Trump’s Deals With Companies Aren’t Un-American. That’s the Problem.

The president’s wheeling and dealing with the likes of Intel and Nvidia echoes the bad old days for stock investors

By Jason Zweig. Excerpts:

"history suggests the likely results will be massive misallocation of capital and a surge in waste, corruption and conflicts of interest. For centuries, government has been the ultimate buy-high-sell-low investor, and that doesn’t bode well for anybody’s stock returns."

"In the 1820s, states competed furiously to fund banks, canals and railroads.

During the brief boom, dividends of stocks they’d invested in were one of the biggest sources of revenue for many states. After the bust, eight states plus the territory of Florida defaulted on their bonds.

In 1844, Pennsylvania began trying to unload its stock in local railroads. Fourteen years later, it had gleaned total proceeds of $11 million on its more than $75 million of investments. That loss is probably equivalent to something like $40 billion today.

After the states got burned, the federal government stepped in.

On July 4, 1828, President John Quincy Adams scooped out the first shovelful of the Chesapeake and Ohio Canal. The U.S. government was the largest shareholder, with a $1 million investment, roughly equivalent to $1.2 billion today.

Other than a flicker of prosperity in the 1870s, the canal “never paid any return,” a later historian concluded. The U.S. bought it out of receivership in 1938 for approximately $2 million." 

"stocks earned an annualized rate of return before inflation of less than 6% in the 19th century."