Everyone's talking about Sarah Palin. Thank goodness for investors, she is pro Wall Street. Her Wednesday night RNC speech struck a cord with businesses across the country. This self proclaimed 'gal from Alaska' is already shaking things up with the substance that she offered up on important economic issues.
1) Oil (USO) is heading lower, much lower. As Governor she began a forty billion dollar natural gas pipeline to help lead America to energy independence. She said,
"Families cannot throw away more and more of their paychecks on gas and heating oil... When a hurricane strikes in the Gulf of Mexico, this country should not be so dependent on imported oil that we are forced to draw from our Strategic Petroleum Reserve...we Americans need to produce more of our own oil and gas. And take it from a gal who knows the North Slope of Alaska: we've got lots of both. Starting in January, in a McCain-Palin administration, we're going to lay more pipelines... build more nuclear plants... create jobs with clean coal... and move forward on solar, wind, geothermal, and other alternative sources. We need American energy resources, brought to you by American ingenuity, and produced by American workers."
Investors are finally catching on to the fact that alternatives to oil are coming and that America is serious about our oil independence. Since oil reached its high in the 140s, we at www.lonepeakportfolios.com have forecast a return to historical levels of $30-$50 a barrel. Political pressure from both Republicans and Democrats might push oil to those levels sooner rather than later. I wonder what the oil guru over at Goldman Sachs is thinking now? He made a very irresponsible call for oil to return to $150 this year and $200 next year after it was clear that a downtrend had begun. I hope that investors in the 53 new commodity ETFs are listening to the 'real' oil data loud and clear; new oil is plentiful and alternatives are rapidly coming on line.
2) Governor Palin will cut spending and she likes eBay (EBAY). If her track record of managing the Alaskan budget is a good indicator, the US dollar (UUP) should be in for a nice ride if this Republican ticket is elected. A balanced budget will restore confidence in the greenback, especially as a slowdown spreads throughout Europe and emerging markets. Governor Palin said,
"That luxury jet was over the top. I put it on eBay. I also drive myself to work. And I thought we could muddle through without the governor's personal chef - although I've got to admit that sometimes my kids sure miss her. I came to office promising to control spending - by request if possible and by veto if necessary. Our state budget is under control. We have a surplus. And I have protected the taxpayers by vetoing wasteful spending: nearly half a billion dollars in vetoes."
3) One theory on the market's negative bias since Labor Day is that fear of an Obama victory will put further burdens on consumers and on the economy. Governor Palin expressed her commitment to lower taxes as she made it clear:
"The Democratic nominee for president supports plans to raise income taxes... raise payroll taxes... raise investment income taxes... raise the death tax... raise business taxes... and increase the tax burden on the American people by hundreds of billions of dollars."
Investors are hoping that the renewed energy brought to the Republican ticket by Sarah Palin might reap tax benefits for Wall Street.
At first glance it would appear that America has lucked out with this candidate who vows to clean up Washington with her fellow maverick, John McCain. She came out of nowhere and has made quite a splash on the national scene. Even the seasoned public speaker Rudy Guliani was left in awe at her natural ability to connect with viewers and relay her specific message. No matter how the media tries to spin it, investors are excited about Sarah Palin. Perhaps her ambition for lower oil, a strong US dollar and lower taxes will lift the plague of pessimism that has hovered over this market for too long. God bless America.
Disclosure: Short USO, Long UUP.