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Lessons Learned From The November Election

Tyler Durden's picture




 

Via Michael Naso of FBN Securities,

After the first Presidential debate, I argued that Governor Romney’s solid victory over President Obama was the worst outcome for U.S. stocks, for it gave false hope to a Republican sweeping into the White House despite the Electoral College landscape projecting otherwise.  I suggested that a more gradual acceptance of the November result would give the market a better chance to absorb the news with minimal impact.

We are presented with a similar scenario with Washington’s addressing the fiscal cliff.  Optimistic comments about resolving the crisis has spawned gains in equities that are sustainable while losses resulting from downbeat remarks have offered profitable short term buying opportunities.  While much of this price action the past few days has benefitted from typical calendar money flows that will disappear in the middle of next week, some of the positive sentiment arises from the overwhelming belief that both sides can consummate a deal on the budget ahead of the December 31 deadline.

The longer investors anticipate such a compromise, the more violently shares will tumble upon recognition that assuaging the crisis with a comprehensive solution will take extra innings.  Complicating matters is the presence of year end, for the band of negative convexity will narrow as New Year’s approaches such that a downward exogenous shock would precipitate waves of panic selling to protect 2012 gains.

Speaker Boehner pounced on the Administration’s negotiating misstep documented in Tuesday’s online Wall Street Journal by aggressively moving to the attack.  Unlike more sanguine remarks that have permeated the airwaves by others, he indicated that the talks between the two parties have stalled.  Democratic leaders quickly downplayed the House leader’s comments as mere bargaining tactics.  However, one has to have concerns about the viability of an agreement given his tone and Senator Reid’s observations from Monday, for the two represent two of the primary actors of this fiscal drama.  This fact cannot be underestimated as any statements given by peripheral players such as GS CEO Lloyd Blankfein have minimal importance in comparison.

Much of the initial sparring has centered upon revenue, however, the two sides are even further apart on the spending side of the equation based on President Obama’s proposed $50B in new stimulus as part of his opening bid to the process.  A comprehensive solution seems near impossible given the ideological divide and differences in each faction’s risk profile unless stocks dislocate to a point that forces bargaining in good faith.  If institutions remain optimistic for a compromise, then similar to the Election, the acceptance of reality might come too late to preclude a sharp selloff.

Even cobbling together a piece of temporary legislation to avoid falling over the cliff would be problematic, for I suspect the Democrats will have tremendous difficulty maintaining current marginal rates for all income levels while the Republicans almost assuredly will cry foul if high earners are excluded during this supposed transitory period.  Consequently, the headline chasing tape should build throughout December which will steadily increase volatility and ultimately weigh on shares.

In the interim, additional divergences across the economy and market will continue to surface to foreshadow longer term issues for equities. I have spoken at length all week about the Shanghai Composite’s troubles, yet other warning signs have reared their heads as well.  Despite the S&P 500’s recent lift off the bottom, the yield of the long end of the treasury curve sits near four month lows as the price action in bonds hints at more macro headwinds.  Moreover, while most of the housing figures point to sector expansion, manufacturing has taken a step backwards with 5 out of the 6 regional Fed surveys this month pointing to a contraction.  Most notably, Thursday’s Kansas City reading reached a three year low which puts additional pressure on this morning’s Chicago PMI.

Moreover, recent Core PCE data projects an extension of a disinflationary environment.  Although the bulls view these statistics as a green light for the FOMC to maintain their current QE program, I view the softening of pricing pressures as a sign that economic growth has started to stub its toe again.  Finally, open interest in the futures has decreased consistently during sessions when equities have risen since the November bottom.  Therefore, short covering has sourced the fuel for this bounce which makes these gains quite susceptible to a reversal especially if and when the tone surrounding the fiscal cliff unravels.

 

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Fri, 11/30/2012 - 09:26 | 3023237 GetZeeGold
GetZeeGold's picture

 

 

You can't fix stupid - Ron White

http://www.youtube.com/watch?v=fL6wbsGx9qw

Fri, 11/30/2012 - 09:34 | 3023263 MillionDollarBonus_
MillionDollarBonus_'s picture

I learned that with courage and commitment, anyone, no matter what their race, gender or cultural background can become a politician and redistribute the peoples' property according to their personal preferences and interests. Politics used to be limited to a select few, but today anybody can rise to the top of the political structure and reshape the world according to their vision. This has been the progressive dream for decades, and now it is finally a reality.

Fri, 11/30/2012 - 09:38 | 3023279 LongSoupLine
LongSoupLine's picture

Fucking brilliant MDB.

 

To that point, I give you...Maxine Waters.

Fri, 11/30/2012 - 09:41 | 3023293 GetZeeGold
GetZeeGold's picture

 

 

She's all about sociali.......errr......taking over stuff.

Fri, 11/30/2012 - 19:30 | 3023309 French Frog
French Frog's picture

"Lessons Learned From The November Election"

None.

It will be the same in 4 years time!

Fri, 11/30/2012 - 11:26 | 3023638 odatruf
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I'll see Maxine Waters and raise you Sheila Jackson Lee.

Fri, 11/30/2012 - 11:54 | 3023728 LFMayor
LFMayor's picture

Pikers.  Jesse Jackson Jr.

Go big or go home.

Sat, 12/01/2012 - 09:08 | 3026200 GetZeeGold
GetZeeGold's picture

 

.....or just go nuts.

Fri, 11/30/2012 - 12:48 | 3023957 prains
prains's picture

Million

 

you've just won the camel-toe of the year award, congrats on the brilliant satire now if you could return to swabbing toilets there is a line up

 

Fri, 11/30/2012 - 09:26 | 3023239 LawsofPhysics
LawsofPhysics's picture

What "elections"?  All I see are bread and circuses.  Stupid sheep, let me guess, you still think there are "free markets" too?

Fri, 11/30/2012 - 09:32 | 3023264 UGrev
UGrev's picture

Well, they're free to watch... sort of..

Fri, 11/30/2012 - 09:30 | 3023252 kridkrid
kridkrid's picture

Politics is a distraction and the author is a tool. He may or may not know it.

Fri, 11/30/2012 - 09:30 | 3023253 philosophers bone
philosophers bone's picture

Would "going off the fiscal cliff" be that bad?  It would kinda be closer to having elected Ron Paul!!  Except we still have Bernanke.

Fri, 11/30/2012 - 09:32 | 3023260 fonzannoon
fonzannoon's picture

If this is anything like the debt ceiling last year the market will calmly drift along until whatever news is announced, then sell the hell out of it. That is okay though, Kevin is warming up in the bullpen.

Fri, 11/30/2012 - 09:35 | 3023272 LongSoupLine
LongSoupLine's picture

Lessons learned LongSoupLine analysis:

 

 

 

 

There is no two-party fucking sytem.

both candidates are fucking owned by the same TBTF's and corporate interests.

the voting public are the stupidest, tit sucking, full retard fucking idiots on the fucking planet.

anyone attempting "election analysis" can fuck off

Fri, 11/30/2012 - 10:01 | 3023337 tango
tango's picture

Thre are good reasons why we have two parties instead of 4 or 5 like many nations. The first is our historical dilemma - the relationship between the individual, state and central government. Then we are a people who favor tradition, experience and practicality over theory - we vote for the man and not the party. Finally, we've seen the chaos that multiple parties bring - instability, coalitions among enemies, etc. not saying our system is the best - just that there are real reasons why it's like this and it's not some big plot by banks or churches or aliens.

Fri, 11/30/2012 - 10:21 | 3023400 kridkrid
kridkrid's picture

You are making stuff up. You've rolled out reasons that sound, well, reasonable, but aren't based on anything. Basically you just wrote words. The US didn't collectively sit back and watch countries with 4 or 5 political parties and collectively say, "oh noes, we better stick with the two we got". That's absurd. The history is mostly irrelevant anyway. The reality is that what we have today is fascism under the cover of "democracy", just like every other "democracy" on the planet. Ours just happens to control the world's reserve currency and spends more on its military than the rest of the world combined.

Fri, 11/30/2012 - 10:05 | 3023355 kridkrid
kridkrid's picture

Perfectly stated

Fri, 11/30/2012 - 10:31 | 3023428 earnyermoney
earnyermoney's picture

Exactly.

Romney took one for the team.

 

Want a laugh? Read the comment section of any article over at Naked Capitalism. Progressives wringing their hands that Barry's gonna sell them out. They believe they had a choice and can make a difference. LOL

Fri, 11/30/2012 - 10:34 | 3023440 GetZeeGold
GetZeeGold's picture

 

 

Progressives wringing their hands that Barry's gonna sell them out.

 

Stop teasing us.........GET EM!

Sat, 12/01/2012 - 06:41 | 3026135 Urban Redneck
Urban Redneck's picture

 

 

I don't suffer fools well, now I get to watch fools suffer.  

Yet it is not much of a consolation.

 

Fri, 11/30/2012 - 09:39 | 3023284 LFMayor
LFMayor's picture

Lessons Learned:  Politics won't change the game, because it is the game.   And it's fucking rigged.

Mao was right. 

Stock that shit high and wide peoples. 

We have to help Darwin realize his Theory, something about the fittest...

Fri, 11/30/2012 - 09:40 | 3023287 AU5K
AU5K's picture

OT: Gold down, must be 8:30.

Fri, 11/30/2012 - 09:50 | 3023317 GetZeeGold
GetZeeGold's picture

 

 

Can almost set your watch by it.

Fri, 11/30/2012 - 09:40 | 3023289 Tsar Pointless
Tsar Pointless's picture

"Investors" apparently is a euphamism for algos and HFT computers, no?

Fri, 11/30/2012 - 09:40 | 3023290 Dr. Engali
Dr. Engali's picture

Just BTFD until they players anounce their "grand bargain"then get out of the way.

Fri, 11/30/2012 - 09:59 | 3023335 Kish80
Kish80's picture

Following this site and comments avidly but rarely post.... Have been waiting and positioning myself for this market to tank for too long. Beginning to lose hope but I can't shake the fact that it's all too insane to carry on like this and the house of cards will come crashing down.

Fiscal Cliff, Greece, EU, Fed's Monetary Policy - doesnt equal DOW 13,000.

Hopeful but losing hope too.

All the best.

Fri, 11/30/2012 - 11:35 | 3023663 odatruf
odatruf's picture

That's the same problem most of here face: we know we are right. We are certain where the reality points. We believe in gravity and other immutable laws.

Yet, when Leviathan grabs on tight and many people have so much to lose, the wait can be excruciating. And maybe, just maybe, enough people will despair that they were wrong.  And being rational, they will eventually take action that reflects the new reality rather then what their lying eyes know to be true. When that happens and enough people like you and us all have lost hope, then the collapse will be realized so that we are left with the steaming bag.

 

Fri, 11/30/2012 - 12:28 | 3023868 Joe moneybags
Joe moneybags's picture

"We know we are right.."  Well, this old bear has learned that he is wrong, 2/3 of the time.  How about "we know we are in denial".  The world continues to turn  as we bears shout "stop, I want to get off".

Fri, 11/30/2012 - 10:03 | 3023348 kralizec
kralizec's picture

Learned?

Fuck politics!

Lesson over.

Fri, 11/30/2012 - 11:34 | 3023660 A Nanny Moose
A Nanny Moose's picture

If we stop voting, perhaps they will just go away.

Fri, 11/30/2012 - 10:09 | 3023366 I am Jobe
I am Jobe's picture

Socialism is all the inbreds know about. Whiny ass bitchezz in the making.

Fri, 11/30/2012 - 10:22 | 3023398 IamtheREALmario
IamtheREALmario's picture

What I learned from the election is that it does not matter who wins the vote. It also does not matter who rigs the vote count (Romney was set to rig Ohio). All that matters is who the media announces as the winner (the media announced Obama as the winner of Ohio, without counting the vote or doing exit polls). All else is irrelevant.

Fri, 11/30/2012 - 10:25 | 3023413 Vashta Nerada
Vashta Nerada's picture

I learned that one can commit vote fraud in excess of half a million votes, and that nobody has the courage to point it out.

Fri, 11/30/2012 - 11:42 | 3023688 Vince Clortho
Vince Clortho's picture

Worthless article.

Two possibliities:

1.  The authors intent was to misinform.

2.  Author does not have a clue.

 

Fri, 11/30/2012 - 12:24 | 3023849 blunderdog
blunderdog's picture

Given how seriously he seems to take the Rep/Dem split, I think it's safe to conclude he's clueless.

Fri, 11/30/2012 - 11:52 | 3023726 ItsDanger
ItsDanger's picture

Experienced traders move with the flow regardless.  Only rank amateurs would have been adversely affected by the 1st debate and subsequent events.  The fiscal cliff is similar.  You roll with the waves as they come.

Fri, 11/30/2012 - 12:31 | 3023887 Joe moneybags
Joe moneybags's picture

The Fiscal Speed Bump is simply the topic of the day.  After it is pushed back, with the stroke of a pen, we, as well as the media, will focus on other forseable events, as though they were all that mattered in life.

Fri, 11/30/2012 - 12:43 | 3023943 Bicycle Repairman
Bicycle Repairman's picture

The Romney candidacy was dead coming out of the convention, and stayed dead through election day.  After the first debate, someone mistook rigor mortis for the corpse twitching.

Lessons learned from this election by the GOP hierarchy?  Exactly none, so it's increased taxes and then Jeb Bush 2016.

Yee Haw!!!!

Fri, 11/30/2012 - 13:12 | 3024040 rosethorn
rosethorn's picture

A good a place as any to post this: FDIC leader says banking system still poses significant risks

Essentially nothing was learned from the last banking crisis

Fri, 11/30/2012 - 13:56 | 3024173 jplotinus
jplotinus's picture

The article is next to useless. What a waste of bandwidth.

Better articles requested, please.

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