So who won the elections?–which stocks? I mean

The U.S Chamber of Commerce had spent $35 million on the mid-term elections as of November 2, according to the Center for Responsive Politics. American Crossroads, another independent organization, spent $22 million. The Club for Growth $8 million. The National Association of Realtors $6 million. PACS associated with commercial banks $6 million.

Although in this election as in most recent ones Democratic candidates got their share of corporate donations (and more than their share of union funds), most of the money from business lobbying groups and from so-called independent campaign organizations, such as American Crossroads, went to Republican candidates.

And all those organizations got for their money was enough Republican victories to take the House and make a mockery of Democratic control of the Senate?

Doesn’t seem like much of return on investment. Spend all that money on politicians so they can sit in the House and Senate and talk past each other? Hopes of repealing financial reform? Dead. Legislation to reverse healthcare reform, the Democrats key achievement of the first two years of the Obama administration? Dead.

We’re looking at two years of solid as concrete legislative deadlock where no action will be the only action.

Bet the groups that spent all that money are disappointed.

Hah! Guess you don’t understand how what we call American democracy really works. And any investor who hopes to stand a chance at making a buck from this election better take a crash course how things get done (or don’t get done) inside the Beltway. Read more

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. Read more

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.

What other legislation? Read more

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?”) Read more