Navigating Politics as an Investor
In today's episode, the hosts emphasize the importance of keeping emotions in check when making investment decisions and avoiding the pitfalls of getting emotionally invested in political beliefs. They suggest avoiding spending too much time on political websites and instead focusing on the long-term perspective of investing.
- Keeping emotions in check when making investment decisions
- A focus on well-established companies with robust lobbying organizations
- Avoiding getting emotionally invested in political beliefs and focusing on the long-term perspective of investing.
Thanks for tuning in. Questions about today's episode let us know.
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Transcript:
00;00;06;29 - 00;00;20;20
Speaker 1
Hello and welcome to your investment partners with Paul and Garrett, where we talk about all things financial, focusing on helping you plan, keep and grow for a successful future. If you're new to the podcast, welcome. And if you're tuning in again, welcome back and thank you for listening.
00;00;20;21 - 00;00;41;17
Speaker 2
Hello and welcome to your investment partners with Paul and Garrett. Today we talk about everyone's favorite topic, politics. We cover our main philosophy, highlight how to stay sane through the upcoming presidential cycle and ultimately talk about does it matter who's in charge? If you have questions about any of the items discussed today, please reach out either by phone or email.
00;00;41;26 - 00;00;47;27
Speaker 2
My name is Garrett Smith and we look forward to having you with us today. Hey, at least it's not snowing today, though. When we're recording this, I mean.
00;00;48;19 - 00;00;50;21
Speaker 3
Yeah, I stopped snow on my lawn, though.
00;00;51;22 - 00;00;58;18
Speaker 2
I think I got some fertilizer down and I think I saw some green grass coming up. Spring may be happening.
00;00;58;21 - 00;01;08;03
Speaker 3
Oh, be nice. I'm going to take a picture at my last chunk of snow on my lawn. See how long it lasts this year. I bet it might last till May. Yeah.
00;01;08;03 - 00;01;15;10
Speaker 2
I have a picture of my boy walking through on Easter weekend in, you know, knee deep snow on the lawn. Just unbelievable.
00;01;15;11 - 00;01;15;25
Speaker 3
It is.
00;01;15;29 - 00;01;26;20
Speaker 2
What a year we've had. Hopefully we can handle all the water. I'm just not talking about today's topic because I don't really want to. So talk about other things than this.
00;01;27;11 - 00;01;29;01
Speaker 3
We're going to talk about politics today.
00;01;30;20 - 00;01;42;00
Speaker 2
We've been getting a lot of questions lately about politics. And I think it's I think it's you know, people are announcing they're running for president and things are kind of the cycle start back up again. Yeah.
00;01;42;04 - 00;01;43;26
Speaker 3
Here comes. Here comes the rhetoric.
00;01;44;22 - 00;01;54;27
Speaker 2
And so I just wanted to kind of highlight a few points to get your ready for the political season that we're going to be in that now really never feels like it ever ends.
00;01;55;10 - 00;02;31;18
Speaker 3
But yeah, and, you know, the problem with politics is it's just especially nowadays, it just seems like it's so divisive, you know, it's so bad that the parties seem to be so far apart on everything. And so it's, you know, it's really a challenge. And, you know, people get emotionally invested in what they think is right. And and I've just I've noticed over time, sometimes if you let the politics get in the way of making just investment decisions, it's it it can be a challenge for sure.
00;02;32;03 - 00;02;42;06
Speaker 2
Yeah. I think not only investment decisions, but quality of life, too. Yeah. You know, there's there's so much that's, you know, you can you can only do so much and then it's kind of out of your control.
00;02;42;06 - 00;02;42;19
Speaker 3
You can.
00;02;43;00 - 00;02;58;28
Speaker 2
And so I think just, you know, doing everything you can and then living your life, you know, this happens both in politics and in the market. The market goes down. It's not great. It's not fun. And if you're letting it run your life, then you're missing out on some great memories that usually.
00;02;59;16 - 00;02;59;24
Speaker 3
Happen.
00;02;59;24 - 00;03;14;27
Speaker 2
During that time, too. And so I think that kind of leads to the first point that we always talk about. We always highlight is it's you always got to watch what they do, not what they say. And everything from now until question is what they say.
00;03;15;06 - 00;03;15;13
Speaker 3
Yeah.
00;03;15;27 - 00;03;29;20
Speaker 2
Yeah. And obviously there's going to be we haven't hit the debt ceiling discussions or anything yet. So there are some critical things to look at. But from an election standpoint, there's just a whole bunch of talk and not anything substantial.
00;03;29;21 - 00;03;57;22
Speaker 3
Yeah, and what are we a year and a half away from Election Day? And it's it's going to start it's going to start ramping up. And, you know, we just need to keep in mind that politicians, you know, they for the most part just have to say what they think is the most likelihood of them getting reelected to charge up the base, to get get people either upset or excited either or is fine with them as long as they can get you to write a check.
00;03;57;27 - 00;04;19;13
Speaker 3
You know, and and so sometimes you just get all these, you know, really weird extreme ideas out there that are that are popular to some people and and dreadful to others. And it's it's all the it's all the fundraising mechanism to to try and just solidify the base and and stir the pot.
00;04;19;24 - 00;04;39;15
Speaker 2
Yeah. You know, they need dollars from you today so they can ask they have enough money to ask for you for more dollars tomorrow so that they can ask for more money from the next day. You know, it's just an ever fundraising cycle for the next year and a half. It's you know, the incentives right now are to say the things that get the dollars coming in.
00;04;39;16 - 00;05;02;12
Speaker 2
Yeah. And so they're appealing to, you know, the large donors right now. They're appealing to the sections of their bases that will give them money. And and just remembering that, you know, a lot can happen between now and then. Yeah. And, and, you know, I use the example of covered to, you know, cover changed politics you know as well just as much as any election does.
00;05;02;12 - 00;05;17;10
Speaker 2
You know, we don't we don't know what's going to happen between now and the time everybody actually puts in their votes. You know, things can be be very different. And so it always comes down to watch what they do, not what they say. And everything from now until Election Day is what they say.
00;05;17;16 - 00;05;48;13
Speaker 3
Yeah. Yeah. I learned a long time ago to kind of check your political beliefs. You know, I was I started in the business in the mid, you know, the mid eighties, so I've been at it for nearly 40 years and I remember, you know, so I kind of started when when Reagan was president and things were really robust and and then, you know, along comes this Clinton guy and I thought he was, you know, the devil incarnate.
00;05;48;15 - 00;06;09;08
Speaker 3
I mean, I just was so worried about. And I thought, oh, when Clinton got elected, everything was just going to be a disaster because, you know, he just didn't I just didn't align with him politically at all. And so I just expected the market to to be horrible. And the nineties were, you know, awesome. I mean, it's one of the best decades we've had in the market.
00;06;09;27 - 00;06;31;10
Speaker 3
And and part of that was because he ended up losing control of the Congress. And, you know, the Republicans forced him to do some things that he normally wouldn't have done. But the point is, is that it's really more about what they do and not what they say. You just have to watch legislation, tax policy, regulation, all that kind of stuff.
00;06;31;10 - 00;06;53;03
Speaker 3
And and then just make decisions based based on that. And and that was a that was a real good learning experience for me, is that, you know, politicians are you know, the president is not king. He doesn't get to just say, well, here's what we're going to do. He's got to you know, he's got to deal with a cabinet.
00;06;53;03 - 00;07;14;07
Speaker 3
He's got to deal with the Congress, the Senate, and in the House and, you know, legislation. That's why it's so hard to get legislation passed is because it is such a just a a big blob of inefficiency. And it's it's just truly most of the time, only bipartisan stuff ends up getting through so they can say what they want to say.
00;07;14;07 - 00;07;20;10
Speaker 3
But at the end of the day, they have to deal with the other side to get really thing anything meaningful passed.
00;07;20;20 - 00;07;47;02
Speaker 2
Yeah, it's I saw study once that looked at if this bill is supported by 90% of Americans overwhelming support and this other bill is supported by 10% of Americans, the odds of both of those getting passed is basically 50%. It really doesn't matter if there's support or there's not support. There's kind of a coin toss whether the legislation actually gets, you know, because it's what what were they trying to accomplish that day?
00;07;47;02 - 00;08;11;06
Speaker 2
What you know, what were they trying to satisfy that day? And so usually what ends up getting enacted is very, very different than what gets talked about on the campaign trail, like it's originally pitched because it's got to go through committees and subcommittees and get it. You know, the House and the Senate have to vote on it. It's just there's a long, drawn out process of what the ultimate bill looks like and how legislation has been passed in the last few years.
00;08;11;06 - 00;08;30;10
Speaker 2
You know, it's on the 11th hour of the 11th day and it gets signed into law. And then you then you adjust. And that's one thing that we always look at is, you know, everybody obviously has personal preferences, what you're hoping or what you think the right way is. But once it comes down and is actually written in legislation, then we can make adjustments.
00;08;30;13 - 00;08;47;15
Speaker 2
Right? And that's, you know, you kind of make some plans here or there if it looks likely that something's going to happen. But ultimately it's not until this is what the language looks like and then it's usually years afterwards of clarification of different parts of it until you fully know what that piece of legislation actually is going to do.
00;08;47;15 - 00;08;59;19
Speaker 2
Right. And so I think just kind of highlight the point of, you know, you know, you set down aside what you think and just look at what's the rules of the road today and let's make adjustments accordingly.
00;09;00;14 - 00;09;24;16
Speaker 3
Yeah, I think it's important for people to keep in mind, too, that, you know, for the most part we just own really large, well-established companies. And and, you know, these companies have been around for, you know, 40, 50, 80 years and they've dealt with, you know, conservative presidents and liberal presidents and everything in between. And they all have, you know, robust lobbying organizations.
00;09;24;16 - 00;09;53;16
Speaker 3
And the lobbyists are in there helping write the legislation as it's being written. And and, of course, some legislation might benefit one list of companies. And and at the detriment of another list of companies. And and that's why diversification is important. Big companies are important. Companies that pay dividends are important so that it just really can kind of smooth out a lot of the bumps that happen because of the political environment.
00;09;53;26 - 00;10;22;14
Speaker 2
Yeah, And I think a great example of that is, is during COVID time. Right? Obviously, a lot of policies were enacted, a lot of unknowns, and it obviously benefited one group of companies far more over another group of companies. Yeah. And that is that happens time and time again. And so it's just looking about, you know, that's why, yeah, diversification matters is because, you know, if everything in your portfolio is going up, that means everything in your portfolio can go down if something were to change against that group.
00;10;22;17 - 00;10;53;27
Speaker 2
Right. And that's why we like having, you know, across different industries is from, you know, consumer led companies to health care companies, to technology companies. You know, if you can spread across all those different areas, legislation generally doesn't impact everything all the time. You know, those companies can adjust and have plenty of time to do so. And we the reason why we choose the companies we do is they they're in the business of making money.
00;10;54;17 - 00;11;13;22
Speaker 2
Right. And, you know, so they have that incentive to, regardless of who's in power, who's writing the laws to make sure they can adjust and make money. And whatever regime and is that is that changes you know, then the companies adjust. And if they don't adjust, that's when we look to move out of the portfolio and and put something else in.
00;11;13;29 - 00;11;37;28
Speaker 2
Huh. And I think that's kind of one thing I want to touch on here. Moving on from that is just, you know, the emotions. I think everybody gets swept up in emotions. Um, elections when the markets, you know, you look up and you see the markets moving around, it's down. And then you look at the news headlines and they're down and it, you know, feels like that's just never ending.
00;11;37;28 - 00;11;48;03
Speaker 2
And, you know, everything's just falling apart. And and I think, you know, talking about kind of how to emotionally stay healthy through that is it's a good thing. Yeah.
00;11;49;11 - 00;12;18;16
Speaker 3
You know, and that's a tough one, too, because I'm you know, I mean, I spend a lot of time probably the website other than, you know, my lap, you know, my my workstation at work, you know, it has all the quotes and people accounts and stuff is probably real clear Politics, you know. And so I, I spend a lot of time reading about politics and it's, you know, I think I think I need to just, you know, try and avoid it.
00;12;18;16 - 00;12;39;18
Speaker 3
I mean, most of us pretty well know what direction we're going to lean. So I'm about decided, you know, I just need to not pay as much attention because it it does get you worked up sometimes and and really does it need to right. I mean, most of us pretty well know what direction we're going to lean when we go in to pull the lever.
00;12;39;18 - 00;12;52;06
Speaker 3
And and so, you know, unless you're truly right in the middle and, you know, you have to pay attention the last couple of weeks to see what's going on, maybe we just need to ignore it a little bit more. I don't know.
00;12;52;17 - 00;21;37;27
Speaker 2
Yeah, I think there's I think.
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