November 10, 2006: Election impact on stocks

I tried to digest from various sources, primarily military, the impact of the Democratic sweep of Congress will have on stocks of major industries. Here is a very general summary of my research efforts.

In almost every instance over decades, stock indexes have gone up following an election (1994 and 2002 being exceptions).

Aerospace and Defense: A Democrattic Congress will imply defense spending constraints and likely pressure defense multiples. Rumsfeld's resignation could well lead to an INCREASE of troop strength short term in Iraq at the expense of equipment spending. Aerodefense will experience no significant impact on spending.

Agribusiness: No change. Ethanol has broad support on both sides of the aisle.

Airlines: Taxes and consolidation will remain the same. Do not expect increased implications for airlines, which should be positive for airline related stocks.

Autos: Good for domestic autos (thank you, John Dingle). Bad if taxes are raised by the Dems.

Cable and Satellite: There will probably be franchise reform. A network neutrality policy may be adopted (and vetoed). No other major implications are likely.

Communication Infrastructure: As above, focus on franchise reform and network neutrality. Nothing significant.

Electric Utilities: Potential problems are environmental legislation and tax policy. The consensus is that the Democrats will try to tax about anything that moves, squeaks or is demonized as a perk for the rich to fund new spending schemes for their major constituency (so-called victims of society and the educational elites.
Utilities are an easy target.

Entertainment Software/Internet Sales: BEWARE of sales tax mandates on internet purchases across the board.

Chemicals: Increased security measures on chemical plants and tougher environmental regulations.

Media: Less deregulation. More intrusion by a Dem-controlled FCC. Bad for Limbaugh, good for PBS.

Metal and Mining: No significant changes, except for carbon regulation for utilities that will impact coal.

Mortgage/Specialty Finance: Bad for student lenders as regulations will be gutted that protected lenders from student defaults.

Oil and Gas: Environmental to a degree. Democratic policy will be surprisingly soft and will be determined by world fuel access.

Paper and Forest Products: Paper companies will be pinched because of higher chemical costs due to security and environmental restrictions at chemical plants. Packaging companies will be hit with additional environmental issues.

Tobacco: Potential for increased regulation. More litigation likely that will severely hamper tobacco profits.

I know these are very general, sweeping remarks. To include more would be to bog down the blog and glaze over your eyes. I have additional information on each industry. If you have specific questions, e-mail me.