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Investing Under the Democrats… Who Wins/Who Loses
by Dennis Gartman
November 11, 2006
After this week’s election, there are a few things I am certain of…
The profits of American oil companies and Big Pharma companies may be in jeopardy. And the big winner in this election will be investments in the Canadian oil sands. Trade accordingly.
Let’s take a look at which investment sectors will be the likely winners and losers, and why…
The Winners
Biotechs should be winners, benefiting from stem-cell research, which will now certainly be viewed positively in light of the furor over Michael J. Fox.
Alternative Energy will be a winner. The Democrats almost certainly will increase both the funding of and the incentives for alternative energy. The major winners will be ethanol, wind energy, and bio-fuels companies. We are not supporters of corn-based ethanol, believing it to be a truly inferior product compared to bio-diesel, but the Democrats will not care and the public "loves" the concept of ethanol.
Thus, the truly big winner is, as it should be, is Canadian oil. The Democrats should love Canadian tar sand oil production, for it is the true, viable, and massively available “alternative” fuel.
The Losers
Big Pharmaceuticals... If Canadian oil sands are the big winner, “Big Pharma” is the big loser, by a wide margin. The Democrats intend to attack and perhaps try to overhaul the current prescription drug plan enacted by Republicans a couple of years ago. No matter how we view the recent electoral developments, we cannot cast the results as anything other than materially deleterious to these companies.
Defense... Although defense spending as a percentage of GDP remains far too low, not too high, in our opinion, defense spending will be the Democrat’s sights.
Big Oil.... Big Oil is always the Left’s favorite “bad boy.” When all else fails, attack Big Oil. Under John Dingell, U.S. oil companies will be under attack.
Rep. John Dingell (Mich.-D) will almost certainly be named as chairman of the House Energy and Commerce Committee. He is quite far left-of-center and prone to uncomfortably antibusiness rhetoric. For example, when queried yesterday as to the possible areas of his committee's interest in the future, he said:
“We certainly are going to find out whether or not the American consumer is being screwed by Big Oil.” One can surmise that the only answer that Mr. Dingell's committee will be comfortable with is “Well, of course they are, and let's get those nasty oil companies and make ‘em pay!”
Also, Nancy Pelosi (D-Calif.),the presumptive House speaker, already has said that many tax breaks and financial incentives given to the largest energy companies will be under direct review and all haste shall be made to end them.... immediately. The public will love this, even as they own oil company shares... illogical though that might be.
In sum, it appears that Canadian oil will be the clear winner, for the profits from Canadian oil companies are beyond the purview of the left-of-center U.S. Congress under the Democrats, at the expense of American oil. Invest accordingly.
Dennis Gartman,
for DailyWealth
