Know your Rulers

The financial sector, the energy sector and the agriculture sector all have something in common besides amassing a large collection of stodgy white dudes who play golf with lobbyists. You see, one of the most frustrating things for many investors is the fact that political climates seriously influence the prices of stock. When one picks a stock, as one does whenever one feels one doesn’t have enough to worry about, one must choose a stock with what the industry calls, strong fundamentals, which essentially means that the company in question is filthy rich, getting filthy richer by the moment and generally in a good position to beat its competition over the head with a big wad of cash and then (quite literally) own them. It’s not hard to find stocks with strong fundamentals if you’re looking.

What is hard, however, is predicting what the government will do.

We’ll start with the financial sector because this part bothers me the most so I want to get it out of the way and move on to things that make me less angry. A few years ago, our smacked and dabbed with genius crew of congressional representatives decided to do something stupid: they passed The Community Reinvestment Act which made it possible for people to get loans without proof of necessary income. Bankers are salesmen and they tend to get paid more when they write more loans, so they did it, because people are by nature greedy and stupid.

As a result of this melee of intellectual forethought, a whole bunch of lending institutions went under and the government is paying them billions of dollars to keep them in business. Of course, the banks are doing the right thing (for shareholders, anyway) by laying off everyone left and right and it is obvious that the government will always bail out their banker buddies, so their stocks go up after they post hundreds of billions of dollars of losses every other day like it’s the new thing all the cool kids are doing. These companies are doing horrible and yet their stocks are rising and this is normal. After all, if you knew someone who had the full backing of the American government, you wouldn’t bet against him either. But better than American subsidy, is global subsidy.

The energy sector was one of the first quarter’s 100%, guaranteed-how-can-you-not-lose sure things of the year. Many leading oil-related stocks are hitting their heads against the political condom that is government policy. Apparently, some guy with a good shot of running the country wants to increase taxes on oil companies, which always works because smart companies never find ways to make more money by passing their problems onto consumers but whatever. The point here is that alternative energy, because of both an increase in demand and constant increases in government subsidy worldwide, are a safer bet. They don’t make as much money. They don’t have as much demand, but they also get the love from the rulers. So it goes and all that.

And all of this garbage goes for the agriculture business as well. Though admittedly, they would be doing well without any financial assistance (which kind of crawls under my skin and chews at my nipple if you know what that means, and I hope for your sake that you do not). Corn is actually so subsidized it’s cheap enough to be in every food that comes in a box. Farmers receive so many subsidies for corn that really, you would think the stuff could create orgasm or something.

I guess my point with all of this is that when you purchase a stock, make sure you consider the government climate very closely. Bush is on his way out and the media likes to make oil companies out as villains. Meanwhile, going green is the new way to make companies money that you earned.

America, what a country.