Ignore politics when investing until you cannot
- January 19th, 2012
A quick post on the topic of politics and investing. Jeff Miller at A Dash of Insight has noted many times that investors should be “politically agnostic” when it comes to their investing. In short, don’t let your political views affect your investing. Like all rules there are some exceptions.
However a recent post at Global Macro Monitor got us thinking. In the post the author talks about the failure of the Obama administration to unleash the “green economy.” That being said the prospects of the administration and the solar stocks seem to be picking up along with the economy.
We decided to to chart the Intrade probability of an Obama re-election (blue-right hand axis) against the performance of the Guggenheim Solar ETF ($TAN) relative to the SPDR S&P 500 ETF ($SPY) (red-left hand axis). As you can seen since the beginning of the data set solar stocks have been performing poorly relative to the overall market. Only recently have the stocks begin to perk up. That bounce has corresponded with a firming in Obama’s prospects for re-election. Admittedly solar panel pricing is in part affected by the global economy and other countries’ policies so US politics is only part of the equation.
So what does it all add up to? Who knows. The bounce in the solar stocks may simply be a reflection of the “dash to trash” by managers playing catch up in 2012. Then again a smart guy like David Einhorn has covered his short position in First Solar ($FSLR). The challenge this highlights is investing in sectors and/or companies that are highly dependent on government (subsidies) for their underlying businesses. In most cases we should ignore politics when investing, but in certain cases you really do have to pay attention.*
Politically agnostic. (A Dash of Insight)
Does the solar ETF reflect chances of Obama 2.0? (Global Macro Monitor)
Barack Obama to be re-elected in 2012. (Intrade)
Einhorn covered First Solar short. (Reuters)
The ongoing “dash to trash.” (Money Game)
*We are ignoring the entire Solyndra issue for the sake of brevity.
Abnormal Returns is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small commission, yet you don't pay any extra. Thank you for your support.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Abnormal Returns has over its seven-year life become a fixture in the financial blogosphere. Over thousands of posts we have striven to bring the best of the financial blogosphere to readers. In that time the idea of a “forecast-free investment blog” remains as useful as it did six years ago. More »
- What books Abnormal Returns readers purchased in August 2014
- Monday links: valuation moralists
- Top clicks this week on Abnormal Returns
- Sunday links: trusting the market
- Saturday links: financial karma
- Friday links: perception and reality
- Thursday links: a growth mindset
- Moving past the active vs. passive debate
- Wednesday links: for what ends
- Tuesday links: valueless portfolios