Lessons From Prior Change In Elections

Douglas A. McIntyre

American_flag_picThe verdict is in, and change has arrived.  Barack Obama has defeated John McCain in the 2008 Presidential election.  We at 24/7 Wall St. have done everything we could to not show any political bias throughout the entire electoral process, and we plan to keep that stance going forward.  Most of our readers are investors and will likely face some changes in their taxes on either income or on investing activities, but to what extent is not yet determined.  Some will cheer the changes ahead, and some will not.  There are some history lessons  to consider which directly relate to today’s events.

In 1992, a man who was unknown on the national front just a year before named BillClinton defeated a previously very popular incumbent George H.W. Bush.  Clinton did so with much less than a majority vote, as third partycandidate Ross Perot took nearly 19% of the popular vote.

I had the honor of working at a bond brokerage firm as a broker lessthan a year out of college.  This was in Houston, Texas,and the office culture was almost entirely Republican.  I personallyexpected to enter a very somber office the morning after Clinton defeated Bush, who lives in Houston..

The CEO of the firm held a meeting that morning and had everyone comein early to discuss new policies.  To my surprise, the moodsuddenly became one of dealing with the new regime which was going to be around for a minimum of the next four years.

The CEO essentially said, “This didn’t go the way we expected, nor theway most of us probably wanted.  But there are some great things atwork here that will be different than before.  There were more votersinvolved this time and it may be nice to see new blood from ourgeneration in charge.  Many of the things we have worried about may notcome to pass and many of the initiatives may not be able to be passed.Other things are likely to benefit us which we never thought of when wevoted.  Like it or not, it is time to accept the new regime and toevolve around the changes which are coming.”

There are many similar circumstance in 2008 as there were in 1992.There are also many great differences.  We stand at a time where manyof policies and many of the future players and power brokers are stillunknown.  The future outcome is even less known. 

This election has lasted longer than any election in memory.  There arechanges coming.  Some will be better than what we have seen, and ifhistory of rapid and sudden change is any barometer then some changeswill be worse.

There were immediate and partially retroactive changes in the taxsystem in 1993, and very few in the financial community were very happyabout it.  The initiatives for universal health care which scared manynever came to pass.  But in the end, the 1990’s turned out to be veryprosperous times for many Americans.  What will happen in 2009 andbeyond is an unwritten chapter of the history books.  Regardless of whovoted for which candidate, we have yet to find anyone who claims to beable to predict what will occur over the next four years after themayhem we have witnessed this year.

After the September 11, 2001 terrorist attacks, I sent a letter to myclients at the time asking them to be careful jumping into the statusquo of the time as we were likely to find ourselves in a new world offoreign relations.  In this, I said that some nations we have longconsidered friends would not be unconditional allies and wemay find ourselves at odds with many supporters.  I also said that we mayfind ourselves with new allies and new friends.  The point here is thatmany things which seem to be a given often end up much differently thanexpected.

The message here today is not one of forced opinions.  We have heldback all personal views here and only gave recent historic events as areference.  We are not a politically biased site and we arehere to give you opinion editorial analysis based upon analysis of historic trends. We will not tell you how you should see things in political orsocioeconomic events.  As a friend from a media company once told me,”I don’t have to tell you my opinion.  I just have to get the callright on how the outcome looks right now.” 

It is far too soon to know whether or not the coming changes will befor the better or for the worse.  It will be up to the history books todetermine whether the near-term changes will be better or worse ageneration from now.

Either way, and for better or for worse, we all now have a newenvironment to adapt to.  As we maintained on Tuesday, the real winner here may actually end up being Warren Buffett.

Jon C. Ogg
November 5, 2008