Recently, Forbes revealed that Donald Trump lost $1 billion of his personal wealth in the span of a month. His net worth reportedly dropped from $3.1 billion to $2.1 billion in March 2020. How could this possibly happen, and what’s to keep it from happening again? We’ve got a comprehensive guide to what went down.
COVID-19 Effects
What, exactly, happened to Trump’s money? We can sum that up in one word: COVID-19. The coronavirus and resulting pandemic has caused some catastrophic losses to multiple aspects of Trump’s business empire.
To be fair to Trump, much of this was out of his control. Despite his previously taking credit for a strong stock market, the truth is that stock highs and lows are out of the president’s control. And the stock market panic in March affected Trump just as it affected millionaires and billionaires all around the world.
In fact, the unpredictability of the stock market is why investors must always diversify their investments. To his credit, Trump doesn’t rely directly on stock and relies primarily on his business empire. Unfortunately, this pandemic hit every inch of his business empire.
Doing the Math
While certain aspects of Donald Trump’s finances are public, many of them remain private. That really begs the question: how can we possibly know that he lost a billion dollars in a month?
Forbes did the calculations, and their math is pretty straightforward. They basically looked at how much certain industries (such as real estate and hospitality) has been hit by the pandemic panic and then compared with Trump’s known investments.
For example, if we know that real estate suffered an average 37% stock drop, and we apply that to Trump’s real estate holdings, it’s possible to calculate approximate losses. The exact number may not be 100% precise, but the stock market remains highly fluid. In fact, many businesses who experienced serious losses in March have already begun bouncing back in April.
Next Page: How COVID-19 Affected Trump’s Real Estate
Real Estate Empire
We touched on the effects COVID-19 has had on real estate investments. And it is this area that has most keenly affected Donald Trump’s own business empire.
That’s because, while his investments are diverse, Trump builds his business and his reputation on real estate, and that sector is still the cornerstone of his net worth. His New York properties (primarily in places like Manhattan and Fifth Avenue) were previously worth $1.9 billion. According to Forbes, those values plummeted to $1.2 billion.
It’s an issue that is affecting the tourism industry as well. After all, it’s difficult to make money from real estate when nobody is traveling!
Decline of Tourism
Trump built his real estate empire on those three magic words: location, location, location. Normally, Manhattan and Fifth Avenue properties are so valuable because they are magnets for wealthy tourists who want to experience New York.
Unfortunately, New York has been one of the states hardest hit by the COVID-19 pandemic. Now, The Guardian reports that the shopping area around Trump properties “has been deserted for weeks.”
The math on this is pretty simple: when no one can shop, no one needs to rent a room near these boutique shopping areas. In this way, some of the most valuable real estate on the planet loses its value as Trump experiences some of the fallout felt by the entire travel industry.
Next Page: Trump and the Travel Industry
The Airbnb Problem
It may be weird to think of Donald Trump experiencing the same issues that the travel industry is experiencing. To make it stranger, he’s also in the same boat as many Airbnb property owners!
Airbnb prides itself as an alternative to the hotel industry. When people want to travel somewhere new, they can simply rent a room or even a whole home from someone who lists their place on Airbnb.
With the COVID-19 crisis, the company had to deal with people canceling their reservations in droves. Airbnb decided to let people cancel with no penalty, causing an outcry among hosts. Now, they are trying to cover some of the hosts’ lost revenue while also allowing them to apply for grants.
What does this have to do with Trump? In addition to his high-profile New York real estate, he owns over 500 residential homes across the country. He makes a lot of money renting these places out, but the decline in travel and tourism has affected him just as it has affected AirBNB. And unlike an Airbnb host, there is no one he can turn to for financial relief.
Oil Prices Plummet
Even if you didn’t know much about Trump and the travel industry, you’ve probably noticed changes at the gas pump.
Recently, the crude oil prices of West Texas Intermediary went into the negatives. This had never happened before in investment history. And while it was nice to see lower gas prices, those prices signaled a grim reality: no one is traveling anywhere anytime soon.
Among other things, that means that no one is driving to any of Donald Trump’s famous golf courses.
Next Page: Trump’s Golf Clubs Plummet in Value
Hole in None
We touched on how changes to the hospitality industry affected Trump’s net worth. While you might not immediately associate Donald Trump with the hospitality industry, we’ve got two words for you: golf clubs.
Trump has golf resorts all over the world, and these have taken a hit during the pandemic. Some of that is because people have concerns about social isolation. And some of it is that an expensive golf club membership may seem like an unnecessary luxury during a time of global crisis.
Those golf clubs were previously worth about $271 million, but Forbes estimates that value dropped 20% due to the virus. And as with any other part of the hospitality industry, these losses will only get worse if the quarantine lasts a long time.
It Could Have Been Worse
While it’s easy to judge Donald Trump for losing this much money, a simple truth remains: it could have been a lot worse.
As Forbes reports, Trump actually got out of the direct stock market game a long time ago and keeps $160 million in cold, hard cash available. This may have looked foolish back when the stock market was booming… after all, this was a lot of wealth that Trump could have been growing.
Now, having this money on hand and safe from a volatile market means that Donald Trump may get the last laugh on this global economic panic.