Two Investment Areas That Could Benefit from an Obama Presidency 4 comments
-
Font Size:
-
Print
- TweetThis
According to the bettors at Intrade, Barack Obama has about a 65% chance of being the next president. I have started to look into different investment areas that could benefit.
Two conservative investments that look interesting now are REITs and municipal bonds. Of course, I also will look into closed end funds that invest in these areas.
Here are the reasons I like these two areas:
- REITs: Obama is planning to raise the 15% tax rate on dividends and long term capital gains. Currently, REITs are not eligible for the 15% tax rate. When the 15% tax rate was originally passed, many income-oriented investors (or their financial advisors) sold their REITs to buy dividend paying stocks that were eligible for the 15% rate. If the legislation passes, this will reverse and money will flow into REITs. What goes around comes around.
- Obama will be raising the marginal income tax bracket on the wealthiest 1% of taxpayers. This group are big buyers of municipal bonds,and the relative benefit of munis to them wll be increased. This is especially true, since the 15% dividend rate is also going away.
There is also another short term reason why muni bonds are attractive now. The bond insurer MBIA (MBI) recently unloaded about $4 billion in securities in the second quarter. There are also rumors that Ambac (ABK) will also be unloading large amounts of muni bonds. The reason for this is simple - both companies have been declaring huge losses and have large tax loss carryforwards. So their marginal tax rates going forward is essentially zero. They have no need for municipal bonds which provide tax exempt income.
Related Articles
|


























This article has 4 comments:
Of course, there will be data points at the extremes of the distribution. That could happen this time.
Of course, one can argue that there will be reversion to the mean. That would tend to produce results for the next 100 years that would be the opposite of results for the past 100.
Also, it is possible that the policies of political parties and how they effect the economy have changed over time and historical results can not be reliably projected forward.
I don't have a clue if history should be a guide or if any of the above arguments will prove to be true. I plan to invest based on current information and my best estimates of trends.
If MBIA and Ambac are going to be selling large amounts of Muni bonds why is that "another short term reason why muni bonds are attractive"?