SAN LUIS OBISPO, Calif. (MarketWatch) — “Liberals and conservatives do
not just see things differently. They are different, in their
personalities, even their unconscious reactions to the world around
them,” warns senior editor Emily Laber-Warren in Scientific American
Mind, one of the more fascinating reports on behavioral-science research
on the political brain.
Yes, conservative or liberal, Republican or Democrat, you can tell them
apart from their DNA, brain scans, behavioral patterns ... seriously,
guys like Eastwood, Trump and Romney don’t just “see” the world
differently than Spielberg, Soros and Obama ... they are very different
human beings from the outset. Yes, they see different, but they also
think, decide, behave, vote and invest different.
How different? Here’s a simple test: Do you cheer loudly when a tough
guy like Dirty Harry points his .357 Magnum, challenging the bad guy to
“go ahead, make my day.” And did you feel relieved when the frazzled
Dreyfus character in Spielberg’s “Close Encounters of The Third Kind,”
marches up to the UFO to gets the hell off your great Earth?
In her “Calling a Truce in the Political Wars,” Laber-Warren elaborates
on the differences between conservative and liberal thinking by
paraphrasing humorist Dave Barry: “Republicans think of Democrats as
godless, unpatriotic, Volvo-driving, France-loving, elitist latte
guzzlers.” “Democrats dismiss Republicans as ignorant, Nascar-obsessed,
gun-fondling religious fanatics.”
That’s why “Congress is in a perpetual stalemate because of the two
parties’ inability to find middle ground on practically anything.”
No compromise till 2016: Will your retirement portfolio lose too?
OK, so you ask, what’s all this really mean for my investing strategies,
now and especially after the November elections? Yes it depends on who
wins: Will conservatives get absolute control of Washington? What if
liberals hold onto the presidency and the Senate? Or if the
conservatives add the Senate to their control of the house, but Obama is
still president?
Remember the president has enormous power to appoint over 5,000
administrative positions, including the SEC and other regulatory
agencies, plus the Fed chairman, as well as any Supreme Court and other
federal court vacancies?
So, given your unique brain psychology, how will you invest successfully
with four more years of irrational chaos when both parties get even
more aggressive jockeying for the 2014 and then the 2016 races?
Yes, you got a helluva lot at stake folks: Should you invest in defense
contractors? Conservatives want to increase spending on the Pentagon
budget. Liberals want to cut back as our wars wind down, use the savings
for social programs, highways.
How about Wall Street bank stocks? They’re betting on the conservative
free-market agenda. And what if the Affordable Care Act program is
reversed? And you get a voucher? Or buy more health-care insurers,
hospitals, drug stocks now?
Yes, you bet your investment choices will be impacted by psychological
“differences,” and big-time, no matter who wins the election.
Why your political brain has a huge impact in portfolio strategies
So let’s look at the new behavioral research, see if it increases our
understanding of the “differences” between conservative and liberal
thinking and their impact on your investing strategies. We found several
fascinating differences in Scientific American Mind:
More wars ahead?
A study by psychologist Michael Dodd and political scientist John
Hibbing at the University of Nebraska “found that when viewing a collage
of photographs, conservatives’ eyes unconsciously lingered 15% longer
on repellent images, such as car wrecks and excrement — suggesting that
conservatives are more attuned than liberals to assessing potential
threats,” which might also be why they bet on the NRA and Pentagon.
Controlling or curious?
In a study of the contents in the dorm rooms of 76 college students,
researchers found “conservatives possessed more cleaning and
organizational items, such as ironing boards and calendars, confirmation
that they are orderly and self-disciplined. Liberals owned more books
and travel-related memorabilia, which conforms with previous research
suggesting that they are open and novelty-seeking.”
NYU psychologist John Jost, co-author of this study adds:
“These are not superficial differences. They are psychologically deep.”
And he adds that “the capacity to organize the political world into
left or right may be a part of human nature.”
Yes, that left-right division is locked, hidden in our DNA, our brains, thinking processes, inherited, our destiny.
Will Washington ever get past the irrationality, stop sabotaging America?
In “The Righteous Mind,” another NYU psychologist, Jonathan Haidt, sees a
time of cooperation ahead, out of necessary: “Although conservatives
and liberals are fundamentally different, hints are emerging about how
to bring them together — or at least help them coexist.”
And they “need not revile one another as immoral on issues such as birth
control, gay marriage or health-care reform. Even if these two world
views clash, they are equally grounded in ethics,” says Haidt.
Hope for a reconciliation may seem quixotic, certainly before the 2012
elections. But when Scientific American Mind focuses on fear,
psychologists “found that conservatives are fundamentally more anxious
than liberals, which may be why they typically desire stability,
structure and clear answers even to complicated questions.”
Scientific American Mind quotes social psychologist Paul Nail of the
University of Central Arkansas, “Conservatism, apparently, helps to
protect people against some of the natural difficulties of living ...
The fact is, we don’t live in a completely safe world. Things can and do
go wrong.” So conservatives tell themselves, “if I can impose this
order on it by my world view, I can keep my anxiety to a manageable
level.”
But do conservatives really experience more fear and anxiety? That’s
questionable. Still, generally we can see “anxiety is an emotion that
waxes and wanes in all of us, and as it swings up or down our political
views can shift in its wake.” As a result, “when people feel safe and
secure, they become more liberal; when they feel threatened, they become
more conservative,” according to Nail’s research after the 9/11
attacks.
But will Big Oil agree with environmentalists on climate research?
The core message of Laber-Warren’s “Call a Truce in the Political Wars,”
is, of course, that these “psychological insights might tone down the
bitter feuding between Democrats and Republicans.”
Unfortunately, the evidence and research may actually suggest just the
opposite by focusing on America’s broken political system as we go into
the November elections, further suggesting that in 2013 the feuding will
intensify, and even get far more aggressive at least until the 2016
elections ... no matter who wins this year! Why? Behavioral science is
no magic bullet.
Scientific American Mind highlighted one area of hope in the most
contentious climate arena. In one experiment, “psychologists reframed
climate change not as a challenge to government and industry but as “a
threat to the American way of life.”
The research was conducted by Irina Feygina, an idealistic NYU doctoral
student who Scientific American Mind believes may have “found a way to
bring conservatives and liberals together on global warming.”
Feygina’s research process: “After reading a passage that couched
environmental action as patriotic, study participants who displayed
traits typical of conservatives were much more likely to sign petitions
about preventing oil spills and protecting the Arctic National Wildlife
Refuge.” Scientific American Mind makes a quixotic leap of faith,
concluding that “environmentalism may be an ideal place to find common
political ground.”
Unfortunately, America as a whole is in collective denial about the
environment. And this issue goes to the heart of Big Oil revenues that
exceed $150 billion annually, far in excess of the $1 billion cost of
getting the oil-friendly politicians in office. Big Oil has zero
interest in compromising.
So what’s an investor to do as our brutal political infighting accelerates?
While we have the highest respect for Scientific American Mind, the
same can’t be said for the behavioral sciences. This new research,
rather than revealing a new path forward, simply confirms the fact that
behavioral science has, in the last decade, become the investor’s worst
enemy, another powerful weapon in Wall Street’s vast arsenal
manipulating America’s 95 million investors. One that cannot be trusted.
In the final analysis, Scientific American Mind editor Laber-Warren
admits that when it comes to many moral issues, “liberals and
conservatives will never see eye to eye.” Maybe they “can try to
cultivate mutual respect.” But even that seems highly unlikely, not now,
not in 2013, nor likely any time before the 2016 elections.
Worst case scenario: Only a global catastrophe will shock politicians
out of their self-defeating gridlock that’s savaging America’s future.
So where should savvy investors put their money? We began hoping to find
solutions in Scientific American Mind’s work ... but in the end, we
only see ahead more chaos and gridlock as irrational politicians will
have far more impact on investing and retirements than market
fundamentals.
No, expect no compromise, at least not till after 2016 elections ... or
after the coming crises, catastrophes and global economic crash,
whichever comes first. Till then political ideologies will intensify,
interfering unpredictably and irrationally in economies and financial
markets worldwide ... no matter who runs government.
Best strategy? Get out of the stock market, now, till 2016 ... although,
unfortunately, your political brain won’t let you!
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