PREPARING FOR THE ELECTION

In my youth I loved to sail. Sailing can be a very rewarding experience. As much as I love sitting behind the 800 horsepower turbine engine in my airplane, there is something very special about a quiet, beautiful day on the water, gliding peacefully along under the power of the wind. In recent times my son Jared has joined me in my renewed interest in sailing.
 
Generally, as a pilot the wind is not your friend. It is a constant battle to keep the plane on course while the wind is usually pushing you somewhere else. Flying against the wind requires raw power and determination. Sadly, on those days when you get a nice tailwind, the benefit is more than negated by the headwinds going home. The physics of flight are such that a headwind hurts you more than a tailwind helps you. It works much like an investment where a 10% drop in value is not recovered by a 10% gain, so you have to plan carefully.
 
A captain of a sailboat views the wind much differently than a pilot. It is no longer his enemy but his friend. It has always fascinated me that ancient mariners were able to cross the seas both directions using the same wind. Modern sailboats are even more capable at using the wind to move them the direction they want to go. The wind provides the energy that moves the boat, but the captain decides the direction by the way he sets the sails and the rudder. As Ella Wilcox’s famous poem reminds us, “Tis the set of the sails and not the gales which tells us the way to go.”
The last couple of years have been pivotal in American politics. To say that contrary winds are blowing might be an understatement. The polarization has reached such dramatic levels that government struggles to function properly. Historically, presidents like Reagan and Clinton worked across the aisle with a divided congress and were able to get the country’s work done. The current environment may be so toxic that changes in Washington may have a more dramatic effect on our lives, and our investments. Elections may have much higher consequences. Past politicians were very divided on the campaign trail but after the elections they largely worked together to get things done. That does not appear to be the case anymore.
 
As such, I encourage investors to be more pro-active in planning how their portfolios might need to be adjusted depending on changes that may occur in November. It would be wise to assume that changes in control of the branches of government could have a more significant effect on investors than they have in the past. In the coming months I will share some of my specific ideas on this relatively new challenge for investors, along with its potentially increased risks. Like good sailors, we must find ways to move toward our destination, regardless of which way the powerful political winds may blow our nation.