Political Instability as a risk factor

larryB

This board is broadly speaking a discussion of investing and markets. Topics often include risk factors that influence our individual investment decisions. Interest rates, rising and falling profits, inflation and deflation,,,,,, We talk about investing both in US and ex US shares and specifically unique risks of investing in emerging markets like political instability. But what about political instability right here?After watching todays historic hearing and thinking about everything that has led to today it seems fair to consider DOMESTIC POLITICAL INSTABILITY as a significant risk to our individual and collective investments. We can be like the Bogleheads and ignore the republican threats to our nation’s future or we can speak openly and honestly as we add it to the risks we must all consider. Is this a topic that this group can include or is it off the table no matter how real it is?

Crash

good question. gotta catch up with the hearing, now. ...
https://thehill.com/homenews/house/3780559-live-coverage-jan-6-committee-holds-final-public-hearing/

Unprecedented.

Old_Joe

A good question, and not all that easy to answer. If we consider the general effects of political instability without getting into the detailed specifics of personal actions which have generated or contributed to the instability, then the discussions certainly would not be out of place in the general investing arenas.

But if the posts devolve into heated discussions of who did what and when, and who is or is not an indictable criminal, then the discussions should be restricted to the Off-Topic arena.

From experience, and the observation of human nature (including my own) I would suspect that the latter situation would be the most likely to prevail.

Crash

A respectful, generic conversation might be in order, yes. We've had to install that particular ring-fence you describe, @Old_Joe, because of unprecedented subversive behavior by a particular Party. As "The Hill" describes in my link above, what the Jan. 6 committee had to confront was unprecedented, leading to unprecedented decisions to recommend specific indictments. And by the way, I could see this prospect might very well happen, back in 2015. Ding. Policies are not in focus, but criminal activity, instead. And sadly, he'll get away with it, too. Deep pockets, running out the clock on everything.

larryB

@ Old_Joe. I agree with your observations of human nature without reservation. Yet any discussion of political instability in the United States would be not very meaningful without considering the fact that one of our two major parties has descended into THE source of instability in the United States.

AndyJ

@larryB, instability like the debt ceiling crisis of 2011 (and again in 2013)? The Wiki article on the 2011 version characterizes the effect on markets this way:

The crisis sparked the most volatile week for financial markets since the 2008 crisis, with the stock market trending significantly downward. Prices of government bonds ("Treasuries") rose as investors, anxious over the dismal prospects of the US economic future and the ongoing European sovereign-debt crisis, fled into the still-perceived relative safety of US government bonds.

And that was a crisis that was resolved before any default took place.

LewisBraham

I can say this: When I talk to investors who specialize in foreign stocks, political stability or instability is always a factor in how they invest, especially in emerging markets. They will insist on a larger than normal discount to a company's intrinsic value before investing in its stock if the company is domiciled in a politically unstable nation. If you think about it, such logic should apply everywhere.

larryB

@AndyJ. If you think that a debt ceiling crisis is the equivalent of republican inspired violence and chaos,,,, if you think a republican attempt to repudiate a fair and closely examined election is the equivalent to a debt ceiling crisis then thank you very much for your contribution to our discussion.

Old_Joe

@larryB- Larry, if you've been monitoring MFO for any length of time you are fully aware that my personal feelings on all of this are very much the same as yours.

However, MFO is primarily dedicated to financial and investment discussions, and you asked if discussing political instability was an appropriate subject for the financial and investment forums.

As I noted, it certainly can be, if it remains as a general discussion and does not degenerate to heated political accusatory and inflammatory commentary.

For discussions which do not fit that description, MFO has, for very good reasons based on the expressed preferences of the great majority of MFO posters, established the Off-Topic arena. Like the rules generally observed for deciding elections, that majority opinion should be honored.

Frequently I also would prefer it to be otherwise, but as long as we are guests here we have an obligation to honor the rules established for this community.

larryB

@ Old Joe. I asked if political instability in the US as a risk factor is valid. So would it be acceptable to discuss Republican acts to destabilize the 2024 election as a reason to change one’s asset allocation ? This is not the same topic as discussing pro and anti democracy parties in the United States. There is a difference…….

AndyJ

larryB said:

@AndyJ. If you think that a debt ceiling crisis is the equivalent of republican inspired violence and chaos,,,, if you think a republican attempt to repudiate a fair and closely examined election is the equivalent to a debt ceiling crisis then thank you very much for your contribution to our discussion.

I never said they were equivalent, @larryB, and I don't know why you would conclude that I think that. I was offering a clear case from the recent past where a political event smacked the markets around. And of course, those two debt ceiling crises were entirely political events, brought to us by the same gang you cite.

Yes, political instability is an investment risk factor.

larryB

@ Andy. I stand corrected.

Old_Joe

@LarryB- Sir, I've done my best to lay out my view of responsible posting on MFO. I've tried to acquaint you with the reasons behind and history of the MFO platform. If you have other perspectives and preferences, that's pretty much up to you.

hank

”Is this a topic that this group can include or is it off the table no matter how real it is?”

@LarryB - Depends on the “group”. I have no trouble with you raising the topic on a general purpose Twitter or Facebook page. Nor do I object to your right to address this in a town square somewhere. However you are posting on what considers itself to be primarily an investment board. I like to make money. You like to make money. etc.

Your question, somewhat cloaked in platitudes, is: “Should we as investors be cognizant of domestic political instability and factor that into investment decisions?

The problem with the question is that, unless you’ve been buried for the past decade in an underground bunker with no contact with the outside world, the answer is yes. So the real intent here would seem to be not to sharpen anyone’s investment acumen but rather to hash-out long standing, conflicting and heart-felt beliefs about the current U.S. political climate - likely with today’s recommendations of the Special Congressional Committee center stage.

There’s 2 problems: (1) This topic is, ISTM, designed more to provoke political discussion than to promote carefully considered investment decision making and (2) There is a suitable section of this board, as @Old_Joe mentioned, designed for just such “excursions” beyond the normal investment related confines. It is called “Off Topic.” It’s not a garbage bin, but rather a comfortable sanctuary where ideas about anything from sports - to music - to politics can be aired calmly without impinging on or compromising the board’s predominately investment related mission.

Now a personal beef. I can get an earful of this type of hyped up political banter by tuning in to CNN, MSNBC, FOX or any number of other cable networks. These are professional rabble-rousers. They’re well trained and well paid for what they do. They’re really good at it! Better than most here. So, why would one bother logging in to an investment board called Mutual Fund Observer to ingest the same type of vitriol? I’ll go further. Were I moderator I’d close the thread or ask the poster to move it into the OT section.

larryB

@ Hank. Your answer leaves no doubt of your opinion. Thanks for responding with such clarity.

LB

Old_Joe

Well, and here I thought that my answers "left no doubt" of my opinion. Oh well...

@hank- Thanks. / OJ

LewisBraham

To me the notion that money can be completely divorced from politics is absurd. The idea people can just silo or segregate the two when money and politics are in reality like peanut butter and jelly is in fact political. It’s a libertarian free market fantasy that companies and the money invested in them only exist in the abstract as engines of profit. In this fantasy, companies aren’t really domiciled in nation states run by governments, and there aren’t flesh and blood human beings working at these companies and real people consuming their products and a planet’s environment affected by company policies. Companies are just numbers on a screen like the money in one’s bank account. Everything else is euphemistically called an “externality.”

But many investors with significant amounts of money no longer want to separate their money from their politics. A number of investment surveys reveal there is an entire generation called millennials who increasingly want to invest in accordance with their political values. So to say the intersection between investing and politics can’t be discussed here is to exclude all of those who care about both profit and people. The caveats I would recommend though are there should be a true intersection between the two and posters should try to be respectful. That I know is easier said than done.

With regard to “carefully considered investment decisions” being the only goal what about those pesky “externalities” you know like the planet? https://prospect.org/power/libertarian-delusion/

larryB

@Old Joe. Sure enough Sir, your answer left no doubt. You responded to my question with “good question. “