Ric Edelman runs a company from whom I contract investment management services for my clients.

Ric has build an organization that now has over $4 billion under management. That alone says something about his skills and reputation. The following is from an email he sent out to all of us earlier this week.

It confirms my comments yesterday that the issues we face as investors and citizens are more political than economic.

The economy: From an economic perspective, the rating cut (by Standard & Poor), by itself, doesn’t matter. So what does? This:
• On Friday (8/05/2011), the Labor Department announced that 117,000 new jobs were created in July, 27,000 more than expected.
• The Fed’s Quantitative Easing II program ended without any disturbance in bond yields.
• The Greek debt problem has been addressed with a second rescue package designed by European leaders. Similar results are widely expected for Italy.
• Japan’s economy, the world’s third largest, is returning to normal after suffering major disruptions following a tsunami and nuclear disaster.
• The USA remains the biggest and strongest economic power in the world. We represent 40% of the world’s market capitalization, according to Bloomberg7. China represents just 2% — smaller even than Canada (5%) and Australia (3%).
• U.S. corporate earnings for the second quarter, and projections from CEOs regarding their expectations for future earnings, have all exceeded expectations.
• Bloomberg just announced the results of its survey of the chief strategists at the world’s largest banks. They predict that the S&P 500 Stock Index will end the year 18% higher than its current level.

For all these reasons, we believe that any declines in the stock or bond markets will reflect investor sentiment of the political situation, not the economy. The more that prices might drop, the better buying opportunities will become. Eventually, investors will realize that the political games in Washington are not the driving force behind securities prices; they will realize that profits are the key factor, and that profits are strong and rising. At that point of realization, the stock market will rally strongly. Because no one can predict exactly when this will occur, the best approach is to remain invested.

Let’s remember that when Canada’s bonds were downgraded in April 1993, its stock market gained 15% in the following 12 months. When Japan was downgraded in November 1998, its stock market gained 25% over the next 12 months.

Let’s not assume that S&P’s recent downgrade portends bad news for the economy. In fact, quite the opposite might occur. It might serve as the stimulus our leaders need to get them to start acting like the leaders we need them to be. The loss of the sterling AAA rating is an embarrassment for the nation. Historic events like this are invariably linked to the President.

Fair or unfair, history will record that it was during Barack Obama’s administration that we lost our AAA rating. (Think about it: You know that Lincoln was president in 1864, but I bet you can’t tell me the name of the guy who was Speaker of the House.)

If we enter the 2012 campaign season without a AAA bond rating, a lot of people — perhaps including the President — might lose re-election. This gives all the members of the House and a third of the Senate, as well as the President, a strong incentive to fix the problem. Standard and Poor’s has made its position clear: Cut $4 trillion to keep our AAA rating. Congress has cut $2.1 trillion; if it cuts another $1.9 trillion — by cutting spending, raising taxes, or some combination of the two — S&P can be expected to restore our AAA rating. This would give our nation a huge emotional boost, new-found confidence and optimism, and a shot of adrenalin for the economy.

Instead of being worried about what’s happened, now’s the time to become very excited about the investment opportunities that now exist.