The Capitalist Investor - Episode 3

American-held investment portfolios are directly impacted by the fiscal policies of the U.S. Government, so as we move through the primary season leading up to the 2020 election, we have a great opportunity to learn about the financial policies of Presidential hopefuls — and assess how those policies would impact the overall investment world.

Bernie Sanders’ financial policies are nothing less than Socialistic, he says so himself. Currently (February 2020) he’s the leading Democratic candidate. So, let’s take a look at how the average investment portfolio would be impacted, negatively and positively, were Bernie to receive the Democratic nomination and if he was to become President.

Outline of This Episode

  • [1:02] Our take on the Iowa Caucus (conspiracy theories galore)
  • [4:10] Student loans as an example of bad left-leaning’ policies
  • [8:12] Breaking down the Iowa Caucus results – Bernie in the lead
  • [11:06] Assuming Bernie wins the nomination (and the Presidency)
  • [12:50] The winning asset classes under a Bernie Sanders Presidency
  • [15:30] The losing asset classes under a Bernie Presidency

An example of left-leaning policies gone wrong: The student loan crisis

We agree that there is a student loan crisis in the United States. But the solutions the candidates are proposing don’t always make sense. Take Bernie Sanders and Elizabeth Warren’s proposed policies for example. Both candidates are left-leaning in their policies and propose policies that provide for the repayment of student loans in a “cooperative” sort of way. That means that those responsible enough to work off their own loans don’t receive any benefit from their policies.

The main problem with these policies is that they do not solve the root issue. For years policies have allowed student loans to be handed out like candy, which in turn has allowed colleges to raise tuition to an unreasonable degree because they knew loans would be available to pay for it. We’ve got to fix that problem, not compound it by making everyone involved pay for ever-increasing loans for which they are not responsible.

Iowa Caucus 2020: The results that could impact your portfolio

The Democratic response to the Iowa Caucus is nothing short of amazing. The DNC appears to have tried to stifle the results entirely because it didn’t turn out the way the party wanted. Joe Biden is the favored candidate of the DNC, but he’s not looking good at this point. The top 5 contenders in the Iowa Caucus came out as follows:

  • Pete Buttigieg received 26.2% of the vote and 13 delegates
  • Bernie Sanders received 26.2% of the vote and 12 delegates
  • Elizabeth Warren received 18% of the vote and 8 delegates
  • Joe Biden received 15.8% of the vote and 6 delegates
  • Amy Klobuchar received 12.3% of the vote and only 1 delegate

That’s all the delegates, so those are the only contenders that matter. Currently, Buittigieg and Sanders are the clear winners. The financial policies of these two men would impact the investment world, and in particular, Bernie’s socialistic policies would be devastating for most of our clients’ portfolios. Listen to learn why.

Bernie Sanders is already expected to win the next two caucuses. That means…

He’s likely to become the Democratic nominee for President whether the DNC wants to back him or not. Why do we say that? It’s a matter of history…

No candidate in the history of the United States, in either party, has won two of the first three primaries and then gone on to lose the nomination. It simply doesn’t happen. With Bernie being heavily favored to win the next two caucuses (New Hampshire and Nevada) it seems that he is going to be the Democratic nominee unless the Democratic party vetoes him despite his popularity.

Those facts are the reason we’re examining the impact his financial policies would have on the economy and in particular, on the typical investment portfolio. As we list the winners and losers in this episode, keep track of the asset classes we mention that you hold in your portfolio and see how you’d fare under a Sanders Presidency.

How would various asset classes be impacted by a Sanders Presidency?

When it comes to how Bernie’s policies would impact your investment portfolio, it’s not hard to figure out the winners and losers. As we see it, here is what you’d experience.

WINNERS:

  • Bonds (Our clients do hold bonds, but they are a minor portion of most portfolios)
  • Annuity bonds
  • REITs (Real Estate Investment Trusts) – excluding prisons
  • SG investing (Not in huge demand by many investors)
  • Life Sciences and Tools
  • Renewable Energy
  • Foreign Oil
  • Companies being pummeled by Amazon (everyone else)
  • Cannabis
  • Child Care Facilities

LOSERS

  • Stocks (This is huge. Most investors hold stocks)
  • The U.S. Dollar (Cash would not buy as much)
  • Companies that benefited from the 2018 tax reform (everyone)
  • For-profit prisons
  • Private equity (Small biz is what is getting hurt here because they eventually sell to private equity firms)
  • Managed care (hospitals and biotech)
  • Energy
  • Chemical makers
  • Banks
  • Facebook / Google / Restaurants / Retail

OUR PREDICTIONS:

If Bernie is the Democratic candidate:

Stocks will be negatively impacted immediately — there will be serious concern and uncertainty in the market — multiples will come down — the stock market will pull back 5% to 10%

If Bernie becomes President

Healthcare, which is 12% of the economy, will drop (because Bernie plans to nationalize healthcare) — The corporate tax rate will go from its current 20% to 35% or 30% — most stock portfolios will lose value quickly.

Listen to learn why we make these predictions and to hear our advice on how you can mitigate your risk in light of these possibilities.

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Keep Listening to The Capitalist Investor:
Episode 23:
Elon Musk, Michael Jordan, and Capitalism, Ep #23
Episode 2:
Is the Stock Market Overvalued?
Episode 4:
Coronavirus, Pandemics, and Your Money
Episode 5:
What We Consider A Smart Investment Strategy, Ep #5
Episode 6:
Why Investing In IPOs Is Not A Good Idea, Ep #6
Episode 7:
How a Joe Biden Presidency Will Impact Your Portfolio, Ep #7
Episode 8:
Special – Coronavirus and the Economic Shutdown, Ep #8