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 ...
True, but what has kept business on the sidelines is uncertainty. With Democrats fully in control, business had no idea what wacky socialist idea they were going to pass next, so why invest?
Gridlock, while not ideal, means Obama won't be able to get through the most extreme parts of his Marxist/socialist agenda so there will be more investment, more jobs and more recovery, even if the GOP can't actually pass much of what they want - the Democrats won't either.
The irony is that, once the economy starts to recover thanks to this huge GOP win, it will be Obama and the Democrats who will rush to every microphone to claim credit and say their policies worked but that they just took a little longer than they thought.
It depends on what "winning big" means. The market probably thinks "collectively" that the GOP will gain 55-60 House seats, and 8 to 9 Senate seats. It has already discounted for these estimates; the are figured into the prices. Any gains more than this would be generally bullish. Any gains less than this would be generally bearish.
There is also the general bearish factor of the inane leftist legislation the lame duck 'Rat Congress might try to perpetrate on vulnerable corporations between Election Day and the swearing in of the new Congress at the end of the year.
Obviously, there will be individual differences in the effects of the new Congress upon each company and each industry that have to be considered in making market decisions.
Perhaps if the lame duck Congress doesn’t try any mischief, the market will go up after the new Congress is sworn in, provided that Republicans win big.
Not necessarily. They might go up, then down, as people sell to lock-in gains. Whatever happens though, State Controlled Media will portray it in the way most favorable to the Dems.
I am, sadly, inclined to agree with you.
Market has priced a 100-seat swing and the Senate.
Plunge when it doesn’t happen.
That would be dumb unless you plan a swing trade. Sure there might be some selling on the news. However, the long run business’ will start spending and that will spur economic growth. Once that starts happening look out. If you aren’t in you’re gonna get squashed by inflation because we all know that’s coming to a big head.
Don't be so sure. The general rule is "buy the rumor and sell the news."
A rally would require better news on Tuesday than the market is already expecting.
QE2, QEII, what is that?
QE and QE2 mean the US government sells Treasury bills and bonds with a wink and a nudge that they will buy them back tomorrow, making a sure thing profit for the banks who hold the bills/bonds overnight. Then when the banks have the money back, they go out and don’t make loans to Main Street, but loans to AA rated NYSE firms (hard to find AAA rated any more) and a basket of stocks, such as S&P 500.
What all that means is more money gets into circulation, raising the prices of everything people want (which right now does not include residential and commercial real estate). So if you’ve saved $500,000 for retirement, you can earn 0.26 on cash (T-bills) or 2.6% on 10-year bonds, or gamble on BB bonds for income, or buy stocks at possibly high prices.
In the next two years, it’s possible for stocks to go up 50% or down 50%, depending on what the Chinese decide to do with their large stash of US Treasuries. My best guess is that the Chinese are buying US stocks in basic materials quietly. They certainly are buying commodities, and quite visibly. Watch the price of grains, oil, and natural gas. Don’t buy UNG (natural gas ETF). Contango will kill you.
Gold has dropped from its recent peak, much as it started to fall in 1980 when Volcker showed that the Fed can be a force for good, and not evil. Don’t expect a repeat of 1980, though. Obama is no Jimmy Carter.
Hopefully, gold and silver will drop a bit. You should back up the pickup and fill it up with precious metals, you won’t see an opportunity like this again.
Titanic 2 will decide the fate of the markets. Just another big fat bubble created courtesy of the fed...The emerging markets are the only economies being stimulated by QE2..Does not mean one does not trade but be prepared for a short term pullback...then hop on the QE2 gravy train....
A GOP win will probably restore some confidence....
Headline might be misleading. For example, tomorrow:
Will the Federal Reserve Cause a Civil War?
http://www.freerepublic.com/focus/f-news/2610988/posts
“[Nov 3rd] could be the most important meeting in Fed history ...”
... and ...
Insider Selling Volume at Highest Level Ever Tracked
http://www.freerepublic.com/focus/f-news/2615250/posts
U.S. sells debt with a negative yield for 1st time
http://www.freerepublic.com/focus/f-news/2614290/posts
Fiscal disaster set to explode—Commentary: States’ unemployment bill has come due
http://www.freerepublic.com/focus/f-news/2615805/posts
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