Let me start with a proposal about politics that would get wide agreement:
The 2012 election will be significant for the economy and the financial markets.
Getting a handle on this requires understanding the nature of the American Voter -- a special breed. The long series of election studies shows that voters have strong opinions but often lack information.
The latest story on this line cited a Pew Poll asking people a simple question: Who is the Chief Justice of the US Supreme Court?
If you know the asnwer, put yourself in the top 25% of the population. I understand that most people might not know, but some responses are amazing. 8% said "Thurgood Marshall" proving that they had heard of this famous Justice and former Solicitor General. They did not seem to know that he had never been the Chief Justice nor that he died in 1993. 4% cited Harry Reid! A little confusion of the branches of government.
A few years ago I reported that 80% of the people could name two of the Seven Dwarfs, but only 30% could name two Supreme Court justices. Who do you think is the best-known Justice?
As a former poli sci prof, I have studied every presidential election since Truman in 1948. As an undergrad student, I did an analysis of voting data on the Kennedy/Nixon debates in 1960. When I started in the financial markets in the late 80's I looked to the analysis of politics as something that would provide an investment edge -- and it has.
I do not engage in political advocacy at "A Dash." I am a political agnostic when it comes to investing -- seeking to profit no matter who is in power. I have opinions that I share with friends and express in the voting booth.
Here in Illinois we have our own system of term limits for politicians: One term in office and one in prison! I have voted for officials from both parties.
I am trying to put this expertise to work, but the crystal ball is still cloudy for this year.
The 2012 Election
I have not yet suggested investment conclusions for this year, but it is an active research project. It was only last week when we learned, for sure, the GOP nominee -- my prediction in my January year-ahead interviews. We can now start analyzing the actual policy differences, as opposed to the skirmishes we are already seeing this week.
Each week will provide some additional clarity, but there is a problem.
The most important issues for investors require significant knowledge and analytical skill. The most salient issues for voters are things that anyone can understand.
We can see this taking shape.
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.
and we are just getting started.
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 -- picture below).
- 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.
Notice the difference in the knowledge and skill required. The latter list of topics is something where everyone can have an opinion with little information. The opinion is based upon everyday experience. Yours is as good as mine.
The big issues will eventually be important, but I do not see it so far. At the moment we just have a spectator sport. There is no reason to jump the gun with investment picks.