No Tricks or Treats
Should Democrats wrest control of Congress from the incumbent GOP, investors will not get any candy next week, so they better take advantage today. Republicans on the hill are in the political dogfight of their lives and may disprove the old adage that people vote with their wallets or pocketbooks. Despite a resilient economy, an all time high on the Dow, a peak in home ownership and gas prices dropping nearly $1 at the pump; recent polls continue to show that Americans still are under the impression the economy is weak and that the country is heading in the wrong direction.
Brilliantly enough, the party that used to be of FDR and JFK have convinced the public that our country is bad. Our leadership is bad. Our policies are bad. Our economy is bad. Our national security is bad. Most importantly, the war in Iraq is bad. Iraq is their trump card—and while they accuse republicans of fear-mongering, the domestic politics of the left rely heavily on the conservative boogieman, whom is out to steal from you and give to his rich friends.
While it is true that the NASDAQ and S&P 500 have not breached their record highs from the late 90’s, the Democratic Party today is a far cry from the moderate President Bill Clinton (of which those highs occurred under) and the fact that his second term was accompanied by the Newt Gingrich spear-headed “republican revolution,” that clamped down hard on spending, resulting in a balanced budget, record low inflation and a blossoming financial boom.
Frustration with the Bush administration has taken the minority party on a wild ride to the left, a position in the political spectrum that will have dire consequences for business—reached well into the global economy. With politicians like Nancy Pelosi and Charles Rangel directing the legislative slate and controlling spending, it will be far worse than the sorry state of current GOP-led Congress. If you thought spending was out of control before, you are in for a rather crude awakening. While many of the key committee leaders-to-be have stated they have no intention of raising taxes—its because they really cannot—but will do nothing to prevent the expiration of the Bush economic agenda in 2010, which has provided lots of ammunition for the economy and the market (which has been in bull run since ’02).
In a cursory overview of the possible political landscape, I have identified two sectors of the economy that could be hurt dramatically: Energy and Pharmaceuticals.
The energy scenario is simple: House Democrats will engineer a “windfall profits” tax on energy companies. The result will be three-fold. First, the profit margins of oil and gas companies will literally evaporate. Considering that most energy companies don’t have large margins in comparison to most industries, this will be particularly painful for them to swallow. As a result, most companies will dramatically cut their capital spending budgets—drilling, new refining capacity, ports, etc.—which will constrain supply in the future.
The other result will be a downgrading in the size of these companies, i.e. layoffs. Right now, U.S. based energy companies are one of the largest employers in the world. This will obviously drive unemployment in the U.S. and will contribute to a decrease jobs around the world. Since many of these companies operate in third world countries and the Middle East, further poverty will only contribute to the instability of the region, as well as less money to purchase our goods.
In terms of “Big Pharma,” their profit margins will also come under serious pressure. Since democrats have historically demonized this sector, one should not expect things to be different this time around. Pharmaceutical companies will find themselves on the receiving end of an entire agenda that is dedicated to them giving away their products, while opening them up to more and more lawsuits.
I read somewhere that the cost to a drug company to bring a new product to the market is somewhere around $8 billion and 8 years, not including all of the compounds that never make it that far. The only way to finance their baseline operations over the long term is to turn a profit and reinvest those profits (I would also point out that the point of running a business is to turn a profit).
While the majority of these companies provide a level of humanitarian support that is unrivaled in this business world, this is simply not enough for some politicians. Their donations of free and below cost HIV treatments to areas of Africa, immediate responses of drugs/care to victims of domestic tragedies like Hurricane Katrina and 9-11 fall short. The billions upon billions of dollars they contribute to charities and health organizations around the globe are also without merit in the eyes of some.
They would prefer to see these companies sucked dry while their executives are publicly lynched. Why? Because drugs aren’t affordable enough for everyone—which they will never be unless they are free. Actually, if they were hung then the democrats would be left without their domestic straw-man and unable to strike fear in the hearts of Americans by misleading them.
CLICK TO ENLARGE
CLICK TO ENLARGE
Brilliantly enough, the party that used to be of FDR and JFK have convinced the public that our country is bad. Our leadership is bad. Our policies are bad. Our economy is bad. Our national security is bad. Most importantly, the war in Iraq is bad. Iraq is their trump card—and while they accuse republicans of fear-mongering, the domestic politics of the left rely heavily on the conservative boogieman, whom is out to steal from you and give to his rich friends.
While it is true that the NASDAQ and S&P 500 have not breached their record highs from the late 90’s, the Democratic Party today is a far cry from the moderate President Bill Clinton (of which those highs occurred under) and the fact that his second term was accompanied by the Newt Gingrich spear-headed “republican revolution,” that clamped down hard on spending, resulting in a balanced budget, record low inflation and a blossoming financial boom.
Frustration with the Bush administration has taken the minority party on a wild ride to the left, a position in the political spectrum that will have dire consequences for business—reached well into the global economy. With politicians like Nancy Pelosi and Charles Rangel directing the legislative slate and controlling spending, it will be far worse than the sorry state of current GOP-led Congress. If you thought spending was out of control before, you are in for a rather crude awakening. While many of the key committee leaders-to-be have stated they have no intention of raising taxes—its because they really cannot—but will do nothing to prevent the expiration of the Bush economic agenda in 2010, which has provided lots of ammunition for the economy and the market (which has been in bull run since ’02).
In a cursory overview of the possible political landscape, I have identified two sectors of the economy that could be hurt dramatically: Energy and Pharmaceuticals.
The energy scenario is simple: House Democrats will engineer a “windfall profits” tax on energy companies. The result will be three-fold. First, the profit margins of oil and gas companies will literally evaporate. Considering that most energy companies don’t have large margins in comparison to most industries, this will be particularly painful for them to swallow. As a result, most companies will dramatically cut their capital spending budgets—drilling, new refining capacity, ports, etc.—which will constrain supply in the future.
The other result will be a downgrading in the size of these companies, i.e. layoffs. Right now, U.S. based energy companies are one of the largest employers in the world. This will obviously drive unemployment in the U.S. and will contribute to a decrease jobs around the world. Since many of these companies operate in third world countries and the Middle East, further poverty will only contribute to the instability of the region, as well as less money to purchase our goods.
In terms of “Big Pharma,” their profit margins will also come under serious pressure. Since democrats have historically demonized this sector, one should not expect things to be different this time around. Pharmaceutical companies will find themselves on the receiving end of an entire agenda that is dedicated to them giving away their products, while opening them up to more and more lawsuits.
I read somewhere that the cost to a drug company to bring a new product to the market is somewhere around $8 billion and 8 years, not including all of the compounds that never make it that far. The only way to finance their baseline operations over the long term is to turn a profit and reinvest those profits (I would also point out that the point of running a business is to turn a profit).
While the majority of these companies provide a level of humanitarian support that is unrivaled in this business world, this is simply not enough for some politicians. Their donations of free and below cost HIV treatments to areas of Africa, immediate responses of drugs/care to victims of domestic tragedies like Hurricane Katrina and 9-11 fall short. The billions upon billions of dollars they contribute to charities and health organizations around the globe are also without merit in the eyes of some.
They would prefer to see these companies sucked dry while their executives are publicly lynched. Why? Because drugs aren’t affordable enough for everyone—which they will never be unless they are free. Actually, if they were hung then the democrats would be left without their domestic straw-man and unable to strike fear in the hearts of Americans by misleading them.
CLICK TO ENLARGE
CLICK TO ENLARGE
