The Election's Impact on the Market 36 comments
- Roger Nusbaum's articles on Seeking Alpha
- Email Roger
- Follow Me on Twitter Roger's blog: Roger's wealth management firm:
-
Font Size:
-
Print
- TweetThis
A reader asked me to weigh in on the coming election and whether I think it will be market moving.
First, a hysterical quote from Alan Ableson's column attributed to Tom Gallagher from ISI:
This, indeed, is an odd election: It pits a candidate who should have been president eight years ago against a candidate who should be president eight years from now.
I don't write too much about politics because my skeptical nature leads me to conclude that election results are never as meaningful as some would have us believe.
I'm a Libertarian, so I don't really care for either candidate (have not been fond of any candidate for quite a long time). They both have flaws galore and they probably each have positives too.
Part of my frustration (not unique) is the fact that very, very few of the "promises" made can actually happen. Candidates often promise things that cannot be passed through Congress. They may (or may not) believe in the value of certain policies, but still many of them never have a shot in Congress and they know this going in.
I find the pandering to be nauseating. I find myself perplexed as some of the ideas that come from candidates that seem to ignore common sense. Regardless of how we got here, the economy stinks. Raising taxes in a lousy economy is a bad idea. Raising them in a mid 1990s economy was far less damaging.
I find there is dishonesty in much of what is said, and there is no easy way to find really unbiased analysis of what is being proposed. As an example, Republicans are critical of raising the capital gains tax, to which any Dem they can put on TV says they will be below what they were under Ronald Reagan. I'm sure I am being overly critical, but I find answering the question of "Will he raise taxes?" by saying "They will be lower than..." to be dishonest at the core.
The drilling in ANWR is another absurd debate. It won't add oil for ten years. If they had started ten years ago, we'd have it now. If they started eight years ago, prices now might be less with the realization than ANWR would start producing in two years. The land in question is a massive, barren tundra. If you have been reading my site for any length of time you know what sort of animal person I am. With that said, does it make any sense whatsoever that the wildlife that would be displaced or otherwise harmed by commencing drilling ops on a speck of that massive barren tundra is more important than the American economy?
The US needs twenty something million barrels per day. A bunch of new sources of 500,000 to 2 million BPD seems like a good idea to me, in conjunction with R&D for alternative energy.
If Barry Obama gets in and can allow the taxes on dividends to sunset or otherwise increase, it will create a drag on those sectors that are typically thought of as being dividend payers. While not talked about much anymore, these sectors got a tailwind when the cuts were enacted.
Allowing gains taxes to sunset or otherwise go up will create a headwind, in general, for equity prices. The cuts helped, increases will hurt. I do not think it will trigger a lot of sales ahead of time to capture the 15% rate, but more likely it will hurt demand in the future. That's not to say stocks can't go up, but simply this headwind will be added to the list of others (equities always have headwinds and tailwinds - sometimes the headwinds are more important and sometimes the tailwinds matter more).
Windfall profit taxes are ludicrous. The Dems who favor this focus on the absolute numbers. Continuing the ludicrousness out a little bit, would it make more sense to set windfall rates based on profit margin? Exxon is a very large holding in every broad domestic index fund - you know, the kind of index funds owned one way or another by the very people Obama is pandering to. Every time a Dem is asked about this they spin out to something completely off topic. More dishonesty.
McCain, aside from some unlucky quotes, seems to be very middle of the road and Sarah Plain and Tall (has anyone used this yet?) notwithstanding, he may have a tough time bringing in a lot of Republicans, so very little may get done. This sort of gridlock (Barron's talked about this) is not the worst thing in world.
Obama would be worse for capital markets, in my opinion. I have two friends who are really Obama people. I said to both of them, at different times, that he doesn't seem to embrace capitalism as much as you'd hope for - and both conceded the point.
McCain as a maverick? Will "maverick" ever equate to loose cannon or unpredictable? Still, he is probably better than Obama.
I told you I was a skeptic - but what would you expect from a Libertarian who lives in a cabin, on top of a mountain in the Mountain time zone?
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 36 comments:
obama may transform the country and be the anti-christ that rules the world. on the other hand, mccain could die and leave the gov of alaska in charge. god knows the future of politics is a mystery.
the future of the world is not in doubt though. it will survive, with or without us, until another cosmic body bumps it or the sun engulfs it or galaxies collide. you don't have to worry about the planet.
I'd like for you to answer this question - if you lined up Obama's economic advisory team (University of Chicago boys) and McCain's economic advisory team (ex-head of the Congressional Budget office, Carly Fiorina and Meg Whittman), which side would you feel would be more competent to lead us out of this economic downturn.
Hint: the team run by Halliburton has not distinguished itself.
I live in New York so my vote will be lost in the Obama votes but I hope you come down off the mountain and pull the lever for Bob Barr in 08.
When Clinton left office, the S&P 500 was 1301, 292% of his inauguration-day value and higher than it is today. Perhaps you feel this is unfair and think Clinton should be given "credit" for the 2001 crash. I will do you one better and give Clinton "credit" for all of the market decline to the very bottom value of 800 in Oct 2002. The market increase is still 80%. If we give Bush credit only from that market bottom to the present, Bush's market increase is 60%, 25% less than Clinton despite lower cap gain taxes.
Regardless of the better performance of capital markets under D presidents, every election cycle we hear the same blovating that electing the D candidate would be bad for capital markets. Despite their self-image as cold calculating thinkers, perhaps some analysts have let ideology creep into their thinking.
Why should the markets grow faster under Ds than Rs? Three factors I can think of:
1) More infrastructure spending and less defense spending. Sustained high levels of defense spending have brought more than one empire to it's knees.
2) The D's actually believe government can be made to work. True or not, it is difficult to run such a vast enterprise as the federal government if you don't believe good government is possible. The old joke is that Republicans are convinced government doesn't work, and once elected, they set out to prove it.
3) Emphasizing middle class incomes increases the velocity of money, since middle incomes are spent much faster than those of the upper 0.1%. There is less money hoarding in Munis and Treasuries. Hence, faster economic growth.
Just my 2 cents.
Unless we start to deal with our mandatory expenditures on SS & Medicare/Drug Benefits the debate is moot. Anyone who can multiply could figure out that these costs to the US in 20 years will be impossible to bear. Just like we did not address our energy issues twenty years ago and now we have to deal with the consequences, so will current mandatory spending haunt us. Of course this is one benefit of socialized medicine, it is so bad that it will kill more people each year thus lowering other socialized costs.
As for these anti war freaks who can't shut up about the cost of the war, they are so blinded by their Bush hatred that they lose the simple function of addition and subtraction, somehow figuring that $100 billion a year (probably more like $30-40 billion in reality) might make a difference. The funnier side of that is that as soon as they stop spending that $100 billion they will call it a war ending dividend and spend it on social programs.
But politicians will not deal with the real problems because those problems are long term in nature while elections cycles are short term. The only way to make them care is probably term limits, but that's unlikely.
What I really believe this boils down to is a battle between the baby boomers and everyone under 50 right now. Baby boomers want the system to support them through medical, retirement and drug benefits they did not save enough for or have not paid enough in to. The burden of these payments will fall on those who will not retire in the next couple of decades.
What happens from here I don't know, but I am sure that neither party is looking out for the best long term interest of our country. One of our Constitution's main purposes was to stop a concentration of power in the Federal government. Now we can see that they were spot on in their assessment of this danger. Too much money/power resides in Washington. They have passes laws that make attacking that power through more political parties close to impossible. The system is broken and leading us to the abyss.
I am under the impression that Goolsby is very well respected but, correct me if I am wrong, did he co-author a paper that argued against raising taxes at some point earlier in his career? One odd thing about what I think I hear when he speaks, he talks about Obama's plan in the third person, seemingly distancing himself a tad, instead of talking about them in the first person plural. Maybe his way is normal and I never noticed?
Whitman has had genuine unabashed success. Fiorina is a mix of good and bad.
As for the Cheney comment, this decade has been part shit-storm that anyone would have mishandled and part of what has unfolded has been sheer incompetence. I don't know how much to apportion to each.
As for who I would prefer I always used to think people with Wall Street expericne would be the best but HP has shaken the foundation of that idea a bit.
Big smile. Always a pleasure to read you, sir.
I'm not a libertarian, but a member of the GOP. Not a mountain man-don't-tread-on-me conservative but a Republican in New York City, where we are outnumbered a hundred to one, where trans fats are banned and big government is all we got. To be a Republican in Brooklyn means that you are a heretic, excommunicated from any hope of political or governmental position outside of Bloomberg's personal circle. The Democratic machine dominates my borough and we have a lot of corruption, nepotism and indecency which is never reformed, and I'd rather look to faith based or community groups to solve Brooklyn's problems, rather than another press conference starring Nydia Velazquez yammering about how her district needs more money.
So I say this flashing my party credentials - don't apologize for Cheney. The guy intentionally leaked false rumors that Iraq had weapons of mass destruction to the New York Times. He let his chief of staff Scooter Libby go to jail rather than step forward and take the blame for outing Valerie Plame as a CIA agent. He steered his former company into the plum positions where they would benefit the most from a war that he, Wolfowitz, Tenet, and Rumsfeld completely engineered while diverting valuable resources from Afghanistan where the architects of 9/11 have only grown stronger. He personally engineered an unnecessary curtailing of civil liberties and endorsed torture techniques that singlehandedly took the United States off of a high moral course and dragged it into the dirt with other crummy dictatorships like Egypt - democracies in name only. Our hypocrisy is so bad that Russia used the same techniques of hype and spin to justify their invasion of South Ossetia and after we cheerleaded Georgia to join NATO, we threw them under the bus. Back in the 70s when we had an activist press, we knew what to do with raging blowhards like Cheney - we sent them where we sent Spiro Agnew, away in disgust. Meanwhile, the guy shoots his hunting partner in the face and aside from some late night jokes, no one seems to notice that the same itchy trigger finger is a heartbeat away from the nuclear football handcuffed to an Air Force colonel's wrist.
The guy did more than anyone else to trash our Party's chance of success, and it is no coincidence that you have not seen either him or the President anywhere near a television camera in the last few weeks.
Don't make excuses for him. I hear he's writing a book, he'll make enough for himself.
I would definitely agree that the level of dishonesty in political discourse is far higher than it would ideally be.
I would offer that the statement, "If they had started ten years ago, we'd have it now," falls into the very same category. I'm certain that the author understands that when people allude to the ten year lead time before any oil comes out of ANWAR, the point is that it offers zero relief for the problems we are currently having.
If the author is so hung up on honesty, he might do well to simply acknowledge the validity of this point and avoid the kind of "spin" that he seems happy to assign to the Democratic party.
And here is one opinion that if in the coming ten years we haven't made enough alternative energy progress to make ANWAR is a moot point that ,in and of itself, will be our most devastating failing (depending on how many more countries Republican presidents decide to invade in that time).
Any announcement that oil companies would be allowed to drill for oil would cause to lower options and thus lower current gas prices. If the oil producers actually found a lot of oil reserves (which no one can know until they drill), current prices for gas and heating oil would very significantly drop.
Obama's statement that drilling off-shore and in Alaska will not lower prices "today" thus testifies to his total ignorance of economics.
Indeed, Obama to be ignorant about all of reality, economic and otherwise. Note that although he has an advanced degree, he never has done research about anything and never has published any magazine article or book dealing with a subject other than himself.
This won't do much to help a year that already promises to be the worst in a long time.
PS: Attendance at the daily member's buffet at the Perfectville Country Club is noticeably down.These are bankers,lawyers and business owners.This subsidized lunch is only $ 7.90, plus tip.A coincident indicator of things to come ?
When you say, "The US needs twenty something million barrels per day. A bunch of new sources of 500,000 to 2 million BPD seems like a good idea to me", it seems to me that you confuse the reality of a global market for oil with the needs of the US vis-a-vis China, India, and the rest of the nations that are rapidly climbing aboard the same trolley car with the developed western nations.
It seems to me that there is no practical way to ensure that whatever oil we produce from new sources (ANWAR, oil shale, whatever) will go to satisfy the 20-something million BPD that the US needs to keep local pricing of oil-related items stable.
Instead, the problem is to provide an amount sufficient to meet the global shortfall -- and it IS a global market for oil, we cannot under any rational thinking expect to become self-sufficient on oil with only a tiny fraction (something well under 10%) of global reserves and using 25% or so of the global supply -- which is a LOT more than 20-something million BPD when you consider the needs of China, India, et al.
You see the problem. I won't bother to yammer on about Peak Oil, or anything else. Simply the conflict between what we need as a nation, independent of the rest of the world, and what the global demand is, with no way possible to separate the needs of us as a nation from the needs of the global market in setting the prices.
Yet everywhere I see people talking about the "US shortfall" in oil availability. It is this disconnect between local and global that leads people to believe that whatever actions we take to produce more oil could somehow be restricted to benefit only us.
But it simply ain't so. No matter how much extra we produce, be it 20-something million BPD or 200 million BPD (which is, BTW, simply flat-out impossible, at least within this century), it will be swallowed up in the growing demand for oil by a planet of nations who are all climbing only the western industrial economy trolley car.
That's why I see drilling as a waste of time and energy. Go ahead and drill if you want, but it will do NOTHING toward fixing the problem. If you believe that the combustion of fossil fuels is destroying the biosphere, it will be making the situation worse, digging our hole deeper, as T. Boone Pickens says. But under no circumstances can it close the gap between what is needed and what is produced. It is a global market (and we import too much to change that) and the global shortfall is a lot more than 20-something million BPD.
But as I say, you seem to be an extraordinarily level-headed sort, so tell me, why do you persist in pushing this busted meme of our drilling for more oil to satisfy OUR needs?
Bush raised taxes people by paying for the war on credit Obama wants to pay the bill. Or you can elect John McCain and keep on fighting a war in Iraq while Osama is in Pakistan laughing at us.
I'm pro getting Osama and would support spending money to get him.
War in Iraq well we won WW2 in less time than we have been in Iraq the place is a money pit lets walk away it will save us money.
User 2934, I very well might be a joke but "indirect condemnation of Obama?" I don't think it was indirect. As for endorsing McCain, more like hoping for an ineffectual president.
David Lentz; I was not talking about trying to solve the world's problem with oil. My thought was as simplistic as it read. If the US can cobble together a couple a few sources that produce 500k-2million bpd that totaled 15% of our need it would buy the US time as technology evolves to address the issue. This whole thing w/b a multi decade event IMO. A by product of this could be that global pressure is relieved some for a while.
Jimmy, great comment about heresy in Brooklyn. I don't think "sheer incompetence" is really defending the man, lol.
NEH, thanks for the dap on Plain and Tall.
Things come undone, if raising taxes could actually do that without the unintended consequences that would be great. As far as the war goes, i believe the world is better off with Saddam but it would not have been worth my kid's life (I don't have children) for that outcome. It became a quagmire at some point and I wish I were smart enough to offer something constructive about how the US gets out.
I am obviously as ignorant as you claim Obama is because I can't make sense of the following:
"If the oil producers actually found a lot of oil reserves (which no one can know until they drill), current prices for gas and heating oil would very significantly drop."
By "current prices" do you mean what will be "current" in ten years? It seems you may be helping me make my point.
Well, not really.
McCain has just admitted with his VP nomination that he believes he doesn't have a chance of winning. He is telling the right wing who wouldn't accept his first choice--Ridge or Lieberman--you want fundamentalist values--I'll give you fundamentalist values--screw you.
As for Palin taking Hillary votes, she is to women as Clarence Thomas is to blacks.
Obama WILL be President--get used to it.