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The Chairman
Victor Niederhoffer


12/14/04
The "Election Effect", by Victor Niederhoffer

I recently posited that companies that backed the winner performed better since the election than those that backed the loser. A recent Bloomberg article written from the typical agrarian reformist vantage point apparently concluded this was true before the election. Nock and I would attribute this to the thing that led the Secretary of the Interior to hold the only important appointment in Washington in Nock's day, and led to his dancing an extraordinary kind of Kazak as described in Memoirs of a Superfluous Man. But I would also posit that these companies are infused with a belief in the creative power of the enterprise system. .

Ari Siegel Reviews Election Effect Article:

According to a December 13 Bloomberg report, companies that back the winning president’s party in an election year seem to do well on Wall Street. The article states that the top 50 companies that donated to Republicans in 2000 saw their stocks rise an average 44% from 2001-2004, compared to a decrease of 4.1% for the S&P 500. In the 2004 campaign, the 102 large corporate donors that favored Republicans saw an average return this year of 19%, compared with 9% for the S&P 500 and Russell 1000. The 17 companies that donated over $100,000 and favored Democrats in 2004 have returned 11% this year. The five companies favoring Democrats with large donations in both 2000 and 2004 saw share prices drop more than 6% in the past four years. However, in 1996, large corporate donors to both parties lagged the S&P. Those favoring Republicans returned 104% from 1996-2000, while those favoring Democrats returned 86%. The S&P 500 increased 132% during the same period. A simple reason for correlation could be that companies support parties whose agenda would be most beneficial to their bottom line. “The stocks outperforming during the Bush era tend to be ones that underperformed during the Clinton era, which in large measure were names in energy, materials, and seemingly old- fashioned, `old economy,' smokestack manufacturing companies that pay dividends…Dividend tax cuts, capital gains tax cuts, and depreciation bonuses under Bush clearly helped these guys out a lot.”

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