Take a look at this article published today by Jim Cramer. Although he's a democrat and was a supporter of Obama in the beginning, he has reversed course over the last year after viewing the destructive attitudes of the democrats (and some republicans who have gone along with them) in power. Then read my comments after the article:
Cramer: Obamacare Will Topple the Market
Either the market doesn't care that the health care bill will pass -- and it will -- or it doesn't think that the proposal will cost that much -- something I think is nuts. Which brings us to a very tenuous crossroad: We have to wonder if this is one of those occasions, like in 2008, where the market doesn't see the coming catastrophe. Or perhaps the market sees any resolution as positive.>>Here's Your Portfolio If Obama's Agenda Wins
I don't. I think when the health care bill passes -- and it will pass, I believe, because Nancy Pelosi has worked diligently behind the scenes to bend the anti-abortion foes, the key votes, to her will -- the president will get a second wind. That means the whole agenda -- cap-and-trade, Card Check for easier organizing (something that Wal-Mart's (WMT) inability to move even on its dividend boost tells you is coming) and amnesty for immigrants who are currently not citizens -- will quickly come to pass, perhaps even before the election. To pay for these items I see a dramatic increase in ordinary tax rates and perhaps capital gains and dividend tax rates in 2011 either reaching or exceeding those ordinary income rates as this current version of the Democratic Party believes that only rich people own stocks. (That's been a hallmark from Day 1 with this administration.)
Given those hurdles, which include a suicide pact with financial health for small businesses that obviously can't afford health care without risking the capital formation necessary, I think you have to put the double-dip recession back on the table.
Those who have read me here and watch "Mad Money" know that I was out there early thinking that 2010 would not produce a double-dip, despite ample commentary that it would. But if health care reform passes, I am going to revise my thinking -- and you know I think it will -- especially because immigrant amnesty will cause the health care system to be overloaded and our taxes to soar.
The stakes seem so high while the market appears so complacent, perhaps because none of the levies will pass until 2011. To me that's around the corner. It's been slightly more than a year that I have been bullish. That's hanging by a thread this week.
Obamacare cuts that thread. Even if the market doesn't seem to know it.
At the time of publication, Cramer had no positions in the stocks mentioned.
I have had this sentiment for a while, and back in January began scaling down positions, moving to cash. I will continue to do so ahead of this vote, especially with the Dow now sitting at 10,700. This seems like a good level to take some money of the table and wait to see what congress decides to do.
My dad recently asked me what direction the market might be going, and to be honest, I don't know any big professionals that I read who have much to say on it right now either. That being said, while it is hard to get any direction in most sectors of the economy as we await the decision in DC, I think one sector that will do well regardless of what happens is the energy sector. So if you still want to have some money in play, I would think investing in mutual funds, ETFs, or stocks in the energy sector might be a good idea. In my view, if Obama wins and gets health care, he'll probably get Cap and Trade, which will make energy stocks go up. If he loses, energy should still go up because the economy should improve.
And anyway, Energy stocks, especially those with direct holdings in the commodity, gain value the longer the Fed keeps the interest rate depressed. As well, OPEC is not backing down on supply restraints, so oil should hold up and increase in price as demand continues to increase, and production continues to fall. One big player in the price right now is the drilling failure rate which is up dramatically over the last year. That makes oil more expensive to produce, making the future price go up, meaning if you hold a share in the actual fields producing oil the value of that oil in the field increases.
My favorite energy stocks right now are Royalty Trusts and Master Limited Partnerships, or basically anything with either direct holdings in oil or gas reserves or companies that own the pipelines for distributing it. Royalty Trusts and MLPs also pay very nice returns that have tax benefits, so their values hold up better even if the market moves against you. Right now some RTs are distributing about 1% per month (12% annually) which is a great return.
Mutual funds and ETFs in this sector are also a good idea, just be sure they have exposure to natural gas and good oil companies like Devon Energy, Enbridge, and MLPs and RTs as part of their overall holdings.
Good luck out there. And don't wait for Obama to mess things up market wise. Right now the markets are showing no true direction and that is always a good time for some profit taking regardless of your overall market sentiment. But as I said, a lot of the pros are becoming worried there might be a pullback, or worse, a double dip recession. And cash is always nice to have to buy the dip when it happens.
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
