politics and the stock market?

[MaxPowers]

I understand how business and speculation can effect stock prices, but how much effect does politics have on the market?

Side note: I consider myself fairly intelligent, but politics is something I cannot seem to learn and understand. Can someone offer some good politics101 resources that start from the basics? I absolutely love about.com 's investing for beginners. Investing for Beginners They have good information on issues, but not the basics of politics. Any resources would be greatly appreciated. I have also gone through college and had government 1 & 2 and still never picked it up.

[Mr Nice Guy]

Anytime there is noise of any kind, it affects the markets. News about individual companies will probably affect just that company, but from what ive read, politics kind of blankets all national markets. Most recently the mid-term elections, and QE2.

[snafu]

The stock and bond markets and not logical and react to emotions. They are buffeted about like a paper ship on the ocean. Managers of Multi million dollar Mutual Funds must invest their client's money, large pension funds have a responsibility to keep people afloat. If you get 4 economists in a room, you'll get five or six opinions! Bellicose politicians feel it's better to get their name in front of constituents whether they offer wishful thinking, downright lies or just lots of noise to get attention. 'The media is the message' seems to have gotten out-of-hand. We can Blog, Twitter and Tweet to to add our spin on issues. PR people are paid big bucks to fix damaged reputations...even when the individual [Nixon for example] has passed on.

A lot of people enjoy Sarah Palin because she prefers to operate without facts. She would have you believe she can see Russia from her home base in Alaska. Some days I wondered who is the better comedian Tina Feh or Sarah Palin.

Sometimes it's just a big circus scene for the millennium.

[maat55]

Policies by both Washington and the Federal Reserve can have a major impact on the stock market. This stock market recovery can be contributed to QE1 and QE2.

Some, like myself, see this recovery in the stock market as a possible bubble. But, Bernanke keeps inflating it before it deflates.

This is nothing new, the 1929 market crash was based in Federal Reserve policies, which have a government taint to them. The last time we saw a true free market recovery was in 1921(which was swift and led to the roaring twenties). Reagan implemented a partial one.

Anytime the government plays a role in the markets(housing, healthcare, higher ed, agriculture, insurance) you will lack free market principles and have distortions.

[jIM_Ohio]

So much of the market is programmed trading, and that trading reacts to the news of the day, whether that news is a hurricane in Haiti, which might slow oil production, a reaction to unemployment claims (which the gov't indirectly controls) or a reaction to elections.

I would focus on various schools of fiscal policy. Things like supply side economics vs Keynesian economics vs random walk theory. Each of those is a "point of view" which believes it is correct (meaning the other two are wrong).

For example maat is probably a supply side guy (this is a SWAG)... I probably lean more to Keynesian, and many investors here might believe more of the random walk side...

[maat55]

[quote]

Originally Posted by jIM_Ohio

For example maat is probably a supply side guy (this is a SWAG)...

At least we know where the Keynesian solution is going, look to Japan and the Great Depression.

[jIM_Ohio]

Originally Posted by maat55

At least we know where the Keynesian solution is going, look to Japan and the Great Depression.

The issue is the polictians do not use the tax code based on economy (raising taxes in boom and lowering them in bust)- each party is voting on taxes based on party beliefs and not the current state of the economy.

If the politicians do not take away the handout programs in good times, those also get abused, so if there is a second choice, it is supply side, but I prefer some moderate forms of assistance (just not giving 150 weeks of it).

[maat55]

Originally Posted by jIM_Ohio

The issue is the polictians do not use the tax code based on economy (raising taxes in boom and lowering them in bust)- each party is voting on taxes based on party beliefs and not the current state of the economy.

If the politicians do not take away the handout programs in good times, those also get abused, so if there is a second choice, it is supply side, but I prefer some moderate forms of assistance (just not giving 150 weeks of it).

It is more like the federal government is getting involved unconstitutionally into too many individual based issues and not sticking to its national duties.

Example: The federal government decides that everyone should own a home, wah la, we have a massive bubble and burst, hence our current depression.

[krantcents]

Originally Posted by MaxPowers

I understand how business and speculation can effect stock prices, but how much effect does politics have on the market?

Side note: I consider myself fairly intelligent, but politics is something I cannot seem to learn and understand. Can someone offer some good politics101 resources that start from the basics? I absolutely love about.com 's investing for beginners. Investing for Beginners They have good information on issues, but not the basics of politics. Any resources would be greatly appreciated. I have also gone through college and had government 1 & 2 and still never picked it up.

The market hates interference, regulation and uncertainty. Politics contributes to any one of those on a regular basis. Let's not forget the Federal Reserve affecting the markets. The markets like impasses between Congress and the President. I hope that helps.

[Snodog]

Originally Posted by MaxPowers

I understand how business and speculation can effect stock prices, but how much effect does politics have on the market?

Side note: I consider myself fairly intelligent, but politics is something I cannot seem to learn and understand. Can someone offer some good politics101 resources that start from the basics? I absolutely love about.com 's investing for beginners. Investing for Beginners They have good information on issues, but not the basics of politics. Any resources would be greatly appreciated. I have also gone through college and had government 1 & 2 and still never picked it up.

Politics is like investing- you need to diversify. Get your news from various sources and if your sources don't agree use the nonpartisan politifact.com, factcheck.org, and even snopes.com. I trust these more than any other source. Their whole business model is to get the facts right.

A common tactic used by politicians is fear. If you are following someone who wants you to be scared, they are not a good leader and you should consider finding a better leader. And finally, "follow the money". Ask yourself, does someone stand to benefit monetarily from me believing what is said?

[Bastille]

I am simply saying that this has to be put in proportion. Just because people talk about politics at the office or on the subway, doesn’t mean the market cares.

[wrk4lvg]

Originally Posted by Snodog

And finally, "follow the money". Ask yourself, does someone stand to benefit monetarily from me believing what is said?

EVERY last politician is in it for their own personal/monetary gain. Right, left, center. Does not matter.

So we would be left with no one to vote for/follow.

[Snodog]

Originally Posted by wrk4lvg

EVERY last politician is in it for their own personal/monetary gain. Right, left, center. Does not matter.

So we would be left with no one to vote for/follow.

I was thinking more along the lines of well-to-do businessmen funding various "think tanks", and talk show hosts convincing listeners that tax breaks for them is whats best for the country.