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How
to get Re-Elected
Research for Online Investors
by John Dalt
2/01/11
Do politics affect our investments? I believe they
do, thus I try to understand regulations and new legislation. Since 2008, you ignore Washington at your peril. Most
certainly your net worth is in danger when the congress is in session. There wasn’t a light that turned on in 2008;
I only use the credit crisis as a point of reference. Politics affecting business has been going on as long as the
two existed.
I testified before our state legislature against
raising unemployment taxes in the 1970’s. Only in a politician’s mind
can raising taxes on business during the days of Stagflation seem like a good idea. This experience also taught me the sickness of businesses that would flavor their
testimony because of political considerations. One of the largest
employers in our state appeared before the committee. They changed their testimony against the proposed
tax increase because they didn’t want to offend a powerful congressman that decided to attend the hearing at the
last minute.
This was after our conversation in the
hallways. I knew how they felt, but it sure didn’t track with their
testimony! This was disappointing to a young entrepreneur, but a lesson
well learned. I have rarely adhered to this lesson as ‘speaking truth to
power’ seems to be the reason they are listening.
A macro political/stock market fact may help us in
the next year. Dr. Steve Sjuggerud writes a stock market newsletter and
did an interesting study. Since 1940, the third year in every
presidential election cycle has seen the stock market move higher by an average of 22
percent!
His explanation is that of a “routine year three
stimulus.” To a politician, the elections are just around the corner,
and the economy better be good if the President is to stand a chance for re-election. If we look at this year, what did the republicans agree to in
December? Extending the Bush Tax Cuts, and a cut in social
security taxes for one year!
A stimulus by any other name, and what better name
than a tax cut bill? It must be that congress wants a good economy
also. One thing you can count on, politicians all want to be
re-elected! Sjuggerud’s study found that third year stock/economic
rallies go back to 1800, only missing twice previous to 1940.
We have eleven months in front of
us. Thomas Hoenig, the Kansas City Federal Reserve Governor said
today that QE3 will be discussed if economic conditions do not improve. With the congress, president and Federal Reserve doing all they can to push
the market higher. Who are we to argue?
We have a positive bias to owning
stocks. How can you own bonds making 3% (or less) when there are good
dividend payers that yield more and can appreciate in value? We don’t
invest blindly and ignore our holdings, but the stock market should provide good yields in the next
year. We can count on it, because those seeking re-election will do all
they can to help us.
The market is up today, but we predict the next
few months will be ‘bumpy.’
To the mailbag:
As a Shiite nation, Iran supports Hezbollah, not
Hamas. The Muslim Brotherhood is Sunni not Shiite, ditto Al
Qaeda. Osama bin laden is Sunni.---subscriber J.R.
John’s reply: You are absolutely correct. I apologize
for making the connection to Iran for the Muslim Brotherhood. I will
correct the article in our Archives. This was a grave error on my
part.
Thank you for yesterday’s MarketToday…very
informative. I heard there are threats against Wall Street
executives. They are forcing food shortages around the
world.---paid up subscriber
T.M.
John’s reply: Wall Street is not creating food shortages and
inflation. Thank our government and the Federal
Reserve. They are exporting inflation to every corner of the
world. It is going to come back to us like a
boomerang.
The information presented in this newsletter is based on generally available news releases, corporate filings,
current events, interviews and the editor’s opinions. It may contain
errors and you should not make investment decisions based solely on what you believe you have read
here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your
grandmothers! The editor may or may not have a position in any
securities discussed. The editor may have held a position in a
security earlier, or in the future.
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