In This Chapter
Looking at the effects of politics and government on stocks
Checking out a few handy political resources
Politics can be infuriating, disruptive, meddlesome, corrupting, and harmful. Don't let that fool you — it does have its bad side, too! Even if politics doesn't amuse or interest you, you can't ignore it. If you aren't careful, it can wreak great havoc on your portfolio. Politics wields great influence on the economic and social environment, which in turn affects how companies succeed or fail. This success or failure in turn either helps or hurts your stock's price. Politics (manifested in taxes, regulations, price controls, capital controls, and other government actions) can make or break a company or industry quicker than any other external force.
What people must understand (especially government policy makers) is that a new tax, law, regulation, or government action has a macro effect on a stock, an industry, or even an entire economic system, whereas a company has a micro effect on an economy. The following gives you a simple snapshot of these effects:
|Politics → policy → economy → industry → the company → the stock → stock investor|
Now, this chapter doesn't moralize about politics or advocate a political point of view; after all, this book is about stock investing. In general, policies can be good or bad regardless of their effect on the economy — some policies are enacted to achieve greater purposes even if they kick you ...