-- Posted Thursday, 4 November 2010 | | Source: GoldSeek.com
By: Dr. Jeffrey Lewis
Historically, an election following the election of an “anti-business” president has proven to be a negative for metals, but a positive for stocks. As the numbers come in and are tabulated, investors bet on a changing mood from government, one towards fiscal responsibility, lower taxes and regulation, and general pro-growth policies. Of course, the effect is only temporary.
Digesting Elections
One of the many reasons elections have such a profound impact on the market is due to the element of uncertainty. One of the few things that not a single investor will say he or she appreciates is uncertainty or indecision. Such uncertainty and indecision run against the ideals of investing: investors should seek to “gamble” only when the risk is substantially lower than the reward. After enough rolls of the dice, the law of averages says the outcome is a profit.
However, there are two more elements, and those are the inherent optimism and short memory of the population at large. Anyone who is old enough to read this article and has seen their fair share of election cycles knows that this optimism and short memory come at a price.
This election cycle will be no different than most. We'll know the numbers for each party. Each will claim the same pro-business, less government agenda, and then, some months later, everyone will have forgotten. The parties will switch sides, with each blaming the other for the legislation on which they both vote.
Reducing Spending
At the top of the agenda for lawmakers this year was their promise to reduce spending and cut the deficit. In reality, we've seen plenty of increases and decreases when it comes to government spending, and likewise, we've seen many increases and decreases to the federal deficit. We have also seen high interest rates and anti-inflation policies come from the Fed.
However, we have never, ever seen real and lasting change. The dollar has continued to be pummeled with stimulus, easing, and lower interest rates, while the deficit has risen and fallen in the past, but has not yet once been completely erased.
The markets, at least in the short term, will care who is elected. They will pretend like the budget has been balanced, and the dollar's value has been restored overnight. They'll sit around and pretend as if all the problems of the future are now fixed. Meanwhile, nothing will be fixed, nothing will have changed but the power structure, and if the long term, real history is any indication, deficits and inflation will only continue.
Take advantage of the likely buying opportunity coming this week and into next. Take advantage of the baseless optimism that is grounded in hope for a complete 180 degree turn from nearly 240 years of government deficits and 97 years of inflation.
Your money should be on the smart bet: the bet that history will continue to repeat and that those who ignore such simple repetitions will be burned time and time again. Elections last just one day, but poor government policy is apparently forever.
Dr. Jeffrey Lewis
www.silver-coin-investor.com
-- Posted Thursday, 4 November 2010 | Digg This Article
| Source: GoldSeek.com
