A reader asked me to weigh in on the coming election and whether I think it will be market moving.First a hysterical quote from Alan Ableson's column attributed to Tom Gallagher from ISI;
This, indeed, is an odd election: It pits a candidate who should have been president eight years ago against a candidate who should be president eight years from now.
I don't write too much about politics because my skeptical nature leads me to conclude that election results are never as meaningful as some would have us believe.
I'm a Libertarian so I don't really care for either candidate (have not been of any candidate for quite a long time). They both have flaws galore and they probably each have positives too.
Part of my frustration (not unique) is the fact that very, very few of the "promises" made can actually happen. Candidates often promise things that cannot be passed through congress. They may (or may not) believe in the value of certain policies but still many of them never have a shot in congress and they know this going in.
I find the pandering to be nauseating. I find myself perplexed as some of the ideas that come from candidates that seem to ignore common sense. Regardless of how we got here, the economy stinks. Raising taxes in a lousy economy is a bad idea. Raising them in a mid 1990s economy is far less damaging.
I find there is dishonesty in much of what is said, there is no easy way to find really unbiased analysis of what is being proposed. As an example republicans are critical of raising the capital gains tax to which any dem they can put on TV says they will be below what they were under Ronald Reagan. I'm sure I am being overly critical but I find answering the question of will he raise taxes by saying they will be lower than... to be dishonest at the core.
The drilling in ANWR is another absurd debate. It won't add oil for ten years. If they had started ten years ago we'd have it now. If they started eight years ago prices now might be less with the realization than ANWR would start producing in two years. The land in question is a massive, barren tundra. If you have been reading this site for any length of time you know what sort of animal person I am. With that said, does it make any sense whatsoever that the wildlife that would be displaced or otherwise harmed by commencing drilling ops on a speck of that massive barren tundra is more important than the American economy?
The US needs twenty something million barrels per day. A bunch of new sources of 500,000 to 2 million BPD seems like a good idea to me in conjunction with R&D for alternative energy.
If Barry Obama gets in and can allow the taxes on dividends to sunset or otherwise increase it will create a drag on those sectors that are typically thought of as being dividend payers. Although not talked about much anymore, these sectors got a tailwind when the cuts were enacted.
Allowing gains taxes to sunset or otherwise go up will create a headwind, in general, for equity prices. The cuts helped, increases will hurt. I do not think it will trigger a lot of sales ahead of time to capture the 15% rate but more likely will hurt demand in the future. Not to say stocks can't go up but simply this headwind will be added to the list of others (equities always have headwinds and tailwinds, sometimes the headwinds are more important and sometimes the tailwinds matter more).
Windfall profit taxes are ludicrous. The dems who favor this focus on the absolute numbers. Continuing the ludicrousness out a little bit would it make more sense to set windfall rates based on profit margin? Exxon is a very large holding in every broad domestic index fund, you know the kind of index funds owned one way or another by the very people Obama is pandering to. Every time a dem is asked about this they spin out to something completely off topic. More dishonesty.
McCain, aside from some unlucky quotes, seems to be very middle of the road and Sarah Plain and Tall (has anyone used this yet?) notwithstanding he may have a tough time bringing in a lot of republicans so very little may get done. This sort of gridlock (Barron's talked about this) is not the worst thing in world.
Obama would be worse for capital markets, IMO. I have two friends that are really Obama people. I said to both of them, at different times, that he has doesn't seem to embrace capitalism as much as you'd hope for and both conceded the point.
McCain as a maverick? Will maverick ever equate to loose cannon or unpredictable? Still he is probably better than Obama.
Told you I was a skeptic but what would you expect from a Libertarian who lives in a cabin, on top of a mountain in the Mountain time zone?
The picture is from the trail down to Pololu Valley, where I filmed yesterday's video.
25 comments:
"Barry Obama"'s name is Barack.
The windfall tax is crazy, but how come nobody speaks of special tax rebates given to oil companies at a time of record profit? That's the exact opposite of the windfall tax that you oppose. How come rebates (some retroactive) to oil companies are ok but windfall taxes are not.
In every other nation on earth, the big oil companies are sharing the profits with the countries owning the oil. We produce plenty of oil here. Why is it that when oil prices go up every oil producer on earth benefits except for the America?
Alaska has an interesting constitution. It speculates that its natural resources are owned by its residents. Making them different than the rest of USA and similar to countries like the UAE.
Do you know what's the biggest challenge facing drilling in Alaska? The constant refusal of the big oil companies to honor the Alaska constitution and their stubborn refusal to agree on sensible profit sharing percentages with the Alaskans. This information is coming from Alaska Republicans mind you.
So we don't want to have a national oil company because government is bad and Friedman would roll in his grave.
We do not want the American people to share in the profits of oil production like every other nation on earth, because that's bad for capitalism and Friedman would roll in his grave.
We do not want to tax excessive profits because that's bad for capitalism and Friedman would roll in his grave.
We do not want to stop special oil industry tax rebates because that's bad for capitalism and Friedman would roll in his grave.
We do want to give the oil companies unfettered access to our national natural resources without any guarantees of actual drilling nor guarantees of actual price relief and we will just hope that they have our best interest at heart. Much like Standard Oil through Enron and all in between had before them. You do know that Exxon is still refusing to pay the damages caused by the largest oil spill in history, right?
"Windfall profit taxes are ludicrous. The dems who favor this focus on the absolute numbers. Continuing the ludicrousness out a little bit would it make more sense to set windfall rates based on profit margin?"
Rog: I agree with you. However, Gov. Pelan has imposed one on big oil in Alaska to the tune of $1200 for every citizen of the state. lol
"nobody speaks of special tax rebates given to oil companies at a time of record profit?"
born: they do, but it's very hard to do away with legislation that becomes law even when it's bad law. Just look at the battle over AMT.
Roger: Barry wants to lower (slightly) taxes on what he says is 95% of the wage earners. He also wants to give credits for small business spending and formation. He has also promised me a new tractor on my birthday.
born2code - I prefer to call him Barry, thank you.
born2code,
are you saying that whatever is happening with paying or not paying for the spill has something to do with whether there should be windfall taxes? The two seem unrelated.
In his highschool yearbook his picture says Barry, which i'm sure he was just more comfortable with in terms of not standing out.
the population of AK is 670,000. if my math is correct then the permenant fund pays out a little less than $1 billion. one year the fund payed out $2100 to residents (i think that was in 1999 or 2000) but i think that was thanks to returns of the fund. since then reutrns have not been great
special tax breaks, like no luxury tax on big boats in California, the gift of millions of acres of Federal land by McCain to a friend, oil tax breaks, farm subsidies, etc. DO NOT influence growth patterns. The rich just take the money and run. Our markets are volatile because income inequality has steadily increased with Bush's inept but biased policies and by the Feds saving the butts of financial hoodlums. Both Obama and McCain are corrupt to a degree, if you are rich McCain is your boy, if you are poor, Obama is your man.
Everyone is entitled to their own opinion but not their own facts: Obama's tax plans include a cut in income taxes for 95% of wage earners balanced by an increase for the top 5%, a cut in capital gains taxes for small business and a reduction in corporate taxes for any business that creates jobs in the US; see http://tinyurl.com/6h84l6 ; Obama's entire economic plan is at http://tinyurl.com/2srryu
Don't like it, don't believe it will be implemented or believe it's utter bull? Fine, I don't buy all of it myself and think the deficit is going to rise no matter what we do, but getting facts from secondhand sources, particularly ones that like to make stuff up, doesn't work too well (took me all of 3 seconds to google originals of Obama's tax plan and McCain's too which is right here at http://tinyurl.com/59yo6d -- it did take a bit longer to find some reasonably credible analyses, maybe 30 seconds (had to toss some that were pretty creative in making up their facts though).
A fairly conservative but I think reasonably well balanced summation can be found here at http://tinyurl.com/6pw8yq - I rather like the last tag line: "The only comfort is that they are both politicians, so there's a good chance they are lying." Hee, hee.
Well, if McCain wins, the smart thing to do would be to start up a company that builds those bomb shelters like in the 50s and 60s. Of course you'll want to build the first one for yourself.
Alaska: Coldest state, hottest governor.
Roger,
my point was that given the chance to do the right thing, Energy companies, going back to Standard Oil, have always chosen not to do the right thing. Often choosing outright fraud and crimes, as in the example of the oil spill, the Enron fiasco, overthrowing the legitimate government in Iran to install the Shah, working with the Junta in South America to terrorize the citizens... all stuff documented by Congress by the way...
The tax code has had preferential treatment for oil companies for decades, singling them out and treating them different than other companies.
The result of decades long policy of letting the "market regulate itself" is that Dubai is building Thousands of Islands in the Ocean while the disparity in income in the USA is reaching record levels.
I am a free-markets capitalist pig. But i take a different different view of what a free market means. To me, buying Congress members, and scheming with dictators does not qualify as free market capitalism.
"The drilling in ANWR is another absurd debate. It won't add oil for ten years. If they had started ten years ago we'd have it now. If they started eight years ago prices now might be less with the realization than ANWR would start producing in two years. The land in question is a massive, barren tundra. If you have been reading this site for any length of time you know what sort of animal person I am. Does it make any sense whatsoever that the wildlife that would be displaced or otherwise harmed by commencing drilling ops on a speck of that massive barren tundra is more important than the American economy?"
This is really laughable, the kind of mindless propaganda regularly posted by the media for the fanatical environmentalists.
1) ANWR will take 2, not 8, years to produce oil.
2) Oil offshore California will take 1 year to produce because the platforms have been there for years.
"If they had started..." This is an argument for never drilling anywhere, since oil will not be available instantly. Clinton vetoed offshore oil 10 years ago. Without that veto, we would have had all the oil we need 3 years ago.
The fact that "we did not start 10 years ago..." is not an argument for not starting now or ever, it is the explanation of why we are paying Venezuela, Saudi Arabia and Iran $750 billion/year for their oil.
Also, no animals are going to be displaced or harmed by drilling in ANWR, which is no larger than a big parking lot at a giant mall. The caribou population increased after we built the pipeline in Alaska.
You can be any kind of animal person you want, but not at the cost of of the lifestyle of your fellow Americans. You and the environmental fanatics are effectively allying yourselves with our geopolitical enemies by forcing us to pay them exorbitant prices for the sake of utopian environmental purity.
Roger's estimate of production from ANWR is compeltely wrong.
The estimated production from ANWR (a million barrels a day for 30 years) is five times what we could expect to save from the unrealistic goal of a doubling of mass transit ridership.
I have an extreme dislike for both candidates, but I oppose Obama much more because he's a radical leftist and likely to get a big helping of his agenda passed by a like-minded congress.
The energy debate (as framed by the MSM) is truly laughable because the Democrats are fundamentally against:
- producing more energy
- reducing the cost of energy
Don't believe me? Go to Obama's official website and carefully read his "Energy and Environment" section (note, Obama doesn't have "Energy" listed as an issue/section, it's "Energy AND Environment". Telling.
The talking heads in the MSM won't point this out, but the dems push for alternative/renewable energy resources have absolutely nothing to do with producing more energy or reducing the cost of energy. An Obama administration will put the U.S. at a competitive disadvantage to countries who will use the least expensive energy sources available.
Everyone is entitled to their opinion but not their own facts: The 'facts' regarding ANWR cited by the Anons above are unsupported by any reference links (perhaps they get their data from Newsmax or Shell Oil and are feeling shy) and are inconsistent with official estimates despite the best efforts of Bush appointed administrators in the Dept of Energy and EPA to suppress countervailing research results and analytic conclusions.
Frankly, even if you didn't know a thing about oil production (you could learn more at http://www.theoildrum.com though), a modest familiarity with construction would tell you that the notion of a 2-year production window on a vast project in an environment as difficult as ANWR is simply nonsense; anyone here ever run a nail gun, formed concrete or welded at 40 below zero?
The spastic and peculiar notion that Obama is a "radical leftist" -- I love how right-wingnuts pretending to be real Libertarians consistently misread political centrism -- who's energy policy is somehow designed to place the US at a disadvantage is something I'll leave to psychoanalysts familiar with delusional or paranoid psychosis.
But if you actually should read Obama's energy policy in the original (it's right here at http://tinyurl.com/4bmu2n) -- 'carefully' too of course since folks who condemn it have either not done so or hope you won't -- you will see that the long-term goal is to produce both competitive advantage and national security: Our dependence on oil has both distorted our economy and left us vulnerable to oil-rich states almost all of whom are tyrannies; we have run out of time to fool with this, we change now or risk going under. Got it?
And here is McCain's energy policy for contrast at http://tinyurl.com/58lbkt (notice how those who condemn reform don't give you links to original documents? Now that's telling).
"An Obama administration will put the U.S. at a competitive disadvantage to countries who will use the least expensive energy sources available."
LMAO!
"The talking heads in the MSM won't point this out, but the dems push for alternative/renewable energy resources have absolutely nothing to do with producing more energy or reducing the cost of energy. An Obama administration will put the U.S. at a competitive disadvantage to countries who will use the least expensive energy sources available."
Oh dear (shakes head). Where does one begin with this kind of comment?
First of all Tom K, did you actually READ Obama's platform? Like others who have commented, there's some parts which seem to me to be a bit much (Green Vets?), but what par t of Obama's proposals don't you get? More energy? - seems to be all kinds of stated intent to build up base power supply using non-carbon sources (wind, nuclear).
Cheaper energy? Well, the cheapest energy is that which never gets used. Conservation/reduction of energy will save huge sums, and support for building insulation and sustainable building design seems to capture that. Smart grid's in there; so's support for flex-fuel and hybrid vehicles.
So Tom, what's your beef? Is a sound energy policy only one which delivers more and cheaper gas to your local station?
Does anyone CARE that an energy policy which reduces your country's dependence upon oil is both environmentally sound AND a mitigative of political and strategic risk???
This is blissfully off topic (sorry to those who are so obviously grateful for the chance to not think about the markets - directly - for a second), but can anyone suggest a source for stocks that are LEAST CORRELATED to Financials, Commodities and Energy?
I'm looking for quant info, but will hear reasoned opinions.
R in NY
(Here's my worthless two cents on the election: some will be happier than others, and all will be happier than Hillary!)
Obama is a product of the vicious Chicago Democratic political machine that will do anything to destroy opponents instead of debating in the arena of ideas. The difference today is, back in the 20s -50s they just shot 'em or hooked them up with a hooker and took pics. Now MoveOn.org and the Daily Kos are the hit men and/or whores. I am not looking forward towards having a country run by the ilk of Soros, radical leftists and other ingrates.
I agree with Roger and generally support a Libertarian philosophy.
McCain is far from perfect, but he is head and shoulders above Obama, whom I think isn't especially smart on his feet, and not clever by any stretch with his selection of associates.
With an Obama in the White House, I can't imagine how many decades it will take to "un do" what he will do.
So far trickle-down economics and low taxation have been working well, and whoever thinks the rich spend 100% of their time working out how to take money from the poor are delusional.
I must apologize for some of my remarks: Fact vied with opinion and then went straight through into snark with hardly a pause and while I'd like to blame it on my guests and a little too much good beer (Negro Modelo) during an excellent barbecue it was really inexcusable and I am sorry.
Religious and political arguments collapse into shouting quickly enough as it is and I usually try to avoid them (sigh). I've been unaffiliated with any political party for 37 years and although I probably do tend to vote Democrat more often than Republican, particularly recently, I've voted for both and Libertarian and Independent to boot. But the devil with it, I'll just leave one fact and one comment that are both actually on the original topic and let it go at that.
The fact is simply this: Since 1947 the US economy has grown more during Democratic administrations than during Republican administrations and it has done so with sufficient persistence to honestly be called a trend.
Mark Thoma discusses this, linking to an article by Alan Blinder as well, and adds some other citations so I'll just link to Thoma's blog post at http://tinyurl.com/5hwz9d but the net result is approximately a 9% increase in income per person over an 8-year administration and that is (a) more than a typical tax cut and (b) spread more evenly around the nation.
Without attempting to explain this my comment is simply that if one looks at the matter strictly from an investment standpoint then: 1) betting with a trend generally provides better returns over time, the "trend is your friend" but, 2) don't forget the boilerplate warning that "past performance is no guarantee of future results."
Pax
some of the fear or concern engendered by what Obama will do is way over the top, IMO. Presidents don't get that much stuff done, further the is already down some, rates are already down, the economy already has problems and housing is already down.
This same concern being expressed has been expressed by other winners and it wasn't that bad (Hoover and Carter as possible exceptions; not sure about that).
LMAO?
Economies like China and India will burn every last drop of fossil fuel while the U.S. sinks
billions into wind, solar, and biofuels - all extremely expensive energy sources. Sorry, I don't see how this doesn't put the U.S. at a competitive disadvantage.
I've read Obama's energy platform. Have you? Obama and the dems are obsessed with reducing carbon emissions and punishing big oil. They oppose drilling offshore/ANWR and oppose the building of more nuclear plants. I can only assume you can't read between the lines of statements such as: "Promote the RESPONSIBLE Domestic Production of Oil and Natural Gas". RESPONSIBLE = legislation loaded with poison pill clauses/regulations.
Conservation. Who's against it? But I hope you realize conservation doesn't always come without a price. And if you've read the experts you'll know there's no way in hell the U.S. can conserve it's way to energy independence.
Roger, I agree with your observation (most Presidents don't get much done), but Obama will most likely end up with a veto proof Senate and an overwhelming majority in the House. Few Presidents in recent memory have had an opportunity like this.
McCain has admitted that he knows very little about economics. Add this to the fact that:
"The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.
That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut."
Add this to the fact that we have a larger middle class under the last democratic leaders and have had poorer economies and a widening gap between the poor and rich and I am coming to believe that anyone who back the Republicans at this point has a real probelem with ignorance or bias. Just as Buffet and Soros who both back Obama--hard to call them socialists!
Curtis
Over the past 120 year period, the average annual stock market return has totaled only 8.25% under Republican rule, while it has returned 10.85% with Democrats in power.
Over the past 60 years, this trend has been more pronounced. The Democrats have held the presidency only 41% of that time, but under their rule the average annual return has been 15.26%, more than six percentage points higher than the 9.01% return under Republicans.
source - Jeremy Seigel
3 words: Social Security, Medicare
...but we owe it to ourselves. Read the charts and weep:
http://perotcharts.com/category/challenges-charts/
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