Politics Is About Money

There’s a new President to be voted into office in November. Now’s a good time to consider what we might expect.

Farmers from North Dakota were very pleased with the outcome of the most recent farm bill. Dorgan, Conrad & Pomeroy brought home the bacon. Big farm contributions to the trio from Republicans as well as Democrats are safe for another 5 years.

But when it comes to bringing home the bacon, absolutely no one compares with the Texans in the White House.

Many consider President George W. Bush to be ignorant because of verbal missteps, but not me. Bush has shown himself to be a savant when it comes to wringing trillions of dollars out of the U.S. economy for his political cronies.
Bush has presided over a near doubling of the national debt to an astounding $9.3 trillion in only a few years. This Enronic executive has more than 5 months to go before he leaves office.

The contract has been let for the new George W. Bush Presidential Library to be located at SMU in Dallas.

Clinton has gathered $500 million for his foundation, so for Bush and his foundation my guess is more than he’ll collect more than $800 million.

Since the Bush administration took office oil has shot up from about $28/bbl. in 2000 to more than $130/bbl today.

The world’s largest oil companies, ExxonMobil, ConocoPhillips, refiners Tesoro and Valero and oil field support companies Schlumberger and Haliburton all hail from Texas, although Haliburton has recently moved its headquarters to Dubai, United Arab Emirates.

Then there’s the defense industry. That would include Haliburton (HAL), formerly led by V.P. Dick Cheney, Kellogg Brown & Root (KBR) spun off from HAL, and Flour (FLR) all headquartered in Texas. There are many more—these are just a few of the biggest.

No matter who gets elected this November, milking the federal government for constituent payoffs will continue vigorously.

Sure $9.3 trillion is alot of debt, but politicians will continue to borrow while their supporters pocket even more lucre no matter which of the two parties are involved.

Online betting has Obama to win at 56.1%, McCain to win 37.2% and Clinton to win 5.7%. Given that Obama wins in November, look for Chicago area constituents to take national offices and Illinois-based companies to prosper with government contracts. Let’s just hope no-bid hasn’t become a tradition with D.C. spendthrifts.

If Obama honors his campaign pledges, the U.S. will end its long, expensive war with Iraq and withdraw. If this happens, look for marginal downward price pressure in oil and base metals.

The war in Iraq is consuming 17 gallons of fuel per soldier and per contractor per day.

The war disrupts oil flow from rich Iraqi oil fields.

Desert sands eat tons of metal every year as military field gear wears at a much faster rate than during the war in Vietnam.

After a few years of adjustment in Iraq, expect the world’s second largest oil field to come on stream.

If Iraqis adopt the U.S. Constitution when they form their government, oil will go down drastically in price, because a free man left to his abilities will do the efficient and productive activities necessary to deliver product at a competitive price while his government stays out of the way.
If the Iraqis bog down in a Venezuelan dictatorship, oil prices will remain lofty. I’d bet on it.

Defense industry stocks have two big strikes in their favor and three big strikes against them.

President Bush still wants to bomb and missile Iran before he leaves office, thereby consuming billions of dollars worth of military ordnance.

Military hardware is manufactured in all 50 states of our nation, so politicians will want their share of production, thereby guaranteeing the money will be there for more war even if it’s borrowed from Arabia.

The strikes against defense industry stocks include the political nature of funding. At $625 billion in this year’s budget, U.S. military expenditures currently exceed the peak year during WWII, when the U.S. was fighting sophisticated enemies with submarines and airplanes.

Voters may see this vast expenditure as economically dangerous, but so far the defense budget has not been mentioned in presidential races except by Republican candidate Ron Paul, who has only 56 delegates.

Second strike: if it’s President Obama and the U.S. pulls out of Iraq, it will be difficult to justify continued expenditure on military hardware given the lack of threat. The second biggest defense budget in the world is China at 9% of what the U.S. spends.

Third, 111 countries recently attended a conference in Dublin to eliminate cluster bombs, because so often they do not explode immediately.

Because of unexploded cluster bombs, thousands of acres of farmland lie fallow. Thousands of children each year mistake unexploded cluster bombs for toys, pick them up and get blown up.

Sweden announced that their government controlled pension funds would no longer own companies that manufacture cluster bombs, so General Dynamics and Lockheed Martin will be sold from Swedish pension funds.

This first time sale of munitions companies by a government run investment group may very well be the start of disinvestment by Sovereign Wealth Funds (SWF) the world over, causing downward pressure on military-related stock prices.

Defense industry stocks have had a big run. Can they double or triple from here? Yep, but it’s not as likely as it once was.