4 More Years Of Obama Will Be Great For Net Buyers Of Stocks

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 |  Includes: DIA, SPY
by: Vin Colby

The Dow plunged 331 points the day after Obama's re-election. The slide continues unimpeded as I write this article on November 13 2012. But should investors run for the hills? Or is it possible that we are witnessing the advent of a brand new secular bull market? The survey of the S&P 500 since Reagan took office may give us an indication of what the future holds.

S & P Gains for American presidents since Reagan

S & P 500

BEGINNING

END

GAIN

ANNUAL GAIN

REAGAN

129

297

2.30 times

10.97 %

G.H.W. BUSH

297

439

1.48 times

10.29 %

CLINTON

439

1,366

3.11 times

15.23 %

G.W. BUSH

1,366

735

0.54 times

-7.41 %

OBAMA 1st term

735

1,380

1.88 times

17,09 %

Click to enlarge

Source: $INX chart msn.com

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(Click to enlarge)

"Now is the time to get rich"

The seventies were an awful time for investors. There were headlines of "Death of Equities" on the front page of Businessweek. Western civilization, plagued by stagflation, oil shocks, heritage of decades of western style socialism, inept presidents and a resurgent USSR, seemed to be in its death throes. Jimmy Carter presided over a 'malaise' of America.

One person, Warren Buffett, however, gave an interview in Forbes magazine in 1974, when he made a very stark public prediction, calling the bottom of the bear market. Asked how he felt, Mr Buffett then famously replied: "Like an oversexed guy in a harem. Now is the time to invest and get rich."

It's morning in America again

One can clearly follow the explosion of Mr. Buffett's wealth from the dark days of the seventies till the stock market pyrotechnics of the Reagan, Bush Sr. and Clinton eras. Buffett briefly became the richest person in the world in the early nineties and has since held firmly in the second or third place. Being born in the depths of the 1930s depression, Mr. Buffett was uniquely placed to profit from his country's re embrace of a new and expanded version of stock market capitalism, beginning in earnest with Reagan taking the office of president in 1981. Morning it was indeed in America, especially for the owners of the country's capital, among them shareholders in publicly traded companies.

However, a rot started to set in America's rust belt (former industrial heartland) and American workers were exposed to more ruthless demands, loosing many of their former safety nets, and beginning, in the Clinton era, to fight for jobs with communist China's downtrodden billions.

The merger of state and corporate power turned its irresistible might again, for the first time since the thirties in the West, against the ordinary working man and woman, a class comprising at least 80% of the population.

Clinton the chief neocon

Bill Clinton was the most ruthless exponent of the neoconservative economic policies. Crushing the poor with the euphemistically named Personal Responsibility and Work Opportunity Act, Clinton attacked head on the social safety net built for decades, and with the repeal of the Glass-Steagall act, guided by former Goldman-Sachs CEO Bob Rubin, his Treasury secretary, he tore down the wall separating commercial from investment banking, thus opening the way to the 2008 subprime mortgage financial crash, the worst economic storm in America since the thirties from which the world is reeling even today.

Obama is no Clinton

Unlike Clinton, Obama seems to be above spending much of his time pondering the many economic issues facing the world today. His second presidency will be chiefly concerned with further breakthroughs in liberal social policies, masking what lies beneath - the continuance of stacking the economic odds in favor of the 1 and 0.01%. McDonald's (NYSE:MCD) has increased its earnings by a factor by 12% annually and Wal-mart (NYSE:WMT) has increased its earnings by 11% annually during the first Obama term. All the while an annual rise in real wages of 1.1% was deemed strong. This shows a strong institutional bias working in favor of corporations over workers.

China the lame tiger

China, like the USSR before her, bears the heavy burden of the Communist Party dictatorship, and the political and social tensions it provokes must cause a breakdown in China somewhere before 2050. However, the current state of China, causing political and economic instability, must be in America's favor. People who believe in American stocks as I do should love the rule of Hus and Xis.

Expect another market crash during the next four years

I have a feeling that the great global economic tensions will snap some time in the second Obama term and we will see another crash similar to the 2008/2009 debacle. Disaster looms from both European (overleveraging, political strife) and East Asian (overly dependent on exports and state subsidies, unstable totalitarian regime and heavy handed central planning in China) economic theaters. But that's maybe just wishful thinking on my part as my intention is to be be a net buyer of stocks during the next decade, so lower prices and crashes will be in my favor.

Hold at least 30% of your investable assets in cash in order to take advantage of a buying opportunity when the market plunges. Keeping cash in this manner is thus an excellent portfolio protection tool.

Disclosure: I am long MCD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.