Who's buying the next president?

By Jim Jubak

Everything's more expensive than it was four years ago, of course, but why is a president selling for a whopping 44% more than in 2004?

As of the end of March, Democratic and Republican candidates had raised $154 million, according to Federal Election Commission reports. The Center for Responsive Politics estimates that candidates of the two parties raised an additional $128 million in the second quarter alone. (Official reports for the quarter are due with the Federal Election Commission by July 15.)

There's a good chance that the eventual nominees will need to raise $500 million EACH for this election. That would be 44% more than in the 2004 election, when George W. Bush and John Kerry raised $367 million and $329 million, respectively.

All this cash comes with strings, of course. Donors expect some pro quo for their quid, and it often comes out of taxpayers' hides in the form of a tax break here, a government contract there. So we might as well see if, as investors, we can find any patterns in the giving that might help us make a little of that money back.

The early money counts

It's still 16 months to the November 2008 elections. But because the states are all jostling to hold their primaries while it still counts, the Republican and Democratic nominations for president are likely to be sewn up on Feb. 5, 2008, with primary balloting in an extraordinary 23 states, including such electoral powerhouses as California, Illinois, Michigan, New Jersey, Pennsylvania and Texas.

In a truncated race like this, early money counts more than ever. Candidates don't have a chance of using an early primary victory to build up fundraising momentum. If you don't have the cash in hand by the time New Hampshire votes on Jan. 22, you're not going to be competitive on superduper Tuesday two weeks later.

So where's all the dough coming from? From the industries, unions and lobbyists who will hope to turn a cash contribution now into access to a sitting president later.

The money trail

A quick read of who is giving money to whom has something for the prejudices of everyone, from the deepest of red to the darkest of blue.

So, for example, Democratic candidates Barack Obama and Hillary Clinton have taken in by far the most cash from education unions. That's a traditional source of funds for Democratic candidates. In the 2006 election cycle, 72% of education contributions went to Democrats, according to the Center for Responsive Politics. And you're probably not surprised that the three top recipients of money from lawyers and law firms are also Democrats, with John Edwards leading both Clinton and Obama by more than $2 million, as of the end of March.

Oil-and-gas-industry money doesn't have a Republican oilman to back for the White House this time around, but Republican candidates Rudolph Giuliani and Mitt Romney have garnered the most cash, despite their Eastern credentials. In the 2006 elections, 82% of oil-and-gas money went to Republican candidates.

View from industry sectors

Dig down another level or two, though, if you want to find ways to put these campaign money flows to use in your portfolio.

So, for example, while the oil industry's cash is still Republican, the industry itself isn't especially enthusiastic in its support. Giving $238,000 to Giuliani, the top candidate in either party in raising money from this industry, isn't exactly going all out, considering how rich the industry is.

The pharmaceutical industry doesn't seem deeply involved, either. Giving to Mitt Romney, the industry's favorite candidate, was just $157,000 through March 30. Hillary Clinton, whom you might think the industry hates, came in at No. 2 at $106,000.

Both oil and pharmaceutical giving is, in relative terms, peanuts. Meanwhile, the investment industry gave Giuliani $1.8 million through March 30, almost nine times as much cash as the oil industry gave him.

And Giuliani, the former New York City mayor, wasn't even the investment industry's favorite candidate. That honor went to former venture capitalist and buyout architect Romney, who raised $1.9 million from the industry.

How the numbers are talking

I think investors can draw some potentially profitable conclusions from these numbers. The oil-and-gas industry may be so ho-hum about the election to date because it really doesn't have very much at stake. Future industry profits will be huge because a persistent worry about oil supplies keeps oil prices high. Alternative fuels might be a threat somewhere down the road, but nothing that a White House of either party could push past the industry's stout defenders in the Senate is likely to dent profits anytime soon.

Continued: Pharmaceutical industry and law firms

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