How to Profit from Socialism
Jim Cramer is one of the most recognizable TV personalities focused on investing. Even among non-investors, Cramer is well known for his Mad Money show. And love him or hate him, he often has very good financial insights.
I haven’t watched his program in quite a while, so I’m not sure if this is still the case. But at the end of Mad Money, Cramer would always close with the same message: “There’s always a bull market somewhere.”
What he's saying is that in good markets and bad, there's always money to be made somewhere.
We can apply this same idea to political trends. During Republican administrations, there are opportunities for profit. And during Democratic administrations, there are opportunities to profit as well.
Today the political tides are turning. And the next president after Trump could very well be a Democratic Socialist. But don't freak out just yet. Because even under a Democratic Socialist administration, there will be opportunities to profit. And I want to explore some of those with you today.
Now, before I begin, let me say that there's no way the United States will ever become a completely socialist country. Fact is, capitalism is too big to fail. But the country is swinging left, like it or not. My message here today is simple: Don't get mad. Instead, let's find ways to profit from the political swing.
One of the biggest agendas of the socialist platform is free college. But, of course, nothing is free. Somewhere along the line, somebody pays. So what we're really talking about is taxpayer-funded college.
According to CollegeBoard.org, tuition and fees represent about 40% of the total budget for in-state college students living on campus at public four-year schools, and 20% for students at public two-year colleges who pay for off-campus housing. In short, there are other costs associated with college life.
Among the largest of those costs is college textbooks. The College Board estimates the average U.S. student spends around $1,200 a year on books and supplies. In fact, some students end up spending more on textbooks than tuition. And with over 20 million students attending universities right now, they're already spending tens of billions of dollars on textbooks.
The Bureau of Labor Statistics says about 7 in 10 high school graduates will enroll in college. So there's still plenty of room for student enrollment to grow. And with growing enrollment comes growing textbook sales. That means textbook publishing companies like Houghton Mifflin Harcourt (NASDAQ: HMHC) could be set to win in a free college environment.
Another major agenda of the socialist platform is free housing. But again, nothing is free. Free housing simply means taxpayer-funded housing. And this is an easy one to find opportunities for profit.
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Most Americans spend about a third of their total income on housing. According to a report by Zillow, 43 million Americans spent a record $485 billion on rent in 2017, up by almost $5 billion the previous year.
In an environment of free (taxpayer-funded) housing, apartment builders and management firms, such as Mid-America Apartment Communities (NYSE: MAA) and Equity Residential (NYSE: EQR), could do very well. And student housing companies like American Campus Communities (NYSE: ACC) and REITs such as Education Realty Trust (NYSE: EDR) might also see higher revenue.
Among some of the issues that won Democratic Socialist Alexandria Ocasio-Cortez her position is stricter gun control and a ban on assault weapons. This also presents us with opportunity.
The Supreme Court of the United States has upheld time and time again that the Second Amendment protects an individual's right to possess a firearm unconnected to military service. Yet during the Obama administration, there was a lot of fear that Americans would have their guns taken away. The result: gun stocks soared.
If we end up with a Democratic Socialist as our next president, there's a good chance gun stocks American Outdoor Brands (NASDAQ: AOBC) and Sturm, Ruger & Company (NYSE: RGR) will again rally.
Again, I don't see the United States ever becoming a fully socialist country. But there's no doubt that the country is swinging left.
Don't get angry about it. Your anger is only hurting you. You have more control over the weather than you do over other people's political beliefs. Instead, it's best to use the turning political tides to your advantage and profit from the swing.
Don't get mad; get rich.
One more way you can do this is through the government itself. The U.S. government owes roughly $20.4 million a month in rental fees... and you can get a cut. Learn more here.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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