Political passion and profitable investing don’t mix
Turns out that it’s hard to invest profitably when you’re wearing political blinders.
What counts in investing isn’t the world as you’d like it to be but the world as it is.
Yesterday, on the day after the evening when Democrats in the House succeeded in passing the Senate’s version of a health insurance reform bill, my e-mail box overflowed with predictions of a crash in the stock market, or of a rout in healthcare and drug stocks, and indeed of the end of just about everything.
Drug stocks crashed so hard they rallied. Bristol-Myers Squibb (BMY) climbed 1.8%. Pfizer (PFE) was up 1.4%.
Among the insurers WellPoint (WLP) was indeed down by 1.1% but Aetna (AET) was up 0.5%.
I guess the market will have to wait another day for the Nancy Pelosi apocalypse that some of my e-mail predicted.
Every investor has a political opinion, often passionately held. We all believe our community, the country, the world would be better if it went down Path A and eschewed Path B.
We get into trouble as investors when we allow that belief in Path A and that dislike for Path B to prevent us from seeing the stock market as it is.
What’s on the agenda after healthcare?
While Republicans battled Democrats (and Democrats battled themselves) over healthcare, not much of anything else got done. Not reform of the financial system, not serious action on jobs (the $18 billion “jobs” bill that Congress did pass isn’t even a down payment), not climate change, not appropriations bills, not deficit reduction.
For investors the most important effect of the House’s vote last night to send a healthcare bill to President Barack Obama for signature (and simultaneously a package of amendments to the Senate) is that Congress will finally be able to move on to other legislation.
Deficit to shrink by $80 billion to just $1.3 trillion: Now don’t you feel better?
This morning, January 26, the Congressional Budget Office (CBO) released new projections showing that–if current laws and policies remained unchanged–the federal budget would show a deficit of $1.3 trillion for fiscal year 2010.
That’s what passes for good budget news these days. The new estimate is down $80 billion from the budget office’s previous estimate.
Of course, as a percentage of the economy (as measured by GDP) the deficit would be the second largest since World War II.
And in the big debt picture an $80 billion swing is barely a drop in the bucket. The CBO projects that total (on budget) federal government debt will reach $8.8 trillion by the end of 2010.
But wait, the news gets better. (Well, maybe not better. How about ‘funnier if it weren’t so important?”)
