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Drinks With the President.

Submitted by madhedgefundtrader on 10/31/2010 23:56 -0400

President Barrack Obama certainly arrives at a party like a rock star. Three silver GM Suburbans flanking an armored black Cadillac limo screech to a halt with lights flashing, and all of the roads in the immediate vicinity closed to traffic. A dozen sunglass bedecked Secret Service agents leap out, immediately scanning the perimeter. The president bounds out and briskly walks to the plush Atherton home, where he enters through the kitchen of former EBay executive and California state controller, Steve Wesley.

For a mere $30,400 donation to the Democratic National Committee, I received a sweaty handshake and an assembly line photo with the once South Chicago community organizer. A Koch brother I am not. The event came on the heels of the President’s 45 minute private audience with the Golden State’s own version of royalty, Apple’s (AAPL) Steve Jobs.

It was all part of a broad swing through the Western states to rally the faithful, and to top off the DNC’s coffers, which has raised a record $50 million in California this year. Perhaps Obama just wants to be among friends. While his national job approval rating languishes at 47%, it is 55% here, and an eye popping 72% among Democrats.

With a short two weeks until the election, the online betting site, Intrade (click here for their site at http://www.intrade.com/ ), is giving an 95% probability that the Republicans will win control of the house. But to me, this is all starting to take on the flavor of a consensus trade that I love to fade. The Democratic Party has become the BP of American politics. Expectations of its imminent demise may be greatly exaggerated, but not for the reasons you expect.

Since the 2008 election, some 4 million “millennials”, “generation Y’s”, or “echo boomers” have gained the right to vote. Have you spoken to your kids lately? The only issues they care about, the environment, global warming, gay rights, and ending the war, are overwhelmingly Democratic ones.

Another 2 million immigrants have also joined the rolls. Thanks to the racist rants by many Tea Party candidates – last week Nevada Senate candidate Sharon Angell said she thought many Mexicans looked like Asians—I would be surprised if any of these voted conservative.

Sure, only 30% of these groups vote at all. But when election results swing on majorities that can be counted in the hundreds –think Florida in 2000, Ohio in 2004, and Minnesota in 2008—they could make a decisive difference.

The Tea Party has already demolished any chance of a conservative win in the Senate by putting candidates the Republican leadership charitably describes as “wingnuts.” Witchcraft practicing masturbation advocate, Christine O’Donnell, took a safe Delaware seat from a 20% lead to a 20% deficit virtually overnight. Sharon Angell converted a campaign unseat the Senate majority leader, Harry Reid, in Nevada from a pushover to a dead heat.

With Sarah Palin’s aid, Alaska’s Senate candidate, Joe Miller, ousted mainstream Republican Lisa Murkowski in the primaries, prompting her to launch an independent write in campaign and a three way split that could throw the election to the Democrats. The net net is that the Tea Party crashing on to the political scene has so far been hugely positive for Democrats.

The polls we see reported daily are only taken of participants with land lines. So they may be undercounting both cell phone addicted, texting millennials, and immigrants. How many of your kids have land lines? My bet would be none. That could be another reason why the final results may differ from what we are being led to believe.

Now, let me throw one big unknown out there. Thanks to the Supreme Court’s Citizens United vs. the Federal Election Commission decision, this is the first election to see unlimited anonymous corporate donations since the sixties. As a result, the number of election ads disclosing donors has fallen from 97% in 2006 to 32% this year. The Republican leadership is hoping this will be enough to turn the demographic tide against them. Where do you suppose BP, United Health Care, and Goldman Sachs is spending their money, all victims of Obama’s wrath?

California’s proposition 23 is a perfect example of what this means. Billed as the “Save California jobs bill,” the measure was placed on the ballot and promoted by $6 million in financing from Texas base energy giant Tesoro Petroleum (TSO). And what is the company’s plan to create California jobs? Suspend the state’s stringent environmental regulations so it can build a new oil refinery in nearby Martinez.

On top of this, you can toss into the mix Obama’s proven, but unquantifiable ability to engineer last minute surges among supporters. The bottom line is that things may not be all they appear to be in this election. Global markets are discounting a Republican win in the House of Representatives that may be much closer than advertised, or may not happen at all.

In every postwar election, the party in power has lost an average 27 House seats in the midterm elections. The Democrats can lose 38 and still keep control. Obama knew this the day he walked into office. That is why the most radical parts of his agenda, like health care, were front end loaded. Expect to hear much about the President’s surprise, Clintonesque move to the middle in 2011, which was in fact, planned two years ago.

If the Republican celebration that has been ongoing since March turns out to be for nothing, expect the shock to be immediate and global. A Democratic win will take all asset prices down, no matter how much QEII Ben Bernanke throws at them.

Yes, I know, I should stick to my day job of calling every turn in the market. But for the next two weeks, that profession and making political prognostications have become one in the same. I can only say thank goodness that my hometown San Francisco Giants are not facing the Chicago White Sox in the World Series this week.

There is more risk in markets today than traders and investors realize. We will find out exactly how much tomorrow.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

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Mon, 11/01/2010 - 04:31 | 690038 Coldfire

Like it makes a difference which group of buffoons "wins".

Mon, 11/01/2010 - 02:52 | 690004 alexwest

junk as always

alx

Mon, 11/01/2010 - 01:43 | 689987 loup garou

That’s an amazing coincidence. Just the other day, I hooked up with Jesus and the disciples for supper and some heavy drinking!

Before supper, we all sat around talking about all kinds of stuff -- the weather, baseball, sea levels, life after death, and hot chicks. Jesus talked about making a comeback tour sometime before the next millennium. By this time, everybody was getting hungry, so Jesus conjured up some fish sandwiches on whole wheat loaves. They were delicious! After supper, we started knocking back some beers. But we were just starting to get snockered when we ran out, so Jesus turned a half-empty can of Old Milwaukee into a 55-gallon barrel of Dom Pérignon. It was pretty cool!

Well, one thing leads to another and now we’re really getting toasted, so we all pick up our guitars and launch into about an hour and a half of In-A-Gadda-Da-Vida. We were really jamming’ and the groupies were going wild! Eventually our fingers got tired, so we decided to go surfing instead. It was pretty wild watching Jesus surf -- without a surfboard!! After a few waves, Jesus asked me if I wanted to come back with Him to His pad and bang some groupies, but He was cutting’ such hellacious farts that I respectfully declined and went on home.

Overall, it was a great time, and very instructive. I never got a chance to ask Him how to spell “Barack Obama” though, or about the elections, or about where the market is headed…

Mon, 11/01/2010 - 02:12 | 689992 williambanzai7

Do you have any recommendations on what gold rush asset opportunity we should all Gomer Pyle into today...before we pay for your permium subscription ;-)

Mon, 11/01/2010 - 01:02 | 689966 ng2aradiofunk

re: Hedgefund Trader,

Calif prop 23 "Martinez Refinery Expansion"

- your postings generally do have a 'special details'

providing the essential elements => message integrity,

confidentiality, non-repudiation... therefore 'credo'

your 'public-mode' absurd styled steganography....very clever

'mad'

Mon, 11/01/2010 - 02:27 | 689996 pussfeller

I have been watching some of the things he promotes, so far, they seem to be doing alright, but I am a total newb at that, so IDK, but putting a mocking slant on the fundamental idea that reducing regulation will create jobs, is just silly.

How can you create jobs in an regulatory environment that is designed to drive out small business and leave nothing except grabbing a few peanuts from MegaCorps, who write, and influence these laws? Answer, you can't.

Luckily, these guys are so bloated and mired in debt and tied to the crumbling fiancial system, they might not be around in their present Leviathan state much longer. But how much damage will they do on the way down?

Drinks With the President.

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