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Thursday, March 11, 2004

A Stock Pickers View of Election 2004

In portfolio management there are two basic schools of thought fundamental and technical analysis. In the words of the Motley Fools:

Technical analysis is often contrasted with fundamental analysis. Technical analysis dwells on charts of stock-price movements and trading volume. Fundamental analysis, on the other hand, focuses on the value of companies, studying such things as a firm's business, earnings, and competition. While investors from the fundamental school want to understand a business from the inside out, technicians mostly remain on the outside, observing how the stock behaves in the market.

In this month's Forbes, Kenneth Fisher provides a both technical and fundamental support of why President Bush will win in November:

In the whole 20th century we refused reelection to only five residents of the White House: Taft, Hoover, Ford, Carter and Bush the elder. Also note that the Democrats are going to nominate a senator, and there have been only two Presidents of either party ever elected straight from the Senate floor: Harding and Kennedy. Recent Senate losers include Dole, McGovern and Goldwater. For that matter, who was the last Democrat elected who wasn't southern? Kennedy. And who last won advocating tax hikes? Gotcha!

There is more to favor a Bush win. He's in the majority party. He has an overwhelming campaign fundraising advantage. Our economy is now too strong to throw out an incumbent. Bush defines the Democrat more than vice versa. It's a cakewalk, becoming clear by November. By then you will see higher prices on stocks.

I found it interesting that Fisher would use technical analysis to support for his prediction. I am not as confident, but we are still a long way from November and Passover is coming in less than a month.