Posted on 10/31/2010 2:31:07 PM PDT by JohnRLott
The economic outlook is bleak. Businesses aren't hiring and the economy has lost 400,000 jobs since May. Unemployment has remained at least at 9.5 percent for 14 months, A record length of high unemployment not encountered since the Great Depression. GDP is growing but the growth is slowing. Consumer confidence is falling; the dollar is falling; the real estate market remains in a slump. And the Obama administration has overseen the 2009 and 2010 deficits at unprecedented levels, accumulating over $2.7 trillion during just two years.
Still, investors sense a glimmer of hope, reflected in rising stock prices. Stock prices have much more to do with long-term expectations of profitability than short-run results. This new optimism likely reflects the rapidly changing political outlook. Stockholders have already been anticipating higher taxes and health care regulations under an Obama administration with basically free rein to adopt whatever economic policy that they want. Now, with Republican victories likely on Tuesday, particularly in the House, predictions are for a more favorable business environment and better economy.
While it is all very intuitively plausible, hard numbers also back up this discussion. The probability of a Republican majority in Congress is provided daily by Intrade -- which is basically a betting market that has proven to be remarkably accurate in predicting past election outcomes. . . .
(Excerpt) Read more at foxnews.com ...
The bigger the stock market run-up, the more the Fed will make according to Chapman’s thoughts...here is Chapman’s explanation.....Excerpt from Chapman’s most recent piece:
“Let the whipsaw continue. This time the sell-off started in China. Note that the Big Board is capitalized at 12 trillion; therefore a 40% stock market crash would create the five trillion they need to keep things afloat for the next two years. This is why the stock markets have been run up. The various stock markets are like giant savings accounts to be emptied whenever they need to sell bonds to soak up more debt as in a QE2. This gets the Fed off the hook as they do not need to directly monetize the debt, reducing the amount of inflation in a type of sterilization. It also lowers rates on bonds and increases their value. The elitists care only about the bond markets. They could care less about the stock markets, which are used to make insiders immense profits when the stock markets go up, or when they go down, it doesn’t matter. The dark pools must be a beehive of activity right now as the elitists place their bets on a stock market crash without regulators knowing anything. The banks will make billions, and their clients will lose billions. It’s just the same old, same old.”
The entire piece is worth a look:
http://news.goldseek.com/InternationalForecaster/1288540800.php
Under ordinary circumstances, I would say the opposite, that a Republican sweep would drive stocks somewhat lower. This is because the market calculates such things in advance, and would have already calculated in a future rise.
However, right now, the stock market is being entirely manipulated, with a few major players, and the government, forcing both the DOW and S&P to stay high, even though individual investors have to a great extent pulled out tens of billions of dollars.
This is not difficult. If you consider the ability of the government to slap a hundred billion dollars into the market, anonymously, any effort of the market to fall will be halted. Then they can just sit on the stock until it goes back up, and they can trickle sell it, with little or no loss.
So if the rats in charge want to crash the market after the election, they can easily do so. Or drive it sky high. Or most likely, they will just tread water with it.
Add to that the 28 consecutive weeks of domestic stock mutual fund outflow (uh, that means the retail investor is exiting the stock mkts, for those in Rio Linda...), and Wednesday might see the biggest buy-the-rumour-sell-the-news selloff in some time.
The market will go up no matter how the vote turns out as long as the buying desk at the New York Fed continues to pump money into the market.
In fact the market will probably go up even more in nominal (i.e. non-inflation adjusted) terms if the Rats win. As the great economics writer, Henry Hazlitt, pointed out, "The stock market went up billions of times under the Weimar Republic. Unfortunately, the cost of everything else went up billions of more times."
Stocks of plombo, plata and oro will go up.
Anyone think “smart money” doesn’t read polls?
...unless of course the election does not turn out they way all the pundits have predicted.
Then it's "katie bar the door".
I certainly hope so.
I think they won’t go up significantly unless obamacare is repealed.
Except if they dont ...
US stocks have fallen sharply within a day or so following mid-term elections in 71% of the cases since 1982. The exceptions generally occurred when the trend prior to the elections had been strongly down—which is emphatically not the case now! A major FED decision will be announced the day after the election, so wild, high-volatility swings are highly likely on Wednesday, Nov 3.
The high of April 2010 is a strong resistance price. The current upmove is the first attempt to penetrate that resistance. The first attempt fails more often that not.
The psychology in play involves those who went long last April—who didn’t exit their positions when they should have—now determined to get out at or near break even. They will be selling their long positions as the market price reaches their entry prices. So will the professional traders who went long at much lower prices, and who know that the probabilities are that the first attempt to penetrate resistance at the April 2010 high will most likely fail.
The above is NOT a good reason to go short. It IS a good reason to PARTIALLY exit long positions. Wait for confirmation that the market is actually rejecting the attempt to penetrate resistance before doing anything else. A clear break past resistance would be VERY bullish. Do NOT expect the lows of July 2010 to be exceeded by much to the downside (but if they are, that would be VERY bearish.)
“The market has already factored in a House takeover”.
...exactly right. That’s why it’s been going up the past 2 months.
While I support austerity as the only rational plan, that doesn't mean it will be painless. Companies will have to do without the government throwing cash at them.
So you don’t think a GOP win of about 60 in the House is in the markets? I would think a under 60 and the markets might go down. Of course a GOP surprise +10 or more in the Senate might spur the markets.
Also what Obama says about cooperation might be the key political item for the market on Wednesday. If he is still talking hand to hand combat, then the market might have a bad day. If he signals he will sign an extention of all the Bush tax cuts, the market could have a good day.
There is way too much truth to your words...if the new congress has any sense they'll be very careful not to become Obama's foil. 1994 again? Yes. 1996 again? H@ll no. Do not underestimate Obama ever again.
But if Democrats take the elections, Starve the Beast 2.0 has hundred of thousands of more participants. Guaranteed.
Often times it is best to sell on the NEWS! With the Republican gains it is best to keep your sell-stops close!
Of course he will, that's what libs do. The roaring markets of the 90s, All Clinton's doings - according to Clinton.
Let things tank and it's all Bushes fault, or an obstructionist republican opposition.
Big Republican win = reduction in spending = stronger $ = reversal of $-based stock run we have had.
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