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Be Careful With Republican Stock Pickers. They May Not Believe In Math.

A Republican friend of mine - a buddy of 20 years who has remained as conservative as the day I met him freshman year at the University of Michigan - sent me a surprising text a couple of Tuesdays ago, moments after Obama had secured his re-election: "Karl Rove is the man."

"How is he the man?" I replied. "He and the Rs spent over $1 billion and Obama won and the GOP lost seats in the House and Senate." If Karl Rove ran a company in which I was an investor, I'd want him fired. But like many Republicans, my friend saw cold, hard reality and denies its existence (just like Rove, himself.)

My politics has admittedly shifted left over the years - particularly since having children - but most folks who know me think of me as a pretty conservative, Midwestern guy. I describe myself as a "Progressive Libertarian." I live my life pretty conservatively, and don't want the government encroaching on personal decisions, but I do believe in a social safety net. As far as the California Secretary of State knows, I'm an Independent, registered as "Decline to State."

A political junkie, I've been warning for years that the Republicans were on track to becoming a regional, minority party. Ultimately, the country is far less conservative than the tea party, social conservatives and right-wing extremists who control the GOP think. And the electoral map from November 6 reflects the accuracy of this prediction. Most staggering to me is that the Republican Party's anti-science commitment has dangerously spread to "math" as they've continued to ignore the realities of the country's demographics. They tried to win a national election yet ceded huge swaths of the population to the Dems - Blacks (93-6% to Obama), Latinos (71-27%) , Asians (73-26%), LGBT (90-10%), Jews (69-31%) etc. Additionally, this time around, they pissed off women, who broke 55-44 for the President.

There are just not enough "white males" to build a national coalition - it's not my opinion, it's MATH. Republican strategist Mike Murphy said this over 3 years ago, and after the election, Erick Erickson of said "…Romney made a conscious decision to blow off Hispanic voters. Yes conservatives, we must account for this. The Romney campaign to the hispanic community was atrocious and, frankly, the fastest growing demographic in America isn't going to vote for a party that sounds like that party hates brown people."

But in the days leading up to the election, Republican pundits -- ranging from the competent George Will and Peggy Noonan to the delusional Karl Rove and Michael Barrone to the carnival barking Dick Morris and Donald Trump - all called for a Romney landslide. How is it possible that all of these so-called experts, including folks from the Romney-Ryan campaign, were "shellshocked" by the results?

I did my own informal survey with Republican friends on Election morning: "Prediction?" the email read. I told them I thought Obama would win 303-235 (I thought Romney, not Obama, would win Florida) and predicted a 1.3% win in the popular vote - it came in at 2.5%. Across the board, ALL of the Republicans said "Romney." Now, remember, I didn't ask who they hoped would win, I asked who theythought was going to prevail (and won a couple of meals as a result of their delusion.)

It was an astonishing realization that my smart, highly-successful group of friends with different political affiliations truly live in an alternate universe. They watch Fox News, read National Review and The Weekly Standard, listen to Rush Limbaugh or Dennis Prager, and have absolutely NO IDEA WHAT'S ACTUALLY GOING ON IN THE WORLD. Of course, if you followed Nate Silver's incredibly good blog, FiveThirtyEight, you knew it was going to be a fairly close race, but Obama was going to win. But because Silver is associated with the New York Times, most Republicans dismiss it as liberal propaganda. In reality, it's a non-partisan, deep, statistical analysis of polling data - the kind of financial analysis a good stock analyst can appreciate.

It's people who are biased, not numbers! Again, the MATH thing.

Something very dangerous has happened to many people in the Republican Party. They discount fact-based arguments - ones backed by math and science - and cling to emotional, faith-based positions. Whether it's my conservative buddy's steadfastness on Karl Rove, or many Republicans' refusal to even look at Nate Silver's numbers, the more they're challenged with fact-based arguments - scientific data on "climate change," or evidence against taking serious "austerity" measures during the heart of a recession, for example - the more they dig in their heels on their opinions.

Which brings me to my thesis: Investors should consider the political affiliation of individuals making stock recommendations because it's a proxy for the person's judgment. Admittedly, the Democrats' displaced idealism often leads them to make poor decisions regarding spending, but hard-core Republicans have a hard-time dealing with math-based reality, which carries over to their outlook on the economy and the stock market. After all, they've been wrong for most of the past 20 years.

Don't believe me? Here's the math:

S & P 500 results during the past 6 Presidential terms:


S&P 500 1/20/09: 805.22

S&P 500 11/19/12: 1,386.89


Bush II

S&P 500 1/20/01: 1,342.54

S&P 500 1/20/09: 805.22



S&P 500 1/20/93: 433.37

S&P 500 1/20/01: 1,342.54


Bush I

S&P 500 1/20/89: 286.63

S&P 500 1/20/93: 433.37