Obama and Your Portfolio

By Jim Wiandt

Should we be excited or scared for our portfolios on the face of an Obama presidency?

First of all, let's take a deep breath, because this was a truly historic election. And while I was disappointed in the general lack of substance from both candidates over the course of the campaign, there are two things that this election has done for the United States on the most broad level that are undeniable. First, despite the focus on the negative dimensions of the campaigns, the tone of the debate was a fundamental shift toward less partisan rancor and more the interest of the nation. We had gotten ourselves in a Bush/Clinton rut that was fundamentally dysfunctional. And hopefully the U.S. is back on track now and can focus more clearly on the national, as opposed to the partisan interest.

Second, this election will be a boon to how the United States is viewed abroad. Many Americans have no idea of how the U.S. is regarded overseas. Let's just say, of late, the answer has been "not so positively." But I think an Obama election changes that overnight (particularly in Europe and the Middle East). If you don't believe that, take a gander at the headlines from abroad this morning:

• http://www.elpais.com/global/
• http://www.timesonline.co.uk/tol/news/
• http://www.lemonde.fr/
• http://www.arabnews.com/
• http://www.spiegel.de/

I think it is fair to say that at least for a time, there will be a bit of a honeymoon for the U.S. abroad, and for Obama internally. But very soon, the reality of enormous fiscal and political crises at home and abroad will strike home.

There was nary a mention of the looming $13 trillion deficit during the election, save perhaps McCain's claim that he'd cut spending on "everything" but the most popular (and biggest-ticket) items in the budget. No numbers, no specifics from either. But both were beating the drums of cutting taxes.

Don't count on that promise to hold.

I think that to the degree that there's much of a difference on fiscal policy with Obama vs. McCain, it will include more spending. I do hope some responsibility creeps into the budget, because right now, the U.S. is like a 12-year-old kid with a credit card, completely out of control. And we've basically put our fate in the hands of other countries, who, if they decide to stop funding our binge spending, could send the U.S. dollar into a money-printing, hyperinflationary, dollar-crashing spiral.

So yes, in that instance, I'd stock those gold bars and Campbell's soup (with maybe some Chinese yuan) in your South Dakota bunker overlooking your potato field and vegetable garden.

Specifically for our portfolios? Here are some thoughts (mostly pretty obvious):

• Alternative energy. This sector should experience a boon if Obama pushes for a "Manhattan Project" on energy à la T. Boone Pickens.
• Traditional energy. With focus on the American consumer, don't be surprised if Obama puts the brakes on profits for U.S. energy companies if oil prices again rise. Think "windfall profits tax."
• John Dvorak also thinks that will translate to foreign energy companies doing better in his "How to Obama-proof your portfolio" article.
• Generally, looking at currencies, consensus certainly at our commodities conference, was that we are entering a seriously dollar-bearish environment after perhaps a bit more de-leveraging.
• U.S. pharmaceuticals and Health Care may take a bit of a breather on the road to nationalization. But I still wouldn't get in the way of that demographic freight train.
• Real Estate and Financials—who knows? I'm not sure I understood either candidate's policies on dealing with the crisis. Regardless, it feels to me like we've got a tough road ahead of us near term, but that things will stabilize. Don't think that an Obama administration will be shy about bringing down the regulatory hammer on Financials. So, though it's been pulverized already, you'd have to be more bearish on that sector under Obama than McCain. But really, who knows—it depends what team he brings in and how competently they address our issues.

In short, it's a breathtaking day for America, and for the world. But there are a lot of very serious challenges ahead for Obama and for the United States of America.

Comments

[Socialism c...:]

I don't think Americans realize who they voted for. We now have a Marxist in the White House...and you seriously think partisan rancor and dysfunction are behind us??? It's only beginning, my friends. Be prepared for internal strife in the U.S., and foreign conflict as well. This is seriously bearish for the dollar and the U.S. as a whole. Laugh all you want with your bunker jokes...there will be those who are prepared, and those who wish they had not been blind as to what this man represents.

2008 Nov 05 12:58 PM

[Crank Monkey:]

Get short before the S&P craters to 400.

2008 Nov 05 01:01 PM

[Smarty_Pants:]

Three words:

"We're Freakin' Doomed"

(Borrowed from the Mogambo Guru without his stinkin' permission)

2008 Nov 05 03:42 PM

[moonbat1775:]

Here da way it be. Socialism will now attempt in a highly flawed way to compensate the victims of fractional reserve banking and to prevent another boom bust cycle without actually changing the underlying system. In other words more regulation of banking instead of outlawing fractional reserve banking or allowing free banking with competing currencies.

So, we will now go from a highly creative finance system built on dishonest banking to a highly regulated finance system built on dishonest banking.

2008 Nov 05 04:08 PM

[Smarty_Pants:]

Obama's vote total it zoomed,
For the Presidency he had been groomed,
Soon he'll rule the bosses,
While our stocks take the losses,
And Mogambo says "We're Freakin' Doomed!"

2008 Nov 05 04:19 PM

[moonbat1775:]

The wheel has turned one more time.
Down go the pigs; up the swine.
The bankers don't care
with their money-from-air.
Left or right they've done fine.

2008 Nov 05 05:22 PM

[User 137633:]

With alternative energy though, is Obama really going to be able to afford new tax credits and whatnot above what we already have along with his other promises? I feel like alternative energy stocks are expensive to begin with...it may just be the perception he's going to do something that drives them initially and then they languish or fall.

While I believe in solar long-term, I'm not sure these super expensive stocks are going to be the right place over the next 4 years. Bubble mentality.

2008 Nov 05 05:25 PM

[bearfund:]

At this point your portfolio should consist of gold and land held in a variety of non-US nations. Said gold should be held physically and said land should be protected by well-paid loyal men with large guns. If you're holding anything else you're a rube.

2008 Nov 06 12:16 AM

[Tom B:]

A Marxist, you say? Gee, it seems to me the Marxists over in China have been kicking our butts the past 8 years. I am less interested in labels than results. Bush was only about helping his Big Fossil Fuel and Military buddies; I think our economy needs a focus on getting more money into the hands of ACTUAL MIDDLE CLASS consumers, so, you know, we can
BUY STUFF. Obama's tax plan and understanding of Tech will help with that. McGrumpy was self-admitedly clue-less on economic matters and would have kept us in Iraq forever.




On Nov 05 12:58 PM Socialism cannot compete! wrote:

> I don't think Americans realize who they voted for. We now have a
Marxist
> in the White House...and you seriously think partisan rancor
and
> dysfunction are behind us??? It's only beginning, my friends. Be
prepared
> for internal strife in the U.S., and foreign conflict as well.
This
> is seriously bearish for the dollar and the U.S. as a whole. Laugh
all
> you want with your bunker jokes...there will be those who are
prepared,
> and those who wish they had not been blind as to what this
man
> represents.

2008 Nov 06 09:20 AM

[Tom B:]

"John Dvorak also thinks that will translate to foreign energy companies doing better in his "How to Obama-proof your portfolio" article."

Dvorak has been noted most in his career for having written hundreds of opinions about Apple Computer, almost every one of which was dead wrong. I agree with him here, though, that INTC is a good place to be; they have NO competition, and people will still be using computers in the foreseeable future. As for buying foreign energy companies-- deflation and lower oil prices will keep them down for a while. I like domestic utes, like DUK for low beta and steady dividends.

2008 Nov 06 09:41 AM

[neutrino23:]

Obama is hardly a Marxist. In the 1950s he would have been called a liberal Republican.

2008 Nov 06 10:20 AM

[jjc7477:]

As long as it's a day for prose:

There once was a man named Obama
People thought he was the Dalai Lama
A Martin Luther King-like voice
Made them want to rejoice
But his policies brought us much trauma

2008 Nov 06 10:53 AM

[long_on_oil:]

Oil to the United States is like dope with the Saudis being the supplier. You are living a dream if you think we are going to develop alternate sources of energy with gasoline priced below $2 a gallon. OPEC will make sure we stay addicted to oil until the oil is all gone. Every time gas gets over $3 a gallon we move towards alternate energy and boom OPEC gets scared and down comes oil.
Obama painted McCain as the candidate of big oil but it was Obama that did not want to drill and increase supply. If you don't increase supply prices rise. Prices rise big oil thrives. Now who was the candidate of big oil?
Wake up America.
Obama is telling us to get ready for $4+ gas because alternate energy is not profitable until that point is reached. Hold on to your wallet, before Obamas first term is over you will be paying over $5 a gallon.

2008 Nov 06 01:49 PM

[Mowog:]

"Obama's tax plan and understanding of Tech will help with that."

Hey, you're right! We can all intentionally remove verification systems on our online credit card donation and payment systems and suck in funds from who knows where. I'm sure "Nodda Realperson," "Doodad Pro," and "John Galt" will help us out, just like they did Obama. Except neither his not McCain's people knew their systems had been compromised.

I didn't know he was B. Obama, BS (in Tech). I thought he went to law school.

2008 Nov 07 08:46 AM