The Justa and Lars Honors Bob Brinker Investment Club Thread Message Board

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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread

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Jan 7 4:00 PM EST

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To: Boca_PETE who wrote (5333)	7/4/2010 6:34:25 PM
From: marc ultra	3 Recommendations Read Replies (3) of 10065

<So you think that the past pattern will repeat as investors look 6-9 months ahead to 2011Q1 when their taxes rise as a result of expiring Bush Tax Cut program, when financially desperate states raise taxes, when shortages in produced Crude oil as a result of shut down drilling in the Gulf of Mexico impact world energy prices, when increase utility bills from a passed "Cap & Trade" program hit......All of this on top of continued credit contraction, poor job growth, and an anti-business anti-citizen administration driven by their dream of "change" to a "worker's (translation "union") paradise where the policy is "to each according to his means, from each according to his abilities"." What I think is it's a serious error to make market and even to a degree economic assumptions based on what are largely perceptions of political and ideological issues or some perceived very long term projection of how things may play out. In fact I think it's where people often make the biggest mistakes because they can be riled up and feel strongly about whether a certain political policy is good or bad and then make assumptions about the implications for the market which often turn out to be wrong. We heard Bob and others say what a bad idea it was for Clinton to raise taxes after coming into office and by the end of that administration things didn't turn out so bad. People got significant tax cuts and and loosening of regulation with W and by the end of that administration investors didn't end up that great. My point isn't that some policy may have been good or bad but the correlation between policy and markets just isn't that strong or obvious. While investors generally favor Republican presidents the market has done a little better under Democrats. I think the point again is not who should get elected but don't get caught up in all these assumptions that don't necessarily play out as you'd expect. These assumptions might be valid if we had two extremist parties but regardless what it may sound like on talk radio or one's own politics the fact is we don't. We have essentially two centrist parties that are further neutered by a Senate that requires 60 votes and the need for political contributions from all sorts of people. I'm also not sure this throw all the bums out idea is all that good. It could turn out to be one of those situations where you have to be careful what you ask for. Bob has made clear in the past that he thinks the worst thing that could happen is if the Fed lost its independence. Well if we elect a lot of tea party types that think like Ron Paul that could be a serious threat to Fed independence as we saw was attempted this year. It was some of these liberal "celebrity politicians" like Barney Frank who went and talked to Bernanke and worked out ways to reach legislation that wouldn't seriously compromise Fed independence when it looked like things were going that way. I think one of the reasons Bob has done so well with market timing is because he doesn't let himself get caught up in the political issues when he analyzes the numbers but just looks at what his model is telling him about market fundamentals. He uses things that historically have good predictive value about where markets are likely to go. Political and and policy assumptions just don't have that type of predictive value for markets.

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