Obama Wins Presidency and Democratic Majority Established, Market Expectations?

It is all over but the crying for the Republican Party. Conservatism for the short term in America seems officially dead. On the bright side perhaps is that with a full Democratic majority there will be no excuses that partisanship got in the way of fixing America. It is either sink or swim for the Democratic Party. America has started down the path of Socialism. Whether you call it ‘Socialism for the Rich’ or ‘Fascism Lite’ it comes down to government central planners picking winners and losers in the economy. 6,000 years of history have demonstrated consistent failure on the attempt to replace our genetic coding of Survival of the Fittest with government ‘fairness’ policies. The only true winners in such a nation are those in power at the top of the food chain.

However, our American government must do its job which at the end of the day acts as the security guard of our nation. Responsibilities include protection from fraud, protecting its citizens from aggressive nations, establishing fair trade policy that promotes internal growth, and protecting its energy supply.

The political power in Washington faces unprecedented challenges on the economy. Specifically, two major problems created this perfect economic storm. Problem one was the shadow banking system and regulatory safeguards that were repealed for the benefit of the few. Lack of supervision and accountability was non-existent these last eight years from enforcement of our laws on our borders to the hedge funds whom gambled on housing and lost with the bill being handed to the American public at large. The second problem was the general philosophy of home ownership as a ‘national right’ whether or not an individual could ultimately meet financial obligations. Again, this benefited the few and created shattered dreams. Problem one and problem two are closely interconnected. Another big factor is the non-accountability of the Federal Reserve to the American public and whether in its present form should exist at all. After all, the Federal Reserve is a global banking cartel that answers to its own constituents first and the American public as an afterthought. But that is another subject for another day.

Will Washington come to terms that much has changed overnight? Time will tell. But for now, I believe it is important to discuss which certain market sectors may see headwinds or reap benefits of an Obama Administration. Here are the highlights from a Bloomberg article this morning:

• National Health Insurers such United Health Group Inc. and Wellpoint Inc. will likely reap strong benefits in a nationalized health care program which Obama plans to implement. Big pharmaceuticals such as Pfizer and Wyeth will face competitive challenges from imported drugs from Canada and likely ‘forced’ negotiations on drug prices. The detriment of course is that pharmaceuticals may just continue to offshore there business if there is not a beneficial portion of such negotiations such as a boom of new patients using there products albeit at a discount price. India and China were happy to accept the Clinical Trial business that once belonged to thousands of U.S. skilled workers. This industry was destroyed by the Democratic controlled House because of the strong arm tactics of ‘negotiate or else’ between 2006-2008. Let’s hope this scenario does not repeat on prescription drugs and the job losses to Chindia are not in the hundreds of thousands. Never mind the mention that China doesn’t exactly have a great track record at producing quality products.
• Unions and larger business wage agreements seem likely to receive favorable consideration. If you own a business, this is likely to be detrimental to productivity and profits. I assume many businesses will follow the French model of hiring more temp or part time workers or seek to offshore business to other nations that have fewer labor protections. Small business will see the trickledown effect of labor expecting more. As a business owner and investor, I can say that the changes of owning a business in a red state that flipped blue (NH) over the last 15 years has created poor attitudes in labor where employees felt they are owed a living and full health benefits to boot but NOT the work ethic to go along. Fortunately, NH still has ‘at will’ employment laws. It will be of vast interest to see how an Obama Administration will position itself on Free Trade policies and Globalization. After all, these are the true culprits of wage stagnation for the American public not your 80% of the population that works in or runs a small business.
• Taxes – America will soon find out the clarification of the tax breaks for 95% of the population. There does appear to be a true tax-break plan under an Obama Administration. If wealth is to be redistributed perhaps a benefit is that the Democratic Party would prosecute Wall St. executives, specifically in the shadow banking system that created fraud and confiscate this wealth. All in all, it’s a slippery slope as politicians on both sides of the aisle personally profited. Big oil will see tax breaks repealed and most likely a windfall profit tax but not implemented immediately. Exxon is mention in the Bloomberg article specifically. Again, the Administration must exercise some prudence. Few realize that Exxon is one of the last American oil companies in operation. A nation’s energy needs controlled by foreigners has told a repetitive painful tale for the American household.
• Despite arguments from Conservatives, Obama does vote for higher defense spending in advance weapons R&D. Defense contractors will likely see a continued boom.
• Energy. Americans can expect larger energy bills in the short term. Natural Gas on the other hand will be a big beneficiary. Those invested with T. Boone Pickens which is heavily aligned with Speaker Nancy Pelosi should see healthy returns. Long-term, Natural Gas is in my opinion a great solution to foreign oil dependence. Obama has expressed interest in allocating $150 B in alternative energy. Solar and Wind sectors will also see a lift alongside Natural Gas. These are great options long term but Americans will see prices rise exponentially in the mid-term.. This is because Index Investors also will notice and will crowd the energy space and go long, similar to the effects of energy prices going to the moon in 2008. Americans can expect a brief respite on energy prices for now as the U.S. continues a deflation stage, followed by a hyperinflation stage on energy commodities. If there was ever a time to buy a fuel efficient car, it is probably now. A tax credit of $7,000 is being proposed for hybrid and alternative fuel vehicles. I am of the opinion that the true investment needed is more in the line of $2 T to become energy independent over a span of 10-20 years and create a large amount of skilled jobs that are needed to restore the economy today. Americans can expect offshore drilling proposals to be on long-term hold or scrapped altogether. Alaska? Probably will remain untapped. Obama is not for nuclear power citing ‘nuclear waste’ concerns. Clean coal? Coal is dirty and killing you according to some prominent members of the Democratic party.
• On media, Conservative Radio and the Internet should be extremely concerned on censorship. The Fairness Doctrine will be implemented. Even some of my staunch Democratic friends are concerned over the talk of censorship to silence the opposition.
• Other beneficiaries will be Internet Technology and Infrastructure sectors. America does have a necessity to fix crumbling Infrastructure on roadways and bridges. A continuation of the Bush policies in increased Infrastructure spending should be expected.

Author: Jason Rines is a Founder of Raging Debate.com