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How a Democrat Made an Extra $200 Million on Obama's Reelection

Not Everybody's Losing Money...

By
Monday, November 19th, 2012

By now, you've heard the stories about Republicans and conservatives complaining about the election results...

From seceding from the Union (all 50 states now have secession petitions) to soaring gun sales, it's as if Armageddon has arrived a month ahead of schedule.

But nowhere has it been more dramatic than in the stock market.

Last week Reuters reported how scared some wealthy individuals have been over Obama's reelection:

Plenty of the wealthy fear President Barack Obama's election victory will lead to another four years of big government, higher taxes on their kind, further big increases in the federal debt, and other policies that could hurt the already limp U.S. economy.

Financial advisers say some clients are vowing to emigrate or convert their seven-figure investment accounts into cash. Some say they will bury cash and gold, while others are simply venting by sending profanity-laced emails that predict civil unrest and economic destruction.

"Some of them are inconsolable," said John Burke, chief executive of Iselin, New Jersey-based Burke Financial Strategies, who works mainly with small business owners.

"I've never seen people so upset about anything in politics."

In short, investors and owners have been selling — and selling everything: from stocks, houses, and even businesses, everything is going up on the auctioning block.

Even Democrats are selling.

The most telling example of this is Star Wars creator George Lucas.

Nearly three weeks ago, Lucas struck a deal to sell his company LucasFilms to Disney for a reported $4.05 billion. According to the website www.Corson.org:

That Lucas struck a deal in 2012 may be no accident either, advisers say. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15% for investors in the 25% income tax bracket or above (Lucas's level), and zero for investors in the 10% or 15% bracket. Those rates are set to jump to 20% and 10%, respectively in January.

"He probably wanted to take advantage of the lower rate on long-term capital gain while it's certain," says Bill Smith, managing director at CBIZ MHM, a national accounting and professional services provider.

Lucas is a one-percenter. He is also a big Obama supporter. Lucas said the following about Obama in 2008: "We have a hero in the making back in the United States today because we have a new candidate for president of the United States, Barack Obama."

An article states that Lucas has surrounded himself with the best legal and tax-avoidance minds in the country (sounds like Mitt Romney). Let's see if Obama and Co. and the people who criticized Eduardo Saverin (one of the original founders of Facebook, who was accused of renouncing his American citizenship in order to avoid taxes of up to $67 million) for trying to avoid taxes will do the same for Lucas. So far, I haven't heard a peep from the Democrats.

Just take a look at the prospect of federal capital gains rates jumping from 15% to 20% next year on Lucas' sale...

At a sales price of $4.05 billion, the 5-percentage-point tax increase represents a higher tax tab of about $200 million — and that's just the capital gains tax.

Lucas is following an old investment maxim: In uncertain times, it's better to have return of capital than return on capital.

Lucas is getting both!

So, what about stocks?

Last Friday's positive close broke a four-day downtrend for the Dow. And since the election results, the Dow has been down six of the last eight trading days.

Simply put, the market got this one wrong.

And this surprised me.

The market is the greatest future discounting system we know of...

The theory is simple: With millions of investors putting money into the market, they're likely NOT to make a bad decision, because they don't want to lose their money.

The market is unbiased. It rewards good ideas. It punishes bad.

It doesn't care if a Republican or Democrat is in the White House; it only cares if the investment capital under said administration will be fruitful. Period.

It's one of the bulwarks of capitalism: Capital goes where it is treated best.

On the day of the election, the Dow closed up 133 points. The election hadn't been decided yet. But investors felt confident enough to put long money into the market.

They also felt that, going forward, there wouldn't be crosshairs on their back for draconian government regulations...

They were wrong.

The day after the election, the Dow dropped as much as 360 points. It was the biggest single-day loss of the entire year. And it was the day Obama was declared the winner.

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My friends, this is not a coincidence.

The pro-Obama media was quick to offer reasons for the market drop, including concerns over Europe and the fiscal cliff. But those issues were there on the day of the election, when the Dow rose 133. They've been there for a long time.

So let me remind you: On the day of the election, the Dow closed up at 13,245. At Friday's close, the Dow sat at 12,588.

The market is down more than 657 points, or 5%, a week and a half after the election.

Eventually the market will bottom. It always does.

But in the meantime, the reelection of Obama is inflationary. Obama will most likely keep Ben Bernanke on as Fed Chairman, and that means more debt.

More debt is positive for gold and precious metals in general, commodities, housing, and high-yielding dividend-paying investments, like REITs and MLPs...

In fact, I've found a $4.8 trillion opportunity in the implementation of ObamaCare here.

Forever wealth, 

Brian Hicks Signature

Brian Hicks

Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.


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