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Politics crosses path with the markets

Discussion in 'Investing' started by TomB16, Jan 29, 2019.

  1. TomB16

    TomB16 Active Member

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    I generally ignore political factors and focus on companies and value. To me, the stock market is a mechanism to buy companies; nothing more.

    There are a few exceptions when I pay attention to macro factors. One is the end of the year. In Canada, we have to sell a stock by the second last trading day of the year in order to take a capital gain or loss on it. This does not affect all stocks but tends to affect old man stocks, like I tend to hold. :D

    I call the end of the year, "the kill zone". I turn off my synthetic DRIPs the last two or three months so I have some money to buy into the year end sale. I do my best to watch for the annual fall run-up. Once the run-up has been on for a month, I shut off DRIPs.

    Whitaker's announcement of the Mueller report nearing completion is one of few political events I have reacted to. I've summed up what small amount (I don't have much after the December fire sale) I can. It is on standby, in case a dramatic event offers a buy opportunity.

    There may not be a buy opportunity when the Mueller report is released and I fully expect the report to be either scuttled or censored but this event has a strong possibility of causing some dramatic market swings.

    I feel I should point out: This is a game to me. This is not how I make very much money and it's just as well because I'm not good at it.

    If I were to ignore these events and simply invest consistently over time, I would be approximately as successful as I am. This is little more than relief from the boredom of being a long term investor. I transferred a relatively small amount of money from a high interest savings account into a trading account and am standing by. If a buy opportunity comes, I will end up 100% invested. I will have zero cash reserve for a month and it will be slow to recover. If the buy opportunity does not arrive, I will move the small amount of money back into the high interest savings account and lament the couple of dollars of lost interest.
     
    WXYZ and T0rm3nted like this.
  2. TomB16

    TomB16 Active Member

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    I'm sure everyone has an opinion on this. Perhaps others aren't interested in dipping their toe into politics but here are the political events I see crossing the market. I've document the events, possible outcomes, and my thoughts to the right of the "->" arrow.

    I look for political events as buy windows (I almost never sell) so this is of interest to me. I ask readers to understand that I'm not spamming my political point of view. This is only presented as it is relevant to investing.

    Mueller Report:
    - Trump dirty -> probably bad for the market, short term, but I suspect the market will snap back within a few months
    - Trump clean -> I suspect this will bring a small boost to the market
    - Trump a little dirty but not enough to indict him -> This is probably the worst case scenario. I suspect this will have a medium small detrimental effect on the market for a while

    China Trade Agreement:
    - No agreement -> Status quo but China is getting pounded by the tariffs so this will have a long term cooling effect on the global economy
    - Agreement better for US -> Very sharp jump for American markets
    - Agreement similar to before -> Sharp jump for American markets but not huge

    Brexit:
    - Scuttled -> I expect this will have minor positive implications to the global economy and long term positive
    - Moves forward -> I expect this will have minor negative implications to the global economy and long term slightly negative
    - either way -> I think most of the Brexit damage has been done so I don't see a lot more damage to come

    Italy EU exit:
    - No exit -> This may have a tiny positive impact but I doubt it's significant
    - exit -> I expect a minor negative impact on the EU and more so Germany with long term negative implications

    Greece bailout repayment problems (This happens every summer, like clockwork)
    - No or minor restructuring -> No impact
    - Major restructuring requested -> I expect this will have a negative impact on the EU and the global economy

    These events and others will take us into 2020 and the heat of the next American presidential election. That appears to be turning into the craziest political season of my life. I have no doubt the 2020 election will have great market opportunities for both buy and sell as polls and campaigns ebb and tide.
     
  3. TomB16

    TomB16 Active Member

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    This thread was poorly named. It should have been called "market impacting events".

    I was surprised to read that delinquent loans and mortgages continue to decline. They are very low, right now. I expect this is having a positive effect on the markets.

    Unemployment is also low, which never hurts.

    It appears the fed has slowed the process of raising interest rates. We all want interest rates to stay low forever. Leveraged capital is market heroin.


    None of this will matter to me, once I'm 100% invested. Right now, I have the occasional blob of cash to invest but we haven't started using our nest egg. Once we are drawing down the nest egg, there will be no more opportunities to shop at the stock discount counter.

    Again, my strategy is: Buy low, don't sell.
     
  4. Steven_Burt

    Steven_Burt Well-Known Member

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    For my two cents. I really don't think the markets care about most politics, imo they prefer dysfunctional government that gets nothing done. The only policy that matters to the markets are the ones that affect the corporate bottom line (taxes, trade, regulation).

    I believe that when we near the end of this historic bull run markets will need to run the market down again to start the process all over. IMO this will probably be a debt crisis that could boil up sooner than later.

    One other major problem for the markets is the shift of more 'socialistic' acceptance. There are a lot of debatable reasons for why this is happening all over the globe, but in my opinion the pendulum has swung way too far to the capitalistic/greed side and it will naturally over react by swinging back way too far to the socialistic/big government side. I also don't believe that it would be a bad thing, it's more just the process that takes place.

    Now if they impeach Trump, the markets may react for a day or two, but really what does it matter to them?
     
    Three Eyes and bigbear0083 like this.
  5. TomB16

    TomB16 Active Member

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    The reason market reactions matter is because price reductions are buy opportunities and price bubbles can be sell opportunities. I would hate to pay retail if I feel there is a strong possibility of a discount in the near future.

    Lower prices = better value

    Perhaps macro factors are only relevant to a value investor.

    People who invest consistently in broad indices over a long period of time with no regard for macro factors (Bogleheads) tend to do extremely well. If this is your philosophy, and you're not just disagreeing in attempt of alpha leadership, then you have my full respect and best wishes for every success.
     
    Steven_Burt likes this.
  6. Steven_Burt

    Steven_Burt Well-Known Member

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    Price reductions are a buy opportunity unless you are buying the top of the market. There is a great deal of people that bought the top of the housing market that are still under water even after the current real estate run. They may or may not ever get green.

    I did not disagree with you at all btw, it is just my belief that long term prices are solely based on returns, and I don’t think a Trump presidency vs a Pence presidency effects corporate returns one bit, so I don’t believe market makers care at all other than how they could manipulate price over a short term. As I said, a day out two.
     
    bigbear0083 likes this.
  7. ElectricSavant

    ElectricSavant Active Member

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    Earnings and earning expectations drive the market. As you know Investing is a long term approach to Macro events. It's those mini-events that can cause bad decisions.

    Every "sell-off" in the market for the last 10 years has been a buying opportunity.

    As long as Trump is President, I am bullish.
     

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