This page has been archived and commenting is disabled.
My Analysis of the Election
Won the World Series, but lost the Speaker of the House. I guess San Francisco can’t have everything. My expectation that demographic trends would limit Democratic losses turned out to be wrong. The kids stayed home and texted each other, partied, or watched MTV, and didn’t go to the polls. I thought that if the Republicans won the House of Representatives, it would be by handful.
They ended up taking 62 seats. Good thing my market calls are better than this, or I’d be washing windshields for a living at Park Avenue and 42nd Street. I nailed the Senate, which I correctly predicted the Tea Party would blow for the Republicans. I even called the spoiler states, Delaware and Nevada.
The West coast turned out to be a clean sweep for the Democrats, as I expected. Meg Whitman spent $35 per vote, versus 60 cents for Jerry Brown, and still lost by 13 percentage points. She probably would have done better if she just sent everyone a check. The sleeper that no one is paying attention to here is that simple majority rule for the legislature passed, dumping the 2/3 requirement. California taxes are about to go up a lot.
Still, without the presidency and the Senate, all conservatives have really won is the right to determine the House agenda, make speeches, and conduct investigations, which I am sure there will be a lot of. One newly elected conservative has even promised to hold McCarthy style un-American activities hearings. You can forget cooperation with the administration. These are not your father’s Republicans. They have been rewarded for obstruction, the Senate setting an all time record for filibusters, so you can expect it to continue, or intensify. Bring on gridlock.
Let’s put the economic polices the voters chose under the microscope and see what we got. It is not a pretty picture. The bottom line is that my scenario of a lethargic 2-2.5% GDP growth rate continues for the foreseeable future. Here are the reasons why:
1) The party with the worst job creation record in a century is now in charge of job creation. There were 23 million jobs created from 1992-2000. There were only 1 million created during 2000-2008 when the population grew by 22 million.
2) The party that presided over the biggest increase in the deficit in history, from $5 trillion to $10 trillion during 2000-2008, is now charged with reducing the deficit.
3) Republican deregulation policies favor large multinationals that have been the most profitable, because they have been the most aggressive exporters of jobs. Small businesses that generate the most jobs don’t show up anywhere in this picture.
4) Without any further assistance from Washington, the states and municipalities are going to have to take an extra sharp hatchet to budgets for teachers, police and firemen, the most junior claims on local resources. The drag on the healthy parts of the economy increases.
5) Much of the campaign focused on cutting the deficit by reducing spending. Below, please find the six largest expenditures in the $3.5 trillion 2010 Federal budget:
$687 billion - Social Security
$655 billion – Defense
$564 billion – Unemployment and Welfare Payments
$448 billion – Medicare
$287 billion – Medicaid
$162 billion – Debt service
Notice, first of all, that you did not see these numbers anywhere during the campaign. They should have been posted at every ballot box along with a Sharpie marking pen. Looking at the list, I see three untouchable Republican sacred cows, social security, defense, and Medicare, taking up the bulk of the spending. Debt service is untouchable. That leaves unemployment and welfare payments and Medicaid as big fat targets.
But even if you completely end this spending, close the agencies involved, and sell off the buildings, as many conservatives have proposed, you have only cut spending by $851 billion, or 61% of the current budget deficit. Some $549 billion of deficit remains. And this assumes the tax rates remain the same. Cut taxes, and the Medicare, unemployment, welfare-free budget deficit rockets to $1.2 trillion, while at the same time slowing GDP growth substantially further. Did I mention that falling spending causes job losses? Talk about jumping out of the frying pan and into the fire.
The mostly closely guarded secret of this election is what spending the Republicans cut in their first budget. I am waiting with baited breath to see how they do this.
Who really won this election? I did! It is setting up trends in the global financial markets that will be easy to identify and cash in on. If you want to jump on my bandwagon and get a peak at some market timing, then keep reading this letter.
While voters may be enthralled with empty promises, platitudes, spin, and sound bites, markets clearly aren’t. Like a huge, dumb animal, they respect only the remorseless mathematics of supply and demand. QEII is still the principal driver, the first $600 million of which we got today. This promises to lift all boats, especially the yachts, to year end, and possible through Q1, 2011 (click here for “Contemplations on Risk” at http://www.madhedgefundtrader.com/october-28-2010.html ). When it ends, the full impact of this election will bite. This will be the outcome:
1) There will be a major sell off next year, not just in stocks, but in all asset classes. The election results increase the certainty and the severity of this event. Volatility (VIX) will rise across the board.
2) The deficit will rise faster. The debt markets’ breaking point will be reached sooner. This means we will get a collapse in bond prices, no matter how much liquidity floods the system. Whether this happens with the national debt at $15 trillion, $18 trillion, or $20 trillion is anyone’s guess. We are headed towards all of those numbers trapped in a runaway Toyota with the accelerator stuck on the floor.
With the administration and congress gridlocked, the Federal Reserve is the sole functioning branch of government, and creating inflation is virtually the only thing they know how to do well. This nicely sets up my (TBT) trade, one of my core shorts for the coming decade.
3) A flight to safety will trigger an extended period of dollar strength. This is bad for stocks, commodities, emerging markets. Flip the “RISK OFF” button. This sets up the crash in the yen, my other core short of the decade, and bodes well for the (YCS).
4) Since many conservatives believe that global warming is a leftist hoax, you can expect more favorable policies and tax treatment for oil, natural gas, and coal. Expect dependence on foreign energy sources to rise and crude prices to rocket. The congressman who apologized to BP for it harsh treatment is now the chairman of the House energy committee. The Bush administration took oil from $20/barrel to $150. Expect something similar going forward. The giant target on our backs in the Middle East stays there. Buy your electric car now.
Sorry, guys, but read it and weep. As with a World Series umpire, I call them as I see them. This is the letter where hard data and facts trump uninformed opinion every day of the week. There are thousands of letters out there whose primary goal is to make you feel better. This isn’t one of them.
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.
- advertisements -
"assuming that Obama could have magically cured the economy in two years"
he could have come damn close in two years by throwing the moneychangers out of the American temple amongst other pressing items....but that would have required him to be a patriot with a brain instead of an oligarchs plaything
We're down on MHFT because he still sees politics in left vs right terms, instead of Statist vs free market terms.
As appears you do, also.
Uh huh. You'll be needin' to ante up on the social issues and personal pork sacrifices before that vulture will fly. Also, identify any Tea Party positions that run counter to Big Oil. Because there aren't any. Even 'anti-Statist' ones.
Don't forget that most self-identified conservatives are hopeless romantics. Other than the professional political grunts, who are posting from the GOP bunkers for free beer and pizza and barely recall their recent undergrad polisci finals.
Bernanke will be able to hold interest rates at zero long enough for those TBT etf's to time decay almost to...zero. A 10 to 1 reverse split will take a chunk out of the old bankroll. I don't think this guy is a hedge fund trader. He sounds like he works for Acorn.
Another factor which you only touched upon briefly is the overall movement to start a real wage-price deflation spiral by attacking public employees, a la Mish Shedlock.
This can only lead to 20%+ reductions in real wages and personal disposable income across the board. Maybe it's necessary but no amount of Fed stock orgies can prevent a depression then.
The Bush gang took oil from $20 to $150 because of its lack of support for a strong dollar, as happened during Jimmy Carter's reign, and now Obama's. It seems this is the real economic elephant in the room no one wants to talk about, including you. Perhaps this will change next year, collapsing gold and silver bubbles, along with oil.
Too convenient to ignore SS taxes and Medicare premiums paid when stacking SS up against the DoD, MHFT.
Any developments on MHFT's silver short postion?
I'm amazed that you accuse Republicans of being the worst party for job creation in a century. You imply that Democrats have done better. Everything the libs have done in the past two years has been the exact opposite of the right thing and that's why they lost. Their arrogance and pride cost them big.
"You imply that Democrats have done better..."
Hey hey,
ever wonder why conservatives don't govern conservatively and Progressives don't govern progressively?
It's because they're all Corporatists!
http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-r...
Own it, fucktard.
IN other words, you're just another 'Crat who has to resort to petty names when your logic fails..
Failed logic and facts
Meanwhile
MHFT wrote the economy gained 1 M jobs under W,
while WSJ wrote 3 M
Who to believe?
Democrats of 2004 Brand Obama Worst President:
"From November 2008, the month he was elected, until (June 2010), the economy has shed an astonishing 4.4 million jobs. That’s worse than Hoover."
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aPnoW_xLLowo
" The sleeper that no one is paying attention to here is that simple majority rule for the legislature passed, dumping the 2/3 requirement. California taxes are about to go up a lot."
Uhhh....that's majority to pass a budget, not to raise taxes (which is still 2/3rds)...California's debt is about to go up...even faster.
What a waste of time reading this nonsensical gibberish. Dems have owned the House and Senate for the last four years, and the Presidency for the last two, and all they have managed to do is spend more in the last two years than has been spent in total history of the US.
What a bunch of crap. MHFT may have figured out the how to make money game, but politically he is a moron. I do appreciate ZH allowing him to post though. He is typical of adherents to the 'progressive' faith. His warped misunderstanding of Conservatives is based on reasonably well constructed Leftist propaganda and what are today his firmly entrenched biases. One of many striking differences that I have noticed between members of the cult of 'progressivism' VS. Conservatives is that Conservatives are far more likely to acknowledge errors (BUSH), while 'progressives' remain locked into a little mental trap.
Please don't feel insulted by what I say if you consider yourself to be a Liberal. Liberal does not = 'progressive' and 'progressive' most certainly does NOT = Liberal. Progressives might enjoy refering to themselves as Liberal but to be Liberal requires an open mind and a willingness to expose ones self to seeking truth; something progressives cannot do.
MHFT may have figured out the how to make money game
Not really, or he would not need this disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these pages will be profitable or that they will not result in losses.
Based on the Feb 2008 archives at his website:
On 1 Feb 2008 MHFT Bought $GOLD @ 913.50 enroute to 681 in 8 months
http://stockcharts.com/charts/gallery.html?s=%24gold
On 4 Feb 2008 MHFT Bought $NATGAS @ 7.80 enroute to 2.62 in 18 months
http://stockcharts.com/charts/gallery.html?s=%24natgas
On 5 Feb 2008 MHFT Shorted SPX Puts while the SPX went from 1400 to 1250 to 666
http://stockcharts.com/charts/gallery.html?s=SPX
The same day he bought GOOG @ 500 enroute to 247
http://stockcharts.com/charts/gallery.html?s=goog
On 6 Feb 2008 he shorted Bonds at 120 enroute to 142.66
http://stockcharts.com/charts/gallery.html?s=%24usb
MHFT subsequently doubled his losses by recommending TBT, which went from 70 to 29.77
http://stockcharts.com/charts/gallery.html?s=tbt
On 8 Feb 2008 he bought GE above 33 enroute to 5.50
http://stockcharts.com/charts/gallery.html?s=ge
On 11 Feb 2008 he bought AAPL @ 119 enroute to 78.20
http://stockcharts.com/charts/gallery.html?s=aapl
On 12 Feb he bought the Dow @ 12,500 enroute to 6469.95
http://stockcharts.com/charts/gallery.html?s=indu
On 15 Feb 2008 he bought TGT @ 53 enroute to 24.43
http://stockcharts.com/charts/gallery.html?s=tgt
On 20 Feb 2008 he found GS tempting at 170, enroute to 46.75
http://stockcharts.com/charts/gallery.html?s=gs
On 21 Feb 2008 he joined T Boone Pickens shorting oil at $100, enroute to $147
http://stockcharts.com/charts/gallery.html?s=%24wtic
On 22 Feb 2008 he liked CROX @ 26, enroute to 79 cents
http://stockcharts.com/charts/gallery.html?s=crox
On 27 Feb 2008 MSFT was a strong buy @ 28, enroute to 14.42
http://stockcharts.com/charts/gallery.html?s=msft
On 28 Feb 2008 MHFT bought Copper at 391.05 enroute to 125.50
http://stockcharts.com/charts/gallery.html?s=%24copper
On 29 Feb 2008 Leap Year Day, he bought Brazil at 65,000 enroute to 29,400
http://stockcharts.com/charts/gallery.html?s=%24bvsp
He bought HNZ @ 41 enroute to 28.37
http://stockcharts.com/charts/gallery.html?s=hnz
He bought HRL @ 40 enroute to 23.91
http://stockcharts.com/charts/gallery.html?HRL
He bought DLM @ 9 enroute to 4.86
http://stockcharts.com/charts/gallery.html?DLM
He bought PZE @ 11.5 when it was trading @ 32.85 post merger enroute to 11.30
http://stockcharts.com/charts/gallery.html?s=pze
What is even more interesting is that he claimed it as a Brazilian stock when it is in fact Argentinian.
So much for variously calling himself a Journalist, Morgan Stanley Financier, UBS Director or Hedge Fund Trader who drinks with the President.
Hey, nobody bats 1000, but when they boast about their performance record and invite people for a look at their actual record, why not?
Nice. Thank you for your effort. I considered demeaning his investment record as well but didn't have the time, or frankly, the desire to put the effort into it.
'progressives' are a dying breed. Call it natural selection. All that attempts to stand in opposition to natural law eventually fails, or in even better words:
On a long enough time line..................................
Thanks for the fine job of research, ATG. (Personally, I wouldn't have wasted the time on this clown ;)
No doubt, these trades were recommended to MHFT during breakfast with the Dalai Lama...
How can we have a stronger dollar and inflation at the same time? And one would have to say El Presidante (That's what they call them in banana republics.) Obama has done a better job with that increasing deficit thing than anyone else ever has. He probably won't get eight years but he'll still manage to do some significant damage.
Obama is a strike upon a bruise left by George W. Clusterfuck....
I agree both parties suck but why did you conveniently ignore the damage the Obama admin has done? How about the job losses under his watch? I give credit to Obama though, he is the master of the bait & switch--he has done the opposite of everything he promised on the campaign trail (and for the record, no I am not republican).
And yeah you are right--the democrats did great in CA, NY and a few other places--the states that are totally bankrupt with the highest taxes in the country....
Ben better keep those blue state goodies coming.....
I agree, your market calls (which I remain unimpressed with) are FAR better than your political readings. Guess you didn't bother reading the propositions?
Proposition 25 — State budgets
This proposition will allow the Legislature to pass state budgets with a majority vote rather than the two-thirds vote that was required. It does not apply to tax increases, which still require a two-thirds majority.
Will someone explain to me why this guy keeps getting headline billing?
Sour grapes and revision of history...
The Republicans will be status quo, but we will get lots of talk about gay people, abortion, and mexicans for 2 years.
can we PLEASE talk about mexicans?
I live in SoCal....
Well, it's better than talking about Obamacare and propping up every major industry in the US. Those topics will be a nice change of pace considering those issues won't cost nearly as much as Barack/Nancy/Harry spent the past 2 years.
medicare part D, two wars, Dept of ze "homeland" defense, TARP, corporate welfare....
"1) The party with the worst job creation record in a century is now in charge of job creation. There were 23 million jobs created from 1992-2000. There were only 1 million created during 2000-2008 when the population grew by 22 million."
Stopped reading this gibberish at this point. Anyone who thinks govt's "create" jobs is an idiot or a fool.
+1 million
Government does not create jobs, they create taxes!
You're taking the original remark a little literally, aren't you? You don't think government policy has anything to do with job creation? Then why all the furor over taxes, or regulation?
Enforcing the rule of law creates jobs. Creating an environment where the rule of law is a suggestion as was done under this administration and the last one is a sure fire way to end up where we are.
If there are nobody getting speeding tickets everyone is driving as fast as they can and the highway is littered with wreckage.
It only took eight years under the Bush regime to wreck the rule of law in this country. It will take decades--perhaps a generation or two to re-establish it given that the wealthy have rigged the system in thier favor with tax law and federal subsidies.
Yes, we are paying for our own demise.
Yes, of course you're right, it's only one party that has betrayed us.
/sarcasm
But But But following the rulez is too expensive and that meanz less jobz. DUH.
+1
The Federal Government is not responsible for creating jobs. It'd be nice if it could provide an environment that allows businesses to create jobs.
Also, the same people were "in charge" from 1992-2000 were also "in charge" from 2000-2008. If you're still in the Red/Blue Team paradigm, then let me know who was Speaker of the House from 1995 - 1999.
"Also, the same people were "in charge" from 1992-2000 were also "in charge" from 2000-2008. If you're still in the Red/Blue Team paradigm"
Exactly. Let's have a major paradigm shift to reality and stop bouncing back and forth between the two fronts for the same team. If not, you're foolishly rooting for one side in a ping pong game between the Wall Street Banksters vs. the Wall Street Banksters. And you're the ball.
global warming is not only a hoax it is a false religion
It's a hell of a lot less false than economics of all stripes and most of all "real" religions. I suppose you also think the Earth in only 4000 years old and that our existence is due to intelligent design? Climate change is real...why not tape your house shut and stick your car's exhaust pipe through a window and then tell me whether or not the carbon monoxide and CO2 you are breathing is real or not? WTF!!
What isn't real is fiat currency and the idea that debt can grow an economy indefinitely. At the end of the day I don't give a rat's ass about climate change for the voodoo of centuries of central banking is already making our shit-hole of a planet less and less pleasant to live on.
According to global warming experts, the earth's average temperature has increased 1 degree since 1850 because the amount of CO2 in the atmosphere has increase from 285 parts per million, to 385.
In other words, an extra 100 parts of CO2 in 1,000,000 parts of air.
THIS MAKES CO2 THE MOST POWERFUL INSULATOR IN THE UNIVERSE!!!!
So, why don't we insulate our houses with CO2? Just make bubble wrap with the bubbles full of CO2.
This will sequester the CO2 out of harm's way and give us perfect insulation. After all if 100ppm will raise the temp 1 degree what will 1,000,000ppm do? You should be able to heat your house all winter with 1 gallon of oil, and air condition it all summer on one ice cube.
Uhhh....
Plants love CO2, so what is the problem? We have natural sequestration.
Global Warming, now morphed into "Climate Change" is a political tool, not science. And please do not slip in the "majority" of scientists bullshit. Truth is not divisible by mass acquiescence.
There are a lot of other chemical concoctions in the air and water we should address. Carbon Dioxide (plants "oxygen") is not one of them.
And investment banks LOVE QE...should we therefore just keep givin' it to 'em? Have you considered that you could have too much CO2 chasing after too few plants?
WTF indeed? Don't junk this post fellow ZH-ers. This is a great one one-liner.
"...Climate change is real...why not tape your house shut and stick your car's exhaust pipe through a window and then tell me whether or not the carbon monoxide and CO2 you are breathing is real or not? WTF!!..."
Thanks for the support, even IF you are being sarcastic..I can't tell but if you enjoyed that line than it was worth the 16 junks... a record for me! While I love ZH and find it extremely enlightening it still stuns me, STUNS me that people are so unbelievably ignorant when it comes to science. Look.. I believe that 9/11 was a false flag.. the evidence just doesn't add up... I believe that the Federal Reserve should be demolished.. I believe that the Oligarchs have pulled a fast one on the small people everywhere for centuries now... I also believe there is intelligent life on other planets and that it might very well have payed us a visit now and again... But climate change (the insistence on calling it global warming just underlines the ignorance) is part of Earth's natural cycles. Everything humans do is Nature at work. QE2 is a natural phenomena.. Benron is just a bearded gland who, given the nominal mandate of the Fed and the real mandate of the Fed (to serve the Bankster Overlords) has no choice but to excrete QE steroids into the system... Our economy essentially has a thyroid problem... Now even if you were to claim, based on all the hard years of data collection and number crunching that you have collected independently of the energy industry shills that human activity does not, in any measurable way, contribute to the natural climate change cycle of our planet, the overzealous activity of half a dozen billion crazy naked apes IS destroying the ecosystem... The Oceans are dying, bio-diversity is being decimated, anthropological diversity is being decimated...
The manipulation of money supply through the ages to finance war and thus technological supremacy is coming up against the wall of resource scarcity. For too long the stewards of the World economy and the innovators that have benefitted from their largesse have been too focused on easy profits and not enough on externalities. It's really unfortunate that money DOESN'T grow on trees.. If it did, we'd have better control over it for we would have to nurture it and cultivate it and then distribute only what was harvested...perhaps Weed, Cocaine and Heroin should back currency in the Coming World Order...
As it stands the free printing of infinite fiat dollars based on nothing more than a song and a dance allows for genocidal destruction to occur in the name of big profits and eratz progress. Global warming is nothing but a straw man... To rail against it as a hoax that is enslaving us is a monumental waste of time. The scientific method is a hell of a lot more robust than any metrics used in finance or economics. Yes, it is susceptible to manipulation and bad faith but nowhere near to the degree that outright bullshit dominates that most essential of human activity: moral economies. I dare say that there is much more truth on Discovery than there is on Fox.
I am willing to entertain tons of what the mainstream would consider crazy ideas, but the idea that Climate Change is a hoax is NOT one of them... Give it a rest. There are larger fish to fry...the largest being the Federal Reserve.
And cancer is a natural "problem" as well, and you know, when the whole planet has it, late stage, we can just accept it and kiss our collective asses goodbye. I have to hand it to you, you're equanimity in the face of mounting evidence and trends is unmatched.
I'm all for doing all that we can for solving the world's problems. "We" certainly take cancer a whole lot more seriously than we do our own destructive behavior towards the cradle of our existence. Having majorities who gladly follow the lead of blowhards and adventure seekers has led to a lot cool stuff but it also leads to great deals of injustice and wholesale destruction and outright Evil. This has worked for us as a species (especially when success is measured by the speed of HF trading and the ease with which Ben can conjure billions with a stroke of the enter key)... and will continue to...until it doesn't. As for planet killing asteroids, check out this link from today that was posted on Naked Capitalism.
"Impact 'catastrophe calculator' updated
http://www.bbc.co.uk/news/science-environment-11685803
For a minute fraction of the latest round of QE2 the very clear and present danger of cities being vaporized by space rocks could be solved in a heartbeat.. Go figure.