Poor Senator

Quick, name a poor senator!
Strategies for investing on an uneven playing field
 
Inspired by the search for an investment strategy that takes the political outlook into account, a tool to track a strategy of investing with politics in mind was required

Can you name any poor senators or members of congress?


It is tough.  Why?  Because more and more, big business and politics are intertwined.  But armed with that knowledge, why can't we make that work to our advantage?

Halliburton:  The stock that got us thinking about how to exploit the corruption at the heart of our government.  One we watched but wished we had bought.  We first thought about investing in Halliburton right after the Supreme Court gifted the 2000 election to W.  Instead we chose to study Halliburton to see if our theory would play out.  Of course it did and we lost out on a chance to triple our investment.  (See graph on Hits and Misses page)

When George W. Bush was running for president his father suggested that W. have Dick Cheney lead the search for a Vice Presidential running mate.  It came as only somewhat of a surprise when Dick Cheney chose himself as the perfect candidate.  The only problem was his CEO role with Halliburton.  Mr. Cheney promptly stepped down from Halliburton but retained his millions of share options.  The press of course had a field day with this for all of five minutes before Dick told them in no uncertain terms to collectively fuck off and so they did.

 

Halliburton as we all know is a giant logistical services provider for the oil industry and the U.S. military and government.  Vice President Dick Cheney is the former CEO of Halliburton, a job he was given while taking a nap on a fishing trip with his Halliburton cronies.  Cheney’s political connections garnered through his service to Nixon, Reagan and Bush I proved to be an asset that the Halliburton gang thought could come in handy.  Boy did it ever.

 

Had you invested in Halliburton right after Bush 43 was sworn in and held it until the market crashed at the end of his 2nd term, you could have tripled your investment.  It is possible that having a connection to the Vice President helped.


The portfolio did very well in the early years of the Obama administration, when he had a congress which was not completely opposed to his administration.  Since the GOP took The House in 2011 we have seen an erosion of our advantage against the S&P 500.  We suffered most since 2011 in a few stocks. 


CME has done well for us, outperforming the market and its competitor NYX.  We are cutting our position ahead of the 2012 election as it looks too close to call.


X (US Steel) has been performing poorly as China slows and Europe stalls, which is suppressing global demand for steel.  We still expect steel to be a good long term play on infrastructure and global urbanization.


C (Citigroup) has lagged the market in the last year.  But since we are still up 100% from our original investment and we sold our principal at $40, we are playing with house money on the remaining shares in our portfolio. 


CNX (Consolidated Energy) has been battered by slowing US demand for coal in a warm northeast winter and slower economic growth in export markets globally.  The new EPA regulations for utilities are also a negative factor.  But I don't see global demand for coal going away anytime soon.  So we will hold onto CNX.


CSX (CSX Corp) - This Eastern US railway firm suffered from the downturn in coal demand in the US and Europe.  The crisis in the European markets in general is weighing on CSX.  However, we expect demand for coal to increase as economies eventually rebound and demand for coal grows.  Increasing coal demand, especially in India and China will help drive growth in CSX coal cargoes taken to US Eastern seaboard coal export terminals.