Answers to Your Questions About Profiting From Government Actions

My in-box is flooded. The other applications on my desktop are lining up two by two. It’s been a deluge.

I have 40 pages — 40 single-spaced pages — of questions from readers about how they can benefit from government action. This topic has engendered more feedback than any other in StreetAuthority’s history. Investors are clamoring to learn just how they can profit from the greatest financial force on the planet.

An informed investor will be a successful investor. Let’s take a look at those questions — and the answers.

 Let’s look at some of the most popular questions you and your fellow investors are asking:
 
What do you consider to be the areas and industries that will benefit most from the stimulus support during this economic crisis?

Infrastructure, alternative energy and health care were the big winners in the stimulus bill.

ETF that is specifically designed for this express purpose. This method of investing requires active participation and a thorough study of executive priorities, legislation, regulation, budgets, court cases and the like. Fortunately, Government-Driven Investing condenses that vast subject matter into readable, digestible form. It analyzes which companies will be affected and clearly and explicitly shows investors how to profit.

Since ethanol does NOT work, why is the land still not used for corn, beans or other useful crops to help the world feed the masses?
Ethanol — the typically corn-based fuel additive — certainly has its drawbacks. But the administration is devoted to biofuels. And remember, the only place ethanol doesn’t work is on a profit-and-loss statement. But the government isn’t in the business of making money, it’s in the business of printing it. That’s a critical distinction. Ethanol is an area that the president likes, and he’s in a position to direct funding to it. Savvy investors can put themselves into a position to profit from that.

Does it matter whether the government is liberal or conservative?
No. We made recommendations for defense and homeland security stocks that did very well under Bush. We’ve made picks since Obama came to the White House that have delivered even bigger results. It doesn’t matter whether there is a Democratic or Republican president in the White House, or who controls Congress. Both sides spend, spend, spend. Both sides create opportunity for immense profits. deficit is here. (Say what you want about Bill Clinton, he delivered budget surpluses.) But when I hear investors express fear that spending will be cut or priorities will change, what I hear is that they aren’t sure how to keep track of the federal bureaucracy. And who can blame them? They federal complex is massive. Millions of bureaucrats spend trillions of dollars each year — it’s a lot to say grace over. The rules for successful investing are the same as the rules for success on the battlefield: Good intelligence assures victory. That’s where currency. At this point, no one knows the exact degree to which the stimulus plan will effect inflation. But while $787 billion is a mind-blowing amount of money to you and me, the appropriation “only” amounts to 22.5% of the government’s annual budget. That’s a big number, but whether it is large enough to significantly impact inflation remains to be seen.

Bear this in mind, though: The historical inflation rate in this country for the past 10 years averages out to +2.6%.  During the same period, the S&P 500 index has achieved an annual gain — almost invisible to the naked eye — of +0.68%. Say inflation doubles. At that point, the question is this: Can you beat a 5.88% return? If so, you’re in the plus column: You outpaced both inflation and the market. Our Obama-related picks have already seen gains three, four, five times that — just since Obama took the White House! Some of those stocks are just getting warmed up, too.

Inflation can be scary, and it’s all the more reason why you need to find a way to generate the strongest gains you can. Investing in companies that will see double-digit returns — or more — as a direct result of government action is the surest way I know of to keep inflation at bay.