Bull and Gore

Sometimes, to listen to the Republicans, Al Gore and the Democratic Party just got lucky in the stock market these past eight years. The phenomenal run in the Dow and the nasdaq happened because stocks were simply due for a rally. We had incredible appreciation in securities because the bears were lulled to sleep by bogus prosperity. Or maybe they just didn’t want to pay the Democrats’ high capital-gains taxes.

What a crock! Sure, I am biased. I helped write speeches for Gore in his aborted 1988 presidential run. I regard him as a friend and have contributed extensively to the Democratic Party. But here I am calling it as I see it as a longtime professional money manager. Stocks spent the past eight years rallying for the same reason they could spend the next four years rallying if Al Gore is elected. The White House made a deal with Alan Greenspan to balance the budget in return for the Federal Reserve’s help in lowering interest rates. Clinton championed the deal, Gore pushed for it and voted for it. By getting the Federal Government to stop borrowing excess money, the Democrats – helped by a recalcitrant Republican-dominated Congress – created an environment that made the stock market the investment of choice. Bonds, particularly the popular 30-year Treasury bonds, ceased to be a legitimate alternative to stocks, a feat that no one even dreamed could happen ten years ago. Money that once headed for bonds poured into the stock market instead, driving up prices. With lower interest rates and virtually no inflation, corporations and individuals refinanced and invested, creating the prosperity we have today.

Which is why this out-of-the-closet, card-carrying, big-lever Democrat money manager is scared to death that George W. Bush is going to win in November and, with his massive tax cuts, bust up the Big Deal that made the market roar. That’s right: I expect if George W. Bush gets in, I will have to switch my mostly long stock fund into a fund that shorts with abandon, because I expect interest rates to shoot up as we get ready to finance the budget once again with bonds and not tax dollars. In short, we will be back to the same miserable stock market with the same second-rate Treasury Department we had when George senior ran the joint (and when I made millions betting against stocks).

In the past few months, I have watched Bush struggle with the idea that voters might be worried about busting the budget with the giant tax cuts coming our way – and I stress “our tax cuts” because, believe me, my cuts will be much bigger than those of most readers if Bush gets in. In fact, it’s not the voters I am worried about; it’s Greenspan, stupid! If he sees consumer spending ratchet up and the budget surplus turn to a deficit, he will take short interest rates dramatically higher, causing the first real competition for stocks since this bull market began. It’s a prospect every money manager silently dreads. Money managers of both parties know these tax cuts would be inflationary and might lead to a repeat of last spring, when the Fed fretted about too much consumer spending and raised rates forcefully, helping to knock the nasdaq down 30 percent.

We keep hearing that Bush is pro-stock market and Gore is anti-stock market, and that Gore will attack big business and Bush will defend and propel it. Frankly, other than the drug companies, which might fare worse under Gore than under Bush, I can’t see how people think that Gore is anti-market. Populist rhetoric notwithstanding, he favors a continuation of the pro-stock-market policies that held under Clinton, policies that he actively championed during his vice-presidency. And I don’t fret as much about problems that the government can cause an individual sector of stocks. I care most about the interest-rate backdrop. Stock prices are driven not by governmental regulation but by an environment conducive to investing – lower rates, strong dollar, budget surplus – versus those of excessive consumer spending, government borrowing, and an unfriendly Fed.

Another constant refrain is that Gore sat out the great bull market while Bush profited from it, and if he was really an enthusiast of stocks, he would have invested. Wrong! I’ve had many conversations with Gore about stocks over the years, and he always has had the same attitude, which I can sum up as “great ideas, Jim, super, love to buy them, but I may have to rule on regulations for these companies in committees I serve on, and I will be conflicted.” And how right he was. I can’t tell you how many times he would have had to rule on just the stocks I was suggesting (even though almost all of them went up). He sat the market out to be an impartial legislator, not because he disdains the market. The guy loves my stock picks, believe me.

Still another rap is that he is so pro-environment that polluters will see their stocks pummeled. Frankly, this argument is just plain stupid. I have some bad news for the anti-environmental crowd: You’ve already lost. Most companies now comply with the rules, and if they don’t, they get sued, and it costs them fortunes to defend, and they end up cleaning the mess anyway. The environmental regulation we have now works, and it won’t be any different under a Gore presidency because he had free rein on this stuff for the past eight years.

Truly, two companies will fare better under Bush than under Gore: Microsoft and Philip Morris. But as someone who is fairly confident of a Gore victory, and who is long both stocks, I am not too worried. Microsoft’s case will get to the Supreme Court under either man, and Philip Morris hasn’t much to fear from the Feds anymore: It owes the states too much money as part of its settlement – nobody wants it put out of business.

Finally, the Republican money managers are supposed to be salivating about Bush’s plan to let individuals invest in stocks for Social Security. Give me a break! What happens when we go through the inevitable bear market? We already write enough checks to farmers when the weather’s bad; now we will have to write federal checks to those who made bad investments? And don’t try to tell me that won’t happen. No way Social Security won’t be indemnified in some sort of ridiculously open-ended fashion if we go down that path.

Don’t get me wrong; I can make as much money in a bull or a bear market. But how about the 45 million homes that own stock? Are they going to take up shorting, too? The easiest path back to record highs for the Dow and the nasdaq is to vote for Gore in November – and to keep George W. Bush as far from the White House as possible.

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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had positions in Microsoft and Phillip Morris. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer’s writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites comments at

Bull and Gore