The rapidly eroding confidence in our institutions gets plenty of news coverage. We expect it will be a dominant theme for investors in the years ahead.
Investing success may require correctly answering the question about what to own in a world where free market forces are taking a back seat to crooked politicians and incompetent central planners.
The guilty verdict against Donald Trump is currently the biggest news story. It would be a mistake to ignore the impact an event like this has on investor psychology.
Kevin O’Leary, of Shark Tank fame, summed it up this way:
"The American brand has been dragged through the mud, sunk to the level of a banana republic where rulers take their political enemies out to the jungle to disappear."
The rule of law is what makes the U.S. much more investable than Zimbabwe. Unfortunately, the Trump story isn’t the only thing shaking confidence. It isn’t even the only one from last week.
On Thursday, Chuck Schumer and 22 other Democrat legislators sent a letter imploring the Department of Justice to investigate and prosecute anticompetitive behavior in the oil and gas industry.
The editorial board at the Wall Street Journal says the evidence supporting allegations of price collusion is flimsy. The Federal Trade Commission is looking to scapegoat the industry for higher fuel prices. Chuck Schumer, Joe Biden, and Democrats generally are certainly eager to avoid the blame.
Regulators always tend to be captured and ineffective, but they now seem to have stopped paying anything more than lip service to the notion of impartiality.
Recent events have been an eye-opener for Americans and they are more nervous by the day.
That has implications for investing.
In decades past, large-cap oil and gas stocks performed as a solid investment and a good hedge against inflation.
Today, investors have other factors to consider before buying shares.
They have to wonder whether or not the company can avoid price controls and/or a politically motivated prosecution by the Department of Justice.
The stories keep coming, and the bull market in uncertainty is beginning to roar.
Picking winners and losers from the universe of conventional assets – stocks, bonds, and money markets – will be a challenge. Oil stocks are a great example. It might make sense to own them, but you definitely can’t ignore the politics.
This is one reason gold and silver bullion have gotten more attention from investors, and it is why even more inflows of investment into the monetary metals are probably coming.
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