In his famous plan for placing either one or two lanterns in the Old North Church steeple, Paul Revere was not trying to signal whether there would be trouble; trouble was certainly coming. He just wanted to let the Colonists know whether the Redcoats would be marching overland (a longer route which would allow more time to prepare) or would arrive more quickly, by boat.
As advisors and investors, we might do well to weigh the implications of this year’s presidential election in a similar fashion. It is already well established that serious financial trouble is in the neighborhood. We just want some idea of when it will explode so we can prepare.
Whether we focus on our GDP-sized sovereign debt swelling by more than a trillion dollars a year … or on the growth of government spending in relation to the private sector, the odds look very high that some painful version of deleveraging awaits us. It seems our selection of a candidate will, at best, determine whether we confront the spiraling debt head on and soon, or ignore it until it is large enough to destroy the economic system that has made America the destination of choice for the world’s emigrants.
Even if I could accurately predict our next president, I wouldn’t design a portfolio around it because:
a) nobody knows who will control the legislature, and
b) a president can always adapt to events.
I think the following are substantive differences between the parties in the current quadrennial quarrel: