Political Beta

Other discussions not related to the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Political Beta

Post by vnatale » Sat Sep 19, 2020 6:24 pm

Political Beta

https://www.fa-mag.com/news/political-beta-44530.html




Conventional wisdom holds that investing and politics don’t mix, and more specifically that markets don’t care who is the U.S. president.


That view might be changing. The country is very politically divided, and some publicly traded companies have come out in support or opposition to comments and policies from the Trump administration.

One exchange-traded fund issuer says it’s time for a politically based investment methodology. Point Bridge Capital’s Point Bridge GOP Stock Tracker ETF (MAGA) tracks an index of 150 U.S. large-cap companies whose political action committees and employees donate money to or are very supportive of Republican party candidates. Or as the fund literature states, the fund is a way “to bring your Republican investment values to life.” It follows the equal-weighted Point Bridge GOP Stock Tracker Index, which is rebalanced quarterly and reconstituted each June following the completion of an election cycle.

The fund began trading in September 2017 and had roughly $17 million in assets under management as of this year’s first quarter. MAGA was up 14.4% through March, which nearly regrouped its 14.7% loss last year. In comparison, the SDPR S&P 500 ETF Trust (SPY) was up 13.5% this year and down 4.6% last year.

Hal Lambert, founder of Point Bridge Capital and a big donor to Texas GOP candidates, says the idea came after he heard about retailer Target’s 2016 decision to allow transgender customers to use bathrooms or fitting rooms that match their gender identity. He considered that a political move.

Although socially responsible investing is becoming more popular, he regards that as politically left-leaning. Lambert wanted an investment allowing “people more on the right side of things to do something similar, to basically put their money where their viewpoint is.”

So he created a rules-based methodology for stock selection, basing his index on political action committee donations. This takes his own personal viewpoint out when defining what conservative is, Lambert says. He culled individual companies’ political contribution data from the Federal Election Commission to build the index, which he calls “political beta.” To be eligible, companies must have donated at least $25,000 over the last two election cycles, and they are then ranked by the total net dollars and the net percentage of dollars given to Republicans instead of Democrats.


A fund based on a percentage of PAC donations could give rise to a Democratic party counterpart, Weisbruch says. Such funds could then be used in unconventional ways that the creators likely didn’t intend. Say if you don’t like a fund made up of Republican donors that “would be a really good way to hone in on short exposure,” Weisbruch says.


Barry Ritholtz, chairman and chief investment officer at Ritholtz Wealth Management, who has researched and written about the intersection of politics and investing, vetoes politics-focused investing.

He noted the stock market still rose when Democrats hated then-President George W. Bush’s tax cuts, and the markets rallied under President Barack Obama, whom Republicans said would be bad for business.

Wall Street doesn’t speak with one voice, he says, though he adds that it is thought of as more right-of-center politically, being anti-tax and anti-regulation in general.

Although the MAGA fund uses a rules-based index, Ritholtz says the rationale that companies that give money to one political party or another will somehow translate into better performance is flawed. “Why would that lead to better performance?” he asks.

He says he would be interested in academic research that looks at what elements of corporate lobbying and political donations might be correlated with improved market performance.

“That’s an argument that says we’ve identified a specific corporate behavior that results in long-term positive market return. Well, fantastic. That’s something everybody should be happy to put their money in,” he says.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: Political Beta

Post by Kriegsspiel » Sat Sep 19, 2020 8:04 pm

In before the Lindsay Graham jokes.
You there, Ephialtes. May you live forever.
Post Reply