Power And Dollar

Massachusetts Is Pushing Up Your 401k

As Massachusetts comes to a close to their choice US Senator, investors from the rest of world are approving their expected result: Republicans will win this election.  How does a local election affect your 401k?  Is that the only factor that drives up your 401k value?  No, certainly not.  However, the spike of not only a few companies (Aetna, NYSE:AET; Johnson and Johnson, NYSE:JNJ), but also industries’ stock value and the appreciation of US dollars against most currencies and in particular against Chinese yuan (CNY) is a good indication that this fluctuation is not due to some company quarterly earnings but some political event (Cadbury is the exception, NYSE: CBY).

NYSE and S&P500 are going up today.  What is the top concern of investors these days?  The future US fiscal deficit.  What will be the greatest contributor to future US fiscal deficit?  Health care.  Obama’s health care reform will have a direct impact to US fiscal deficit.  Not having an one-sided US Senate also means banking reform will have to have greater compromise.  Rumor has it that Consumer Financial Protection Agency may be dropped. 

Are investors disapproving Obama administration?  Investors probably will donate to his re-election campaign as well as his opponent’s in 2012, not to mention both parties’ 2010 congressional election funds.  Investors simply see that the new policies do not provide more values.  Investors like risk management tools that enhance certainties of any kind.  Risk certainty is what helps investors choose their company ownerships (i.e. how your mutual fund manager buys stocks for you).  Therefore, one cannot assume investors hate governments at all times. 

Health care reform in the States will create a higher demand for health care products, such as health care insurance, drugs, and equipments.  The list will be endless.  Financial industry reform will provide greater risk control or at least monitoring over systematic risk.  However, health care reform is so broad that no one can understand while financial reform favors the establishment of the financial industry and not the investors (you, a typical 401k or IRA investor).  

Obama’s options?  House (Nancy Pelosi) will have to pass the legislation at its current form or suffer a longer and more arduous negotiation between House and Senate for any bill senate passed, including the health care bill.  Divert attention from anything unpleasant to immigration legislations.  Haiti will induce refugee problems.  Mexican border violence will induce debate about border security, for instance border fence.

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January 19, 2010 - Posted by | america politics, banking, Barack Obama, Current Events, health care reform, obama, opinion, politics, US politics, wordpress-political-blogs

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