, sweet little people."

Here's a look at Trump's bankruptcy track record.

1. Trump Taj Mahal, 1991

Trump's first bankuptcy filing was probably the most personally painful for him. To chomp with the funds he needed, he sold a 282-foot yacht, as well as the Trump Shuttle, the airline he operated at the time that flew between Washington, D.C., New York and Boston, according to media reports at the time. He had to give up half of his ownership stake in the Trump Taj Mahal, but he did retail control of the property. His largest creditor was financier Carl Icahn, who held $400 million in bonds. Now Icahn is Trump's pick for Treasury Secretary should he be elected.

2. Trump Castle Associates, 1992

In less than a year he was back in bankruptcy court for his other AtlanticCity casinos. This bankruptcy included the Trump Plaza Hotel in New York, the Trump Plaza Hotela nd Casino in Atlantic City as well as the Trump Castle Resort. He gave up half his interest in the New York Plaza to Citibank, but retained his stake in the casinos.

3. Trump Hotel & Casino Resorts, 2004

Trump didn't go back to bankruptcy court again until November 2004, when he filed to shed debt at his various Atlantic City casinos and a riverboat in Indiana. It was another quick trip through bankruptcy court; the company shed $500 million in debt and emerged from bankruptcy the following May. Trump turned over majority control of the company to his bondholders but remained the largest single shareholder, and he once again kept control of the casinos.

4. Trump Entertainment Resorts, 2009

His most recent bankruptcy came in 2009, after the company missed a $53.1 million bond payment. That was pretty much the end of the road for Trump in Atlantic City. While his name remained on three casinos, he resigned from the board and gave up his remaining stake in the company.

"I had the good sense, and I've gotten a lot of credit in the financial pages, seven years ago I left Atlantic City before it totally cratered," he said during the debate.

The two Atlantic City casinos that still had the Trump name filed for bankruptcy yet again in 2014. At the time Trump made sure people knew he was no longer running the company, and sued to have his name removed.

Trump’s empire was overextended by junk bonds and easy bank loans. By 1991 he faced $1 billion in debt and had lost his Trump Shuttle and 282-foot yacht, the Trump Princess. Ralph Benko at Forbes followed up this weekend, pointing out that in earning so much free media with his bombast and outrageous comments, Trump is winning.

Even if his campaign were to subside or collapse, valuable exposure is money in the bank for a businessman whose main business lies in leveraging his brand.

Trump leases his brand name out to casinos, hotels, golf courses, and other ventures. These ventures typically entail no downside risk to him. When the Trump International Golf Club Puerto Rico recently filed for bankruptcy CNBC reported:

“We merely licensed our name for a fee and have nothing to do with the ownership, development or entity,” Eric Trump, executive vice president of The Trump Organization and son of Donald Trump, said in a statement.

"There is nothing immoral about declaring bankruptcy," Benko insisted. "Creditors willingly assume risk and if they are sufficiently bedazzled by Trump’s glamour so as to assume excessive risk, so be it. That said, this has implications for the Trump candidacy."

Falling to number two, even in Iowa [where Ben Carson is rising], could rupture a core element of Trump’s narrative: that he’s a Winner. Leverage even could turn negative."

Trump may not much longer be able to rely on the 100-1 leverage that has taken him this far. Whether deleveraging or facing negative leverage Trump almost certainly will have to start laying out real money to sustain his campaign.

Trump is investing in additional campaign staff. Yet sustaining his momentum is likely to grow far more expensive than that. The cost of political advertising, to supplement earned media, is very substantial. While Trump could, in theory, reach out to big donors doing so would rupture his [fake] narrative of being uniquely his own man. He is likely to find himself in a squeeze play.

As Max Ehrenfreund, writing at the Washington Post’s Wonkblog astutely notes:

[Trump] is a billionaire today despite this poor performance because when he started his career, his father had already built a colossal real-estate empire. And the wealth Donald Trump has accumulated since then has at times come at the expense of taxpayers or the banks and investors who have lent him money.

…Yet perhaps the most telling comparison is between Trump and his golf buddy, Richard LeFrak. The LeFraks and the Trumps have been rivals in New York’s real estate business for generations. LeFrak’s father, Samuel LeFrak, took a no-nonsense approach to the business. He focused on minimizing risk and making money, according to a 1992 profile in Business Week, before the magazine became Bloomberg Businessweek.

“He might be strutting around like a peacock today, but he’s gonna be a feather duster tomorrow,” the elder LeFrak told Business Week when asked about Trump.

Donald Trump, notably, has never declared personal bankruptcy. He shrewdly has managed to insulate his personal fortune from the risks of his highly leveraged investments. This implies a certain personal risk aversion.

There is no comparable insulation in politics. There is a real chance he, and maybe soon, will have to begin digging very deeply into his, as reported by Politico,  liquid assets of $300M (or maybe only $70M) to sustain his momentum. He blusters that he will do so.

Of course he could…

Yet how deep will Donald Trump desire to dig into his Money Bins once it’s an actual gamble for him? In gambling terms Trump’s always played the role of the house, never the bettor.

It’s not impossible that Trump would spend all of his cash. Yet even $300M would not take him all the way to the White House.

It’s not impossible that he would take out loans against his net worth even further to up the ante. That said, doing either would be utterly contrary to his lifelong practice of gaming the system to lay off risk and keep the upside safe in his pocket.

It is highly likely that the Trump Campaign will begin (and maybe has already begun) to deleverage. Earned media will fade as his novelty wears off. He may even, as Carson’s surge suggests, get knocked out of front runner status.

The cost of maintaining his status will rise.  It likely will skyrocket. And it’s on a long shot. Trump does not bet his own money on long shots.

Donald Trump’s lifelong reliance on leverage looks like the Achilles’ heel of his campaign. If the leverage weakens or even turns negative the Trump Campaign rather quickly could enter the political equivalent of bankruptcy. Leverage cuts two ways.