Profit from Post-Election Blues
By The Hard Assets Alliance Team
After Obama won the US election, investor sentiment was immediately evident. The markets reacted strongly to the election, clearly showing that most investors think another Obama term is bad for the economy. It was striking to see gold and the Dow move so sharply in opposite directions.
The reality – according to the Hard Assets Alliance team- is that neither likely winner could stop the train wreck ahead for the economy, so the outcome really didn’t matter.
Sure, Obama wasted no time in talking about raising taxes on the rich, which surely only added to investors’ certainty that the president will make things worse. But Romney could have pushed the US into a war much faster, and that would need to be paid for – not that drone-happy Obama is a dove himself.
Again, the reality is that even if the differences in rhetoric between Obama and Romney were real, they simply don’t matter compared to the world of hurt pending after decades of mismanagement of the US economy and the post-2008 panic. The stampede has taken the US in completely the wrong direction (dousing the debt bonfire with more easy money), as it has in Europe and Asia as well.
All we can really add to this is to remind people to buy gold for prudence and internationalize yourself to diversify your political risk.
That said, perception does move investors, and prices are fixed at the margins, especially during a market mania, which, by definition, divorces prices from underlying value.
In this context, the post-electoral perception of increased economic risk is obviously bullish for the financial safe haven of gold. This on top of the probable seasonal increase in gold prices this winter is highly bullish for precious metals in the months ahead. And if we see any black swans alighting during this time, fear and greed could both drive the masses into the only investing sector that offers security and profits.
That would be powerful indeed, and we’d see a market mania for the record books.
But even if no major black swans upset the house of cards our politicians are desperately trying to hold together amidst a hurricane with an unlimited flow of money-glue… well, there’s still the unlimited flow of money-glue and its necessary consequences, which are bullish for all things real, especially precious metals.
There’s also the looming US “fiscal cliff” and all the media circus around the political grandstanding we’ll see in the weeks and months ahead. Indeed, it’s already started. Among the things at stake are sunsetting tax cuts, the lapse of which would hit many middle-class families hard, not just “the rich.” The rhetorical slugfest ahead and its impact on investor perceptions promises to keep markets fear-dominated and volatile. And that too is very bullish for precious metals in the near term.
What To Do
In short, if you’re an investor who’s unhappy with the way the US election turned out, just remember what to do when life hands you lemons – make lemonade. We don’t call the shots, but we can sure do our best to profit and provide for our loved ones based on the trends we see developing.
The cure for post-election blues is action. If you agree with our analysis above, you know what to do.
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