Republicans Running Out of Arguments

by: Bespoke Investment Group

Throughout this campaign season, three arguments Republicans have put forth against Obama have been that he will raise the capital gains tax, take a more protectionist stance on trade, and nationalize health care.  Ironically, all of these arguments may no longer be relevant.  First, regarding taxes, through October 8th, the S&P 500 is on pace for one of its worst years in its history.  When global equity markets lose over $26 trillion in market cap (41% of their market value) over a span of a year, it's safe to say that the last thing on investors' minds is capital gains.

Regarding trade, critics of Obama point to his campaigning in the Democratic primaries where he said he would renegotiate trade treaties in order to protect the interests of American workers.  Free traders believe that any restrictions you put on trade will slow trade and therefore stunt economic growth.  However, what Republicans feared Obama would do is already being taken care of by the market.  As shown below, the Baltic Dry Freight Index, which gauges the rate at which shippers charge to move raw materials by sea, has collapsed by over 76% since May for the largest decline in its history.  This indicates that international trade has already ground to a serious halt.

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Third, many people think that it will be impossible to work on nationalizing health care because the government won't have anymore money to work with after the $700 billion financial bailout package.  But judging by the performance of our health insurance companies recently, that industry might just need a government bailout of its own.   

Finally, Obama has been running on a campaign that he is the "candidate of change."  At this point, even Republicans will take all the change they can get...quarters, dimes, nickels, or even pennies.