Midterm Prep Part 2: One Asset Thrives Amid Political Gridlock

Politicians hate gridlock, but this asset doesn’t… [Turn Your Images On] [Midterm Prep Part 2: One Asset Thrives Amid Political Gridlock]( [Turn Your Images On] [Charles Sizemore, Co-Editor, Green Zone Fortunes]( Gridlock is a dirty word in politics. Just look at a person’s face when they say it. Almost 100% of the time, their jaw muscles clinch and their eyes squint. The frustration physically manifests itself in the speaker’s body language! I get it. If you’re passionate about an issue, it’s painful to watch it wither on the vine due to bickering, obstruction or downright abuse of the system. Sure, it may be worse today. But if we look at it with an objective eye, it’s always been like this. Our founders wanted our government to be slow, methodical and not prone to emotional impulses. Whether they intended it to ever become quite this dysfunctional is debatable. But our system was never designed for efficiency. [As investors, political gridlock is not a bad thing.]( --------------------------------------------------------------- FROM OUR PARTNERS [If You Use Apps, a Smartphone or Online Banking…]( [You’d better read this.]( Because, says world-famous futurist George Gilder, we’re headed for a stunning $16.8 trillion reboot that could impact the way you use every single one of those modern tools. It could also radically transform the way you get paid, the way you save and — maybe most of all — the way you invest for retirement. It’s all in his brand-new presentation — [you’ll find it at this link.]( What you’ll see could change our way of life the way microchips did. The way the internet did. The way smartphones have. [And, says George, it could make you exceedingly rich — click here to see why.]( --------------------------------------------------------------- The Efficiency of Gridlocks The only thing worse than bad policy is uncertainty on policy. And gridlock, no matter how frustrating it might be, represents a form of stability. It prevents either party from rocking the boat too aggressively. If nothing gets done, then nothing too horrible gets done. Earlier this week, my friend and colleague Matt Clark laid out some [market scenarios following the midterm elections](. It was a solid analysis — if you haven’t read it yet, I recommend doing so. Matt pointed out that, historically, a government in which the Democrats control the presidency and Republicans control one or both houses of Congress is a scenario the market likes. I won’t split hairs as to whether it’s “better” if Republicans control the House of Representatives or the Senate — or both. There’s enough noise in the data that I’m not so sure that level of detail matters. I would also point out that there is more to the market than the political climate. Corporate earnings and Federal Reserve policy have a far bigger effect on the market than anything some morons in Congress dream up. All the same, a divided government is a benign macro environment. That’s great. But what specific sectors or investment vehicles might benefit? Let’s look at bonds. --------------------------------------------------------------- [UP When the Market Is DOWN]( Fellow traders: For years, I mostly traded basic call and put options. And I made a lot of money. But this year, I’ve had to switch things up. I’ve had to learn NEW options strategies that are helping me grow my account — and put money in my pocket — even when markets are FALLING. There’s no better feeling in the world… And we want to teach you how to do it. Mike just finished recording his new Options Master Class — based on the same course he teaches on Wall Street… And we’re charging next to nothing. When you take this course, you’ll discover how to trade options like a true professional. Are you ready to learn from the world’s #1 options professor? [If so, click here.]( --------------------------------------------------------------- A Positive Outcome From Political Gridlock I concluded a long time ago that nothing would stop the inevitable growth in government spending. That’s because there is no responsible political party. Both Democrats and Republicans love spending other people’s money and love doing so on credit most of all. I am under no illusion that a divided government will eliminate deficit spending. Anyone suggesting that should be locked up in a mental institution because they are so delusional. That said… Let’s look at deficit spending over recent history. The chart below tracks deficit spending, starting in the aftermath of the 2008 meltdown and stopping just before the COVID pandemic caused it to blow out again. U.S. Cut Its Deficit by $1 Billion From 2011 to 2016 [Turn Your Images On] [(Click here to view larger image.)]( The U.S. budget deficit shrank between 2011 and 2016, when Democratic President Barack Obama was at the helm and Republicans controlled Congress. This was one of the most dysfunctional periods in American history with: - The perpetual threat of a government shutdown due to gridlock over budget agreements. - And a handful of near-defaults due to bickering over the debt ceiling. It was a total embarrassment, a shambolic mess and no way to run a country. Neither party came out of it looking good. And yet, it did contribute to the budget deficit shrinking from $1.4 trillion to “only” $441 billion. Bonds: A Surprise Midterm Winner Like all assets, supply and demand determine the price of bonds. Less new bonds coming onto the market due to less borrowing by the government is, all else equal, bullish for bond prices. Given that bond yields have blown out to two-decade highs this year, prices are more attractive today than at any point in the investing lifetimes of most people alive. So if you’re looking for a surprise winner in the midterms … take a good hard look at bonds. The 1-Year Treasury yield is the most attractive today, at about 4.75%. This is still the best place to park safe money you can’t afford to lose. But if you want to get a little more aggressive, longer-term bonds will give you more potential for capital gains if yields fall from here. The math here will vary based on the specific bond you buy and its coupon rate, but every 1% move in market yields should cause a price move of 20% or more in a 30-year bond. Bottom line: It’s more of a speculation than an investment, of course. I wouldn’t bet the farm on this. But if you agree that gridlock is coming and that it’s good for bonds, it’s worth considering! To safe profits, Charles Sizemore Co-Editor, Green Zone Fortunes Suggested Stories: [Dividend Compounding: The Eighth Wonder of the World]( [Not $1 Anymore: "Bullish" Dollar Tree Stock Analysis]( --------------------------------------------------------------- [Turn Your Images On] 1957: The Soviet Union launched Sputnik 2 into the Earth’s orbit with a surprising passenger aboard: a dog named Laika. She was the first living creature shot into space. Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: [( Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2022 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Money & Markets. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 800-684-8471) Remove your email from this list: [Click here to Unsubscribe](