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Well, just as Doug Casey predicted, Obama won the US
election. I wouldn't make too much of Doug's successful prediction, as he's the
first to say that these two Obama victories are the only presidential
elections he's predicted correctly.
More to the point is the joke going around about two
guys watching the election results in a bar, when Obama's victory is
announced. One guy groans: "Four more years!" The other guy cries:
"Four more beers!"
What's interesting about this to us is that it reflects
investor sentiment. 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.
Reality
The reality – according to Doug and the Casey
Brain Trust – 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 I can really add to this is to remind people of
Doug's mantra for this cycle: buy gold for prudence, gold stocks and other
"crisis investing" stocks to speculate for profit, and
internationalize yourself to diversify your political risk.
Perception
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 stocks in the months ahead
– miners and explorers alike. 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.
Investors already active in the precious-metals sector
seem to realize much of this already. Share prices for good companies that
have not run out of cash are up, money is becoming available for project
financing, and mergers and acquisitions activity has started heating up
again.
I'm happy to say that our readers who acted on our
recommendations to buy during last summer's Shopping Season are profiting
already, and poised to profit more in the months ahead.
What To Do
Given these circumstances, the odds dictate the
following general strategies:
- If you're long, do not let greed get the
better of you: take profits when you have them. You can redeploy them
into more stocks if you're extremely bullish and don't mind losing your
gains, should the market turn in an unexpected way. Or take them out of
the game – use them to buy some real asset you want or need. Or
whatever else suits your fancy. Just don't get cocky. Yes, we expect
things to continue going up for some time, but no one can say what will
be with certainty.
- If you're not long, it is not too late.
There are great deals out there that have still not rebounded much from
last summer's lows, as well as others that have, but which have
material, value-adding developments coming soon. Plus, a rising tide
lifts all ships –at least the ones without holes in their hulls.
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.
No whining.
That's the investor's equivalent of being a deer caught
in headlights. The deer are not actually caught – if they'd just keep
going, they'd almost never get hit at all.
The cure for post-election blues is action. If you
agree with my analysis above, you know what to do. If you don't agree, that's
fine – take action based on whatever you see the trends to be. Either
course has risks and may or may not work out, but sitting in the headlights
is the worst thing you can do.
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