This ‘Hidden’ Market Is Waiting For Obama — But You Can Invest Now

Page 1 of 2

The presidency of the United States is a position of privilege and power.

Although presidential power is tightly controlled by the Constitution and Congress, the office remains the most influential position on Earth. This political and social influence enables the president to strike up friendships and business relationships with powerful leaders in the banking, finance and private equity arenas.

This fact remains true for nearly every U.S. president. Even our current commander in chief, Barack Obama, is tightly connected to the world of high finance. Despite running his re-election campaign with a populist, anti-Big Business theme, Obama’s actions tell a different story.

General Motors Company (NYSE:GM)I’ll never forget the series of Obama campaign ads attacking his Republican challenger, Mitt Romney, for his work for the private equity firm Bain Capital. The ads attacked Romney’s connection to high finance, alleging a history of draining the life out of companies and the working class. Obama was trying to appeal to the average voter, who might not have a sophisticated understanding of macroeconomic realities. In fact, Obama’s actions make him something of a major player in the world of private equity.

A look at Obama’s actual record reveals his support and connection to the financial world. As an Illinois state senator, Obama was a supporter of the venture capital business: He introduced two bills and one resolution intended to benefit his state’s private equity businesses.

Not only did Obama show legislative support for private equity, but his actual deeds have been similar to the private equity leaders he admonished in his presidential campaign. The primary example is his saving of the U.S. auto industry. By retaining Steven Rattner, a powerful private equity kingpin, to lead his task force on the auto industry, Obama was able to revitalize the industry by restructuring General Motors Company (NYSE:GM) and Chrysler.

Obama’s private equity connections go beyond the world of business. One example is the nearly $8 million Martha’s Vineyard home rented by the Obamas, which is owned by Obama donor David Schulte of the private equity firm Chilmark Partners.

According to the nonpartisan research group Open Secrets, private equity and hedge fund donors gave more money to Obama’s 2008 presidential campaign than to any other candidate.

Flickr/Daniel Borman
Private equity and hedge fund donors gave more money to Obama’s 2008 presidential campaign than to any other candidate, according to the nonpartisan research group Open Secrets.

It’s clear that even a populist president like Obama retains close ties to the world of private equity and high finance. Let’s look at how the average investor might be able to profit in similar ways.

Obama’s investments include three different accounts between $50,000 and $250,000 in the Vanguard 500 Index Fund Admiral Class (MUTF:VFIAX). He also has positions in U.S. Treasurys, four college savings accounts, as well as a steady stream of book royalties in the range of $50,000 to $1 million.

While it’s exciting to discover the president’s financial holdings, this is all chump change compared with the private equity deals Obama will likely be privy to after he leaves office. Fortunately, business development companies (BDCs) provide a way for individual investors to play in the same sandbox as the private equity kings and venture capitalists of high finance.

BDCs are firms that lend money to small- and mid-size companies with the goal of participating in the company’s growth. Investors can buy shares in the company with the goal of profiting from the BDC’s portfolio of company’s success.

My favorite BDC right now is Fifth Street Finance Corp. (NASDAQ:FSC).

The company calls itself an alternative lender. It provides funds to proven small and mid-size companies alongside top private equity companies. Its business strategy is powerful. A leading private equity company locates a company it wants to purchase. The private equity investors look for untapped potential or other value inherent within the targeted company, with the goal of selling the company at a profit. Once the private equity firm provides the equity to purchase the company, Fifth Street Finance gets involved by providing the needed debt. Fifth Street’s profits come from interest and capital gains.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!