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The Election Stakes Are High

Written by Briton Ryle
Posted October 16, 2020

To hear the president tell it, the looming showdown between him and Senator Biden is the single most important election the U.S. has ever faced. It's Luke vs. Darth Vader, Rocky vs. Drago, the Duke brothers vs. Boss Hogg — real "forces of good and evil" stuff.

P.T. Barnum would be proud. Seems to me the whole goal of any political campaign these days is to fool just enough people to get you into office. And once you get there, maybe you've got the resources and the platform to keep yourself there. 

I mean, a couple of weeks ago, Bloomberg Radio aired a clip of Trump at a rally telling his supporters that, if elected, Joe Biden would cancel the Second Amendment to the Constitution and confiscate everybody's guns. Do people really think a president can just cancel the parts of the Consitution they don't like? Have we not seen every court in America rule against pretty much every one of Trump's attempts to act unilaterally via executive order? A president can't even keep his own tax returns out of the public eye, but he's gonna change the Constitution? Good luck with that...

The U.S. government is designed to be such a clustertf*ck that no single person can really do anything. It's an amazing monument to the status quo. And apparently, this is news to a lot of people. Reagan should've said, "I'm from the government and I'm here to make a lot of hollow promises and hopelessly complicate any issue to the point that absolutely nothing gets accomplished." 

The reason is policy and economics do not have the cozy relationship that we expect. We all get up and go to work and buy food and shoes for our families without paying much heed to what the government has to say about it. And businesses care much more about their marketing initiatives than their compliance departments. 

The stock market understands all this. 

If the market really thought that this Republican-led golden age of deregulation is about to fall into a massive depression because of the tax policies and "break up Big Tech" of a Democratic administration, well, the Nasdaq would not be pushing record highs.

Sleight of Hand

Politicians are like good magicians. If you're focused on the histrionics, you'll never figure out how the trick really works. 

Pay attention to what's moving in the stock market and you'll get a much better read of what's really happening out there. For instance, we've had a pretty serious spat with China these last few years. And I fully support a harder line on China to deal with intellectual property theft, price-fixing, and the global aspirations of a communist state. We can't trust them, they don't like us, so we're probably headed to higher tensions and greater confrontations, right?

Well, before we mobilize the fleet, let's ask four-star General Starbucks what he thinks...

After all, Starbucks gets half its revenue and all of its growth from the Chinese market. If the U.S.-China conflict is escalating, then Starbucks' business there should be contracting right? And if its business is shrinking, then the Starbucks share price should reflect that.

At $88 a share, Starbucks is just $6 from the all-time high it set waaay back on... Tuesday. 

If China was about to retaliate against the U.S.'s technology ban on companies like Huawei, well, Qualcomm should be getting hit. It gets more than half of its revenue from China. But whaddya know? Qualcomm hit a new high on... hmm, lemme see... oh yeah, Wednesday. 

It is business that makes the world go round.

Investors have a tendency to sort through various macro policy stuff and then try to figure out which stocks will benefit. I have a better idea: Let the stock market work for you. Watch which industry groups are moving. Pay attention to the stocks that are trending. This will tell you all you need to know about what is happening and which sectors will treat your money best.

It's Not You Stock Market, It's Me...

"The stock market doesn't like uncertainty." It's an investing standard, every player has to be able to sing that tune. And for the last few months, we've all looked around at the pandemic, the high unemployment rate, the rift with China, the stark political scene, and we've thought how can stocks be at record levels when there's so much uncertainty? 

Well, what if it's not the stock market? What if it's just our inability to predict the future that makes us think it's all so uncertain?

Chips stocks are running higher. 5G stocks are moving. Starbucks is nearly at all-time highs... these stocks are telling us in no uncertain terms that this whole spat with China has already peaked. Maybe it's because Biden will win and revert to an Obama-style lapdog Chinese policy. Maybe Trump wins and we discover that his hardline policy was mostly a re-election ploy. I'm telling you the specific reason is irrelevant. The stock market is telling us the outcome. The Great Oz has spoken.

Now I got something for you. It's another sector that is moving higher, about to bask in the warmth of sunny skies: marijuana stocks. Not a campaign issue, not a China issue, but the stocks are speaking to us right now. If you remember the crazy thousand-percent runs some of these stocks went on a few years back, well, they are whispering sweet dollar signs in my ear again. And if you wanna get on that early, before other investors figure it out, I got some ideas right HERE.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

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