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Stock Investing For Dummies, 4th Edition by Paul Mladjenovic

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Chapter 15

The Big Economic and Political Picture

In This Chapter

arrow Looking at the effects of politics and government on stocks

arrow Checking out a few handy political resources

Politics can be infuriating, disruptive, meddlesome, corrupting, and harmful. Don’t let that fool you — it has its bad side, too! Even if politics doesn’t amuse or interest you, you can’t ignore it. If you aren’t careful, it can wreak great havoc on your portfolio. Politics wields great influence on the economic and social environments, which in turn affects how companies succeed or fail. This success or failure in turn either helps or hurts your stock’s price. Politics (manifested in taxes, regulations, price controls, capital controls, and other government actions) can make or break a company, industry, or sector quicker than any other external force.

remember.eps What people must understand (especially government policymakers) is that a new tax, law, regulation, or government action has a macro effect on a stock, an industry, a sector, or even an entire economic system, whereas a company has a micro effect on an economy. The following gives you a simple snapshot of these effects:

Politics policy economy sector

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