The Presidency, America’s Credit Rating and Some Sound Investments
The Presidency, America’s Credit Rating and Some Sound Investments
By:Ed McKinley
A weekly look inside Luckbox magazine
The White House and the Big Board
Opinions on last week’s presidential debate are still fueling panicky chatter on social media, cable news and front pages—not to mention at the kitchen table, around the office water cooler and in the diner down on the corner.
But what does it all mean to active investors?
Well, the outcome of the election will shape U.S. domestic and foreign policy, but the performance of the stock market is less dependent on who sits in the Oval Office. After all, excluding the temporary correction brought on by the COVID-19 pandemic, the stock market performed well during the tenures of both President Joe Biden and former President Donald Trump.
For example, the S&P 500 rallied by more than 60% during Trump’s time in office. And since Biden was inaugurated in January 2021, the S&P 500 has increased by another 48%. Those results suggest the stock market could theoretically perform well no matter which candidate wins the upcoming election.
Don’t be Surprised by Another U.S. Credit Downgrade
For decades, America's sterling sovereign credit rating has been the bedrock of global financial stability, underpinned by the unwavering "full faith and credit" of the United States government. Moreover, long-term strength in the U.S. dollar has fostered a sense of invincibility in the American economy.
That all changed last August when the credit rating agency Fitch downgraded America’s sovereign credit rating from “AAA” to “AA+.” Moody’s followed suit in November, when it changed the country’s outlook to “negative” from “stable,” while maintaining the overall “Aaa” rating. (Note: Moody’s uses a slightly different ratings scale than Fitch, combining both capital and lowercase letters).
These warnings underscore a critical issue: If the government fails to balance income with spending, further downgrades are certain regardless of the outcome of the 2024 elections. And one could argue that the pressing need for fiscal responsibility has never been more urgent, making the so-called "debt crisis" a critical issue.
How YOU Can Profit from Music Royalties
When megastar David Bowie decided not to sell the rights to his songs, an investment banker came up with the idea of Bowie Bonds—the first-ever asset-backed securities in the world of music and entertainment.
Revenue from Bowie’s albums served as collateral, and investors snapped up $55 million worth of the bonds. Royalties generated by Bowie’s music repaid that amount over a 10-year period.
After the quick adoption of Bowie Bonds, a successful series of bonds followed for other legendary songwriters and recording artists, including James Brown, The Isley Brothers, Ashford & Simpson, and the Motown team of Holland-Dozier-Holland.
The bonds enabled artists to convert intellectual property into a tradeable asset, while investors profited from the steady stream of royalty payments.
Ed McKinley is editor-in-chief of Luckbox magazine.
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