Political Investing

The rhetoric remains fierce, as the debt ceiling debate drama continues…again.  Even though we go through this cycle over and over, we keep getting questions from investors as to whether or not they should get more conservative “until this all blows over.”  Our advice, time and again, remains “Stick to your plan.”

A wonderful article-On Investing: The Obamacare Portfolio-was written in the Washington Post over the weekend by Barry Ritholtz, the CEO of research firm, Fusion IQ.  The entire article can be found here:  http://wapo.st/1fdp9R0.  While he offers some investment advice at the end-please don’t act on it since he doesn’t know you or your goals-we think the article is well worth a read.  The opening lines of the article are paramount and spot on:

“Investors are best off when they leave their party affiliation and partisan views behind. I’ve said it before: “Washington, I’m here to tell you, politics and investing don’t mix. Your politics are killing you in the markets.”  Keeping your emotions-those primitive, thoughtless impulses-out of your portfolio has been a consistent theme of mine.”

We could not agree more.  You have goals, and we have worked hard to craft a plan aimed at helping you achieve them over your lifetime.  Getting emotional about the political posturing our country is being subjected to could knock your plan off track.

This tiny rock we live on has been through a lot-wars, plagues, pestilence, environmental disasters, social discourse, riots, assassinations, terrorism, etc.-yet we’ve carried on, and, generally, markets have done fine.  A few bickering fools likely won’t do too much to change that.  In the event they do too much damage, we’ll have the opportunity to kick them out in the next election, and hopefully, we’ll be smart enough to elect pragmatists to take their place.  We know…wishful thinking.

We know a hedge fund manager who shorted stocks when we invaded Iraq the second time.  His logic was that deficits, social acrimony and political discourse would skyrocket.  He was right about all of those things, but he was wrong about what it would mean for markets.  They skyrocketed, and a year later he shut his fund after losing clients and himself a lot of money.

The point is this, markets adapt.  This too shall pass, and it will probably pass fairly soon.  We might get a sell-off, or we might get a rally.  It might be the disaster that the media tells us it will be, or it might not.  Are you willing to make a major, short-term bet on “might?”