If you don’t work for a Political Action Committee or for a news media outlet you may agree that presidential campaign spending is completely out of control. “In the 2008 presidential race, the candidates spent a total of $1.7 billion, double what was spent in the 2004 race. In the U.K. election, a spending cap of 20 million pounds, about $33 million, was imposed on each of the major parties. Of course, campaigns there are less expensive partly because of a ban on paid radio and TV advertising or any ads on matters of ‘political or industrial controversy,’ ” according to the Chicago Tribune on May 14, 2010. Another major difference between the U.S. and U.K. elections is the duration of the campaigns. In this country presidential campaigns officially begin in January of the election year with a number of caucuses and primaries with 10 months to Election Day. The real truth is that the candidates jockey for position 24 months or more with fundraisers and exploratory committees. In the U.K. the heart of the campaign is compressed into one month.
As Gerald Skoning observed in the Chicago Tribune on May 14, 2010, “Despite the obvious lessons we could learn from the U.K., the outrageous expense and duration of our elections is unlikely to change. There is simply too much money at stake, and too many stakeholders stirring the pot, for us to ever wean our political system from the tradition of increasingly expensive and hopelessly endless election campaigns.”
Now if you were a top strategist at a major company considering making campaign contributions to a presidential candidate what would you do? Would you “donate” to the candidate you like or would you think it might be smarter to hedge your bets and contribute to the major candidates running for the highest office? Thanks to CheatSheet.com on June 8, 2015 we can see that “Microsoft was the No. 2 contributor to President Barack Obama’s 2012 campaign, donating more than $815,000 to the Democratic incumbent.” From the same source, Google also donated to political causes too. That company gave “$3.8 million in 2014, which was higher than their 2012 contributions of $3.5 million, “but in 2014 gave more funding to the Democratic Senatorial Committee than its Republican counterpart ($162, 270 and $99,600, respectively).
Hedge baby, hedge
On this side of the pond, I don’t expect anything to change when it comes to the length or the cost of our presidential election cycle. We seem to be entranced with the ridiculous notion that a new president will fix all of the ills in our country. When it comes to investing it appears to me that many of us get comfortable with whatever happens to be rising in value as though we can simply buy that and go to financial heaven. If I were a decision maker at a major company and I thought there may be some to gain by contributing to a political party I am certain this year I would donate money to both candidates. It may not be an equal amount, but because I cannot see the future, and I don’t like to lose, it is only reasonable to me to bet well and that means to bet on both.
With the stock market at historical highs you can find ‘experts’ who believe the Dow will go to 50,000 from here. On the other side of the coin, you can find ‘experts’ who believe these highs are hysterical, so the Dow will fall to 5,000. On this note, Ms. Quincy Crosby, Ph.D., chief market strategist for Prudential Financial made the most sense when we last met with her declaration, “Investing today is too risky not to hedge.”
For the bulls
“Low rates, historic caution from over-hedged and underexposed investors, a solid economy, an earnings recovery with stable FX (volatility) and oil, and valuations that are not excessive by historical standards; we expect the ceiling to be shattered in Q3,” says UBS’s Julian Emanuel on July 7, 2016, Yahoo Finance.
For the bears
“No one is buying company stocks, except the companies themselves,” said Bob Bryan at Business Insider, July 6, 2016. Laurence Fink, CEO at BlackRock Inc., the world’s largest asset manager put it this way on July 14, 2016 at Financial Advisor, “The current rally in equities may not be justified and won’t last unless earnings pick up.”
The last time debt became a problem we never imagined, the experience was visceral. What can be learned from recent history? Where do we go from here? Since no one knows the answer to that question, now is the time for you to determine now what can you do to help hedge your portfolio today.
My friend, Lacy Hunt, Ph.D., of Hoisington Investment Management studies debt around the world. He concurs with Robert Johnson, Editorial Director, Dent Research on July 12, 2016 that, “US consumers have been adding to their debt and now hold almost $1 trillion in credit card debt.” Hunt points out that debt is a two-edged sword. If additional indebtedness doesn’t work to create income and pay down interest and principal, it is a no-win deal.
To illustrate this, Dr. Hunt points out that the average automobile loan has gone from six years to eight to allow less qualified buyers to purchase more expensive cars than they might otherwise have been able to afford. Now buyers make smaller payments over a longer term, but that exposes them to the risk of missing any one of those 96 monthly payments. Student debt has always been a good way to invest in ourselves, right? Not so much anymore says Dr. Hunt. “Unfortunately, the economy is performing so poorly that a lot of our college graduates are coming out and they're having to settle for jobs that are not much better than what they would've received if they had gone directly into the labor force from high school.” Some investments, along with debt, may not pay off like they have in the past.
We are on a mission to save your assets.
200 N. Westlake Blvd., Suite 109
Westlake Village, California 91362-3783
805.495.2077 800.266.2077 888.WHY.BEPOOR
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance is no guarantee of future results. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against a loss in periods of declining value.
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Investors Advantage and NPC are separate and unrelated companies.