I am a firm believer in the ability to make money no matter who controls the White House or which party has a majority in Congress. Rather, my approach to investing focuses on making rational decisions based on the reality of the political situation. I have a whole category dedicated to politics, but my post Will the Democrats Lose Control of the House? (April 22, 2010) is a particularly good place to start.
“Do not allow your political opinions to interfere with sound investment decisions. Join me in being politically agnostic — willing to make money no matter who is in power. Remember that the stock market has done very well (or poorly) with various combinations of partisan control . This is the most important rule.”
Back during the healthcare reform process (December 1, 2009), I used realistic analysis methods to my advantage – and encouraged others to do the same.
“From my perspective, trying to help investors, the analysis of health care legislation has not been very good…The Wall Street firms and the media alike have really cut back on staffing, so there are few genuine experts in political science who are working on this problem. This makes it an opportunity for investors with some real insight.”
Perhaps the clearest example of my politically agnostic approach to making money is my piece How I Pick Stocks (October 14, 2007). Put very simply:
“The government is on a mission. You may not like the policies, but as an investor, you fight it at your peril.”
I elaborated on this point in Politics, Ideology, and Investing (July 22, 2009), which I particularly like because a very conservative expert is quoted using an analytic framework similar to my own:
“But my main message here is that critics of the stimulus bill don’t serve their side of the debate well by judging it against unreasonable standards. I’ve heard some politicians say before actual working cameras that the stimulus package must be judged a failure because unemployment has risen further since it was enacted. Some have expressly ridiculed the counter-factual argument regarding what might have been. Such politicians and pundits are making it harder for me to stay on their side by insulting my intelligence and the intelligence of the American people. Their case would be stronger if they stuck to legitimate arguments, and they wouldn’t look so foolish.”
The varying degrees of misinformation found in the blogosphere and on TV often barrage the average investor into a state of financial paralysis. I examined this phenomenon in Individual Investors and the Information Barrier (July 16, 2009).
“The opposing pundits see no hope for any success. The ‘supporting’ pundits think that Obama has not gone far enough. The impression for the individual investor is that nothing will work.”
In my post How to Make Money on Barney Frank (June 11, 2009), I used the highly controversial congressman allegorically by contrasting how the media covers him with how he is regarded by financial experts. I quote an article by Aaron Elstein on Frank:
“Of course, it also behooves bankers to play nice with Mr. Frank. Asked if bankers have come to grips with new realities, he tartly answers: ‘I think they understand a new set of regulations is coming. And it’s better to sit down and get it right than get it wrong.’”
I refrained from offering opinions on what the Presidential Election would mean for investments, mostly because neither of the candidates spent much time discussing the relevant issues. I outlined this in a post called The American Voter: Often Wrong but Never in Doubt (April 20, 2012).
Investor issues include the following:
- Economic growth — stimulus, the Fed, and deficits.
- Regulation — more or less. Big business or small.
- Health care — how much and how to deliver.
- Supreme Court Appointments — judicial philosophy and policy dispositions.
- Foreign policy — leadership, peacemaking, diplomacy, and command skill.
Things of interest for the electorate include the following:
- Treatment of pets no matter how long ago. (LBJ caused a controversy in playing with his dogs, “Him” and “Her” by lifting one by the ears).
- What someone in the campaign said about the role of mothers and work.
- How quickly we should fire misbehaving government officials.
- Whether the leader ever changed his mind about something.
Now that the 2014 midterm elections have come and gone, many investors have rushed to judge new Republican majorities in the House and Senate. The Keystone Pipeline has been a highly debated topic for years – Republicans argue it is necessary for American jobs and infrastructure, while Democrats warn of an environmental catastrophe. The following excerpt from a recent post is a useful outline of how investors might approach hotly contested issues.
The Keystone Pipeline is first on the GOP Senate agenda next year. While there is still the threat of a Presidential veto, I expect a successful bipartisan coalition and compromise. The overall effects on oil prices are difficult to parse, and the President downplayed the effect in his press conference this week. It will be perceived as market friendly and will have an immediate effect on jobs. It will also provide downward pressure on overall oil prices via reduced transportation costs. While the oil is not just for North America, it will be cheaper at that point. My environmentalist friends should note that I am not citing this as desirable public policy. I am merely sticking to my rules concerning what is “market friendly”.