The Best Investment?

[icetonez]

If Kerry wins we have an expensive new health care plan, if Bush wins we have no child left behind. With either canidate we'll have problems funding social security. With these reasons for the US to raise money the money supply and therefor price should go up, a lot.(they won't want to tax to stay in office) So if we have relatively high inflation rates than wouldn't a great investment be I bonds? They are risk free, tax free, and protect against inflation risk. I think I am going to make this a part of my portfolio. Thoughts?

[adios]

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If Kerry wins we have an expensive new health care plan

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Trying to keep this out of the political realm, I think it's fair to say that Congress may have some different ideas.

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if Bush wins we have no child left behind.

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We already do, the amount of Federal $ isn't comparable between the two, not even close.

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With either canidate we'll have problems funding social security.

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Absoulutely not true during the next 4 years.

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With these reasons for the US to raise money the money supply and therefor price should go up, a lot.(they won't want to tax to stay in office)

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I think money supply is in Alan Greenspan's department. Although my understanding is that Greenspan is going in 2006 . If that's the case the next president will apoint a new Fed chairman.

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So if we have relatively high inflation rates than wouldn't a great investment be I bonds?

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Ok if you thinks this all adds up to high inflation put your money down.

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They are risk free, tax free, and protect against inflation risk. I think I am going to make this a part of my portfolio. Thoughts?

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I don't think your reasoning for high inflation is sound but that doesn't mean it won't happen anyway although I don't see it. Energy related stuff still seems fairly reasonable to me and I'm not sure why. I don't think we'll see oil at $20 a barrel anytime soon.

Here's how I might handicap investment ideas based on the election. If Kerry wins he's more or less vowed to adopt Clinton-Rubin economic policies therefore we might rally in the US $. Another aspect of a Kerry victory is that the House will almost certainly be Republican and the Senate will be close either way but probably Republican. I think this is prescription for a gridlock scenario. If Bush wins I would guess you'd see another 4 years of what we've seen so far. Get on board the energy related issues would be my take and stay with other stuff like REITs that have worked fairly well. My crystal ball is cracked all the time so definitely take this FWIW.

[sprmario]

I have a significant chunk of my portfolio in energy. I have done a lot of research on oil recently for a potential investment in some Kansas oil wells which my firm did not make due to timing issues. The point is that we are closing in on the peak of world oil production very quickly. Depending on who you believe, world oil production will peak somewhere between 2008 and 2012 and will be in decline from there on out. From there on out we'll see declining supply forever. Alternative energy is probably overhyped right now but I think it will be a good longterm play given the realities of a diminishing supply of oil in the long run.

My firm recently did a reverse merger deal for Electro Energy Inc. (EEEI on the OTCBB) and I bought a nice chunk of shares at $3.20 in June and sold last week at $6.90. It's sitting around $7.50 now which I think is way high but it is a really good company that makes a next gen rechargable battery that would be perfect for hybrid cars.

Betting on inflation isn't neccessarily a bad play, but I personally don't see it happening too badly. I would not call it "the best investment" for sure. Good luck.

[GeorgeF]

Article on Bush v Kerry stocks.

http://quote.bloomberg.com/apps/news...umnist_dorfman

If I am going to waste my vote I am going to waste it on Badnarik http://www.lp.org/, so don't blame me for anything that happens in the future.

[icetonez]

Thanks for your responses. I am new to investing and should mention that my first post was what I think to be a pretty tight translation of my finance prof's lecture last night. To clarify on "best investment" he said it was the best in terms of risk/reward. He also mentioned that many wealthy middle aged proffesionals he consults from time to time have never heard of I bonds because he says their brokers won't mention it to them because they won't make a commision off the I bond. That much makes sense. He also went as far as to say that people don't believe I bonds exist because they sound too good to be true (this I'm not sure I buy). Yes they are protected from inflation, but I remember looking at my dad's old passbooks from the mid 1980's and he was getting 10% or so in his savings account because of high inflation right? So same difference as the I bonds.

Although the logic for his inflation prediction seems in tune with other things I've read (this forum included, Ray Zee's prediction about the dollar continuing to lose value), I also think his inflation predictions are excessive. He told a girl that the Volkswagon Jetta she bought last year for 18k would retail for 600,000k by the time she was 60.

I guess the lesson here is you have to take everything with a grain of salt. This is the same guy who on the first day of class mentioned how he got rocked by the tech bubble buying and selling stocks he knew nothing about trying to make money by the "greater fool theory". He also on that day predicted the dow to drop to 5000 before any more significant gains.

With that said, the I bonds seem to be a good fixed income option, but nothing to get carried away with.

[Ray Zee]

icey, come around here more often. we need new blood.
as to bonds. when inflation goes up, interest rates go up. then the value of the bonds you own go down. so buying bonds is only good if you buy near the top of the interest rate curve. otherwise the value of the bonds is less than you paid when you go to sell them.
if you are happy with that rate and want to hold them to maturity than thats okay, knowing that you will lose money if you need to sell. also always make sure any bonds you buy will not be callable. not as much as a problem as in the past when interest rates went way up then down and the bonds got called so they didnt have to pay you the high interest rate anymore. thats like stealing from you. you get the downside but not the upside.
overall bonds are best for interest rate trading or for old people that want to lock in some fixed income to pay bills. or for big outfits trading or protecting assets or the like.
own property when inflation comes as it goes up with the rise but is harder to sell during that time, but stays higher after the fall.

[midas]

You say your firm did a reverse merger- were you an insider?

[AceHigh]

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If Kerry wins we have an expensive new health care plan,

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If Kerry wins I think federal spending will go down. As adios pointed out the house will almost certainly be Republican and the Senate will be close. So Kerry will have to deal with a lot of opposition and have a hard time getting his spending bills passed.

Plus I think his health care plan is kind of modest anyway. Mostly a castastrophic care plan.

[meow_meow]

Rising interest rates = sinking bond prices.
So, if you think inflation is on the rise, best get into the money market and out of long/medium bonds.

[Nemesis]

I agree with Ray... property is the way to go. And it's going to really be the way to go if you can afford to buy some now when interest rates are low, and also if you can buy it when rates go up and all those ARM's change and people get forclosed on.