Preparing your portfolio for a Mormon President

You don’t think we can have a Mormon president? Jesus Christ. 

Who, by the way, was a totally awesome cat, according to the Mormons.   However, I guess that’s pretty universal - unless you’re some kind of foreigner.  Then you clearly have no business making equity investments in the U.S.   Wait………………….. (super long ellipses for all you who take longer to recognize that Henley understands how to calculate the Current Account). 

Mitt Romney took home over 49% of the 2002 vote in Massachusetts when he was elected governor.  He wasn’t any less Mormon then.  He proceeded to balance a state economy notorious for simultaneous over-spending and over-taxing.  He supports the death penalty for terrorists and cop killers.  He fights gay marriage, drunk driving, abortion, and Boston mobsters.  He has a Harvard JD/MBA and co-founded one of the most successful private equity firms in U.S. history, Bain Capital.   It is estimated that there are over 7 million Mormons in the U.S. alone, and a devoted outbound system for spreading “the word” would come in mighty handy for a national presidential race.  

I am going to take a speculative position in the coming of a new age in America.   Yep, for the first time ol’ Henley is going long in LDS, not LSD.   I welcome this regime change, and so shall domestic equity markets.  Think about it, it would be refreshing.

No more pent up homophobic rage.  No more extensive outdoor exercise to replace usual human pacifiers like drinking a bottle of red wine and passing out watching TBS reruns of My Boys.  No more extremist viewpoints.  No more clouded separation of church and state.  Well, maybe things won’t be so different.  Popular belief might be that what we might get is a heaping four year serving of distaste for gays, coffee, pagans, Wild Turkey, boxer briefs, casual swearing, long-sleeve dress shirts, soft-core cable porn, and puking at a neighborhood block party – but realistically I think all of these wonderful things are safe. 

But, if they do actually go away, you are all officially invited to the underground speakeasy I open with my market returns based on playing the market like the hedge fund manager over at Morco Capital.  Now, hand me my short sleeved dress shirt and let me just take a few minutes of your time.

The novice may take a lame, short sighted approach here - such as shorting alcohol, tobacco, and porn.   Romney is far sharper than to lash out against big business in the name of religion, as it will undoubtedly be big business that will gift wrap his nomination and ultimate election.  A general theme in my thinking is the calculating, shrewd, precise, and impressive business acumen of Romney and the LDS church at large.    The organization’s structural goals seem to be comparable to a well run business.   High growth, killer sales force, transnational management, six sigma processes and structure, investments in internal education and training, high diversification of investments and earnings, attractive real estate holdings… sound familiar?   It should.  It’s what works.   The success stories at Bain Capital include Staples (SPLS) (one store in 1986), Domino’s Pizza (DPZ), and The Sports Authority. 

Here are a few places I will make bets that LDS-style executive management will save not only Teldar Paper but that other malfunctioning corporation called the USA (thanks for the intro Mr. Gekko):

Auto -  Romney’s pappy was the wildly successful CEO of American Motors Company before leaving to run for Governor of Michigan.   He brought us the Rambler, painted  annual black ink like a Motor City Picasso, and later saw his baby crushed by idiots. Mitt knows that U.S. automakers are in trouble, and you can be damn sure he won’t let a single dollar of bailout money leave federal coffers when Ford’s debt load cripples its business like sugar in the gas tank of an AMC Pacer.   In Romney’s America, I’m going short on US automakers and their suppliers. 

Healthcare – Romney understands when free markets work, and when things like morale hazard destroy the wheels of beautiful capitalism.  Healthcare is broken and Romney has a plan.   He was in the top 5% at Harvard, so don’t bother lecturing him on letting markets work.  He likes the idea of mandatory coverage, creating a near-universal health care regime, which is partly government subsidized.   As he was quoted, “you have a personal responsibility to either pay your own way or get insurance." 

This guy gets things done. I’ll take a chance on improvements to health care overall.   More people on premium meds, lower costs, more competition, less red-tape, less morale hazard – Healthcare SPDR (XLV) is a nice ETF to cleanly go long on a better way of doing things in healthcare. 

Commodities -  Romney is a smart guy.  This is why he should support eliminating U.S. tariffs and targeted tax credits that artificially protect weak domestic firms from foreign competition.   On his web site, he is quoted “We have to keep our markets open or we go the way of Russia and the Soviet Union, which is a collapse. And I recognize there are some people who will argue for protectionism because the short-term benefits sound pretty good, but long term you kill your economy, you kill the future.”  

At the heart of the skyrocketing corn price is the huge demand for ethanol – demand that cannot be satisfied efficiently because of protectionist tariffs on foreign ethanol.  The party is over, you had a good run, now let’s see if ethanol can succeed without holding daddy’s hand.   I think it can, and I say everyone wins in this case, so I’ll stay long in ethanol, and short in long term corn futures.

These were just a few, but you get the idea.   And that idea is actually something you will hear more and more about in the next year.   Stop worrying about magic underwear.  My magic underwear is going to be made completely out of $100 bills stitched together with fine, high-grade hemp.  As far as I can tell, a Mormon president wouldn’t lead us into creepiness or financial failure, it would be an absolute boon.  Now, please excuse me, I’ve got four beers to finish before the Castleridge Commons block party…

Article written by: Henley Frey
Article posted on: February 28th, 2007

Disclaimer: The Author does not own any stock or long/short positions of the securities mentioned in this publication.