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Ideologues make bad investors! August 7, 2009

Posted by shaferfinancial in Uncategorized.
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I have many friends who have strong political beliefs on both the left and the right.  They regularly make fun of me for my middle of the road political stances.  While I respectfully disagree with their political opinions, there is one thing I am sure about; If you let your political ideology bleed over into your investing strategies you will make mistakes, big mistakes.

I sometimes post on Seeking Alpha.  I read Calculated Risk.   For the last 9 months it has been a zoo at these sites, with the loonies taking over [IMHO].  Now there are many ideologues posting there from both the left and right.  Ironically, they both hate the bailout and the TARP funding.  They have collectively declared the end of our economy as we know it.  After October of 08 and again March of 09 many declared that the stock market was going to go straight down.  They say they use “fundamental analysis” but what they really are basing their opinions on is their ideology.  The followers of the Austrian school are perhaps the prime example, but there are many on the left making the same declaration.  They predicted the Dow index to go to 3500 or even 2500 [currently over 9300].  They think that the next great depression is just around the corner.  As the stock indexes rise they scream “sucker rally” and tell us why the indexes will go down to new lows.  How many of these folks are standing behind their opinions and selling stocks short we will never know, but if they did they lost tons of money.  But what is interesting is the reasons for their beliefs that they post.  It is all based on their core ideological beliefs.  Whether it is paranoia about the influence of banks like Goldman Sachs or a hatred for big business, you can easily see their investing predictions flowing from their ideology.  They don’t even bother to hide their hatred for Obama or Warren Buffett or big business.  And the truth is they can’t make rational decisions about when, where, or how to invest when their hatred is what is driving them.  So when you invest, leave your politics behind, and really look at what is happening.  It will serve you well.



1. Joshua - August 8, 2009

I agree with you on the general idea of your post. However, being a follower of Austrian Economics and having studied much of the past, present, and possible future scenarios I have to say that things are LONG TERM grim.

Yes, it might not happen in our lifetime but if our Government continues to do what it has been doing over the last 100 years or so and most particularly what Obama has been doing and at his rate of speed the inevitable will happen.

I could provide you with much evidence and factual studies of my reasoning but it would take a 300+ page book with small print to explain it.

2. shaferfinancial - August 9, 2009

Joshua, I’m sure you could!
I tend you hang with Buffett on this one. If you need 300+ pages to explain it then it is of little use to an investor. Here’s the problem, the economy is a complicated social phenomenon. So complicated that it is beyond predictions. In fact when we look at the history of predictions we see that they lack any ability to predict. I like to read about chaos theory though. You know the theory that says butterfly’s taking off in a field in China can effect weather in the USA! So that would mean that some small innoculous behavior in Florida could effect the world economy!

3. Joshua - August 9, 2009

You’re right, it is hard to predict. But I will make a prediction that I believe will be 100% accurate at some future point in time and sooner than we think.

I predict that if Obama and his band of morons that “we” elected (Congress) continue to pass bills they don’t read for services we don’t need and spend at the clip they are for the remainder of his term… we (and our children’s children) will be in dire hurt when it comes to taxes.

So far our capital gains tax isn’t too bad and we have some loops in RE we can take advantage of (1031, ect). But when Uncle Sam decides he needs more money to pay for the things they did in these recent years guess what will happen to us investors then.

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