While we're not sure who will be president for the next four years, there's at least a healthy chance it will be Mitt Romney.
Whether we like a politician or not, the changing of the guard always has an impact on the markets. Over the last few years, the coal industry has learned that the hard way.
So what moves will the market take assuming Mitt Romney wins? Let's analyze his plan and look for longer-term trends.
Oil, Natural Gas, And The Romney Doctrine
If there's one economic plan Republicans actually make good on, it's energy drilling. Romney's oil and gas plan is often deemed one of the most aggressive in presidential history, which is great for energy investors, at least.
According to the PDF summary of his plan:
Directs the Department of the Interior to undertake a comprehensive survey of American energy reserves in partnership with exploration companies and initiates leasing in all areas currently approved for exploration...
Directs the Department of the Interior to implement a process for rapid issuance of drilling permits to developers with established safety records seeking to use pre-approved techniques in pre-approved areas
Companies poised to benefit from this include, well, oil and gas companies, especially service companies. Rig Zone explains:
Republican Presidential nominee Mitt Romney's proposed energy plan could be positive for the oil services and drilling industry, with its goals of streamlining and improving the permitting process, opening up new areas for drilling and boosting overall drilling activity, according to a recent research note from Barclays Capital.
Seismic companies and eventually offshore drillers could benefit from Romney's plan to open acreage offshore Virginia and the Carolinas for exploration, Barclays analyst James C. West said in the Aug. 24 research note.
With a Romney victory, increasing exposure to U.S. energy is a gimmie. Stocks like Acorn Energy (ACFN) are sure to gain over what they'd have alternatively, as well as U.S. producers with lots of U.S. exposure like the usual oil suspects.
Impacts On The Federal Reserve
This is a little complicated, because a lot of Republicans tend to assume that the GOP and DNC approach to the Fed is different. Maybe a little, but overall, not really.
Remember, Bush appointed Bernanke. And Bernanke is a registered Republican. Bernanke has made it clear that he was inspired by Milton Friedman to do his plan. Just because a group claims to be pro-free market doesn't mean they really are in the end.
Will Romney fire Bernanke? Maybe. But just a few years ago, Romney defended Bernanke's actions, meaning that Romney's firing of him wouldn't be some kind of tip to Austrians or something -- it just means it's a political firing, and not an economic one. Overall, the Fed won't change much.
Impacts On The National Debt
Romney's plan calls for tax cuts and spending cuts, though I think pretty much everyone realizes most of the major tax cuts are politically impossible and spending cuts are also unlikely.
The real question, as Ryan's plan makes explicit, is whether government can slow government spending increases. They believe they can, though there's no way to be certain.
Assuming Paul Ryan's plan is perfectly implemented, and no terrorist or military events in the next 30 years occur, which increase our costs, and no more financial crises occur, then the national budget should be balanced by the time a lot of the people reading this will be dead.
That's right, a lot of the readers of this article will not be alive. This is kind of silly, and is way too long away for us to be optimistic. Bad things happen. And plans don't work the way we originally think they will.
Long-term policy changes are important, but only when accompanied by short-term reforms. It's possible we could go through seven or eight presidents between now and when Ryan plans on balancing the budget. It's not going to happen. Not even close.
So the long-term fundamentals when it comes to national debt are still horrible, and anyone who thinks our national debt problems are less severe with a Romney win really need to have a more realistic view of political struggles.
The impact for investors here is gold (GLD) and hard assets like silver (SLV). If gold somehow falls due to fewer fears about long-term debt, I'm going to be buying even more than usual because it'll be a huge opportunity. The long-term fundamentals have no real positive response from anyone with political power right now, and probably won't. It's sad, but that's why we buy gold, and it's probably why billionaires Paulson and Soros have been increasing their exposure lately.
Impact On Coal
If Romney wins, I'll be looking for coal investments. Coal has been battered over the last few years, even with Patriot Coal going through bankruptcy. Some might see this as a great thing, but policy analysis isn't investment analysis. For the investor, a coal comeback is an investment opportunity. Look into Arch Coal (ACI) or Alpha Natural Resources (ANR). I wouldn't risk a dime on either company unless a Romney victory seems inevitable.
Overall, a Romney-proof portfolio will likely be an Obama-proof portfolio, only more heavily weighted toward energy and corporations with stronger medium-term growth potential. Any possible fall in gold should be seen as completely irrational, and will open up a huge buying opportunity.
Investors looking for political gains should, if a Romney victory becomes more likely or if he wins:
a) Oil and Gas. Increase exposure to U.S. energy producers of oil and natural gas, as well as oil and gas service companies.
b) Precious Metals. Increase exposure to gold if there's a price drop, because the fundamentals aren't going anywhere, regardless of how the market reacts.
c) Coal Stocks. Increase exposure to the coal industry as Romney allows the industry to have some slack from regulations.
None of this, of course, is about whether policies are good or bad -- but about what the investment opportunities are that they open up.
Additional disclosure: I own physical gold and silver and buy more regularly.