Should changes in politics change investing strategies?

What if you were to chart how much time you spend thinking and or talking about politics over the last 20 years. (OK, this is a question just for baby boomers. The rest of you can relax and enjoy the ride.)

The reason I ask is because I have caught myself thinking more and more about political issues. It used to be that political news was very limited to the evening news shows on the major channels with occasional special features. Now you can watch politics almost continually. The amount of politics watched on television may be a sufficient proxy for how much time is captured by politics in our mind.

If I were to chart how much I think about politics in the last 20 years, I would guess is that the time has increase by multiple times. Of course it is impossible to know for sure, but this seems right.

I now ask the question why?

Because in our personal lives, we have moved from researching the best health care alternatives to worrying about the decisions the government will make that may radically change how our health care is administered. And, rightly so, that concerns us. So we spend more time thinking and talking about politics of health care.

But what about our investing strategies? Should the increases in government debt, ownership of private industry, changing regulations of the financial industry, demonization of Wall Street change how we invest?

Will price patterns continue as they have been? Will large amounts of cash wash in and out of the market driven by changes in the Feds interest rates? Has fear replaced PE ratios? Are the wheels coming off of the cart or has the pendulum swung so far and we are coming back to historical patterns of investor behaviors?

I assert that increasing federal power over the markets and companies will be matched by increasing volatility of optimism and fear in the market place. As the source for producing value shifts from millions of individuals and companies who create employment to the federal government (who is taking responsibility for creating jobs) the market place will move in response to the trillion dollar gorilla. Industries can be created and destroyed, tax changes can shift billions of investing dollars, regulations can hobble growth and subsidies can create wealth that isn’t sustainable.

Whew…

I am staying optimistic and looking for opportunities created by our changing governmental responsibilities. So start thinking…what if…and then think, what are the consequences…what are the unintended consequences…and who benefits?