In the mid-1960s, Hunter S. Thompson wrote to a New York editor from San Francisco, pondering what seemed to him like an epidemic of stagnation affecting the American Dream.
Now, decades later, the repercussions of this stagnation have permeated the entire nation. One can hardly glance around without noticing the decline—whether it’s a lack of basic decorum or individuals fitting their attire far too snugly into their sweatpants.
While stopping this decline may be out of reach, you certainly don’t have to participate in it. There are indeed ways to navigate this landscape to your advantage.
This article is designed for those who are both patient and perceptive. If you identify with this select group, you’ll find the following insights rewarding—and even if managing your finances is a challenge, you might discover an opportunity for clever exploitation hidden within these lines.
You only live once, so why not dare to engage in something that is not only enjoyable but also profitable—and slightly rebellious?
Clearly, many individuals receive funds from politicians. These financial perks often take the form of entitlement programs and transfer payments, which serve as a means for politicians to secure votes.
However, the opportunity discussed today isn’t about garnering government handouts. Instead, you’ll learn an ingenious method to redirect the financial contributions politicians receive from campaign donors and lobbyists into your own bank account.
Before diving into that, let’s touch briefly on the presidential election cycle theory.
The Presidential Election Cycle Theory
The presidential election cycle theory, conceived by Yale Hirsch, posits that the stock market generally follows a four-year rhythm that aligns with the election cycle. In the initial two years of a presidency, stock market performance tends to lag, while the third year, leading up to the election, usually sees the strongest results. The election year itself often yields above-average returns.
This theory is straightforward and appealing. But does it truly hold up under scrutiny?
A study by the National University of Singapore, published in January 2007, confirms that U.S. stock markets exhibited statistically significant cycles related to presidential elections over the past four decades. According to the findings by Wing-Keung Wong and Michael McAleer, stock prices typically decline markedly in the second year before bouncing back significantly in the third year of the election cycle.
Based on this theory, one might expect 2015 to be favorable for stock returns, with 2016 showing even better performance. You can decide how much stock to put in this assessment.
At Economic Prism, in May 2015, we’re more focused on the Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio, which stands at 27.3—65 percent higher than its long-term average. This indicates that current market valuations pose significant risks to the presidential election cycle theory.
Regardless of whether this theory holds true for 2015-2016, various other factors will significantly shape segments of the stock market. Identifying these areas now and investing wisely could lead to substantial returns. Here’s what we mean…
Get Paid by Politicians
Sadly, in today’s democracy, the candidate who promises the most benefits to the largest number of people often emerges as the victor. These promises flow in both directions—politicians vow to voters to reduce taxes and enhance entitlements while simultaneously promising corporations, lobbyists, and special interests favorable policies in return for campaign contributions.
This opportunity revolves around campaign contributions, particularly how they are utilized—and how you can effectively divert the funds that presidential candidates receive from donors and lobbyists into your bank account.
There’s a critical rule in this game that transcends all others: those who spend the most generally come out on top. Therefore, raising and spending money is essential for electoral success.
During the 2008 presidential campaign, candidates collectively spent approximately $630.8 million on media. This number only grew, as candidates in 2012 spent $763.5 million, marking a 21 percent increase in a single election cycle.
Count on an even greater expenditure in 2016, with total spending potentially exceeding $1 billion in media advertising. Here’s how you can make the most of it…
Broadcast and cable networks are poised to enjoy a surge in advertising revenues as the November 2016 election approaches. Companies like Disney (NYSE: DIS), Comcast (NASDAQ: CMCSA), and News Corp (NASDAQ: NWS) could achieve remarkable profits as the third and fourth quarters of 2016 come to a close.
While these stocks are expected to benefit significantly from the impending wave of political ad spending, patience may be the most critical factor. Investing is often dictated not just by what you choose to buy, but also by timing. Currently, market valuations appear to be at historic highs.
The savvy investors won’t rush into stock purchases just yet; instead, they’re building cash reserves. When the inevitable market shakeout occurs, they will strategically invest in stocks, particularly those media companies set to gain from the election campaigns. You might want to consider them as well.
Sincerely,
MN Gordon
for Economic Prism
