Skip to comments.JIM GRANT: Today's Market Rally Really Was About The Scott Walker Victory In Wisconsin Last Night
Posted on 06/06/2012 2:40:53 PM PDT by SeekAndFind
Earlier we joked that some people thought today's rally was the result of the election outcome in Wisconsin last night.
Well, serious people think so too.
James Grant, of Grant's Interest Rate Observer, was just on CNBC, and this is what he told Maria Bartiromo:
"...Today i think part of the source of the levitation was the Scott Walker triumph in Wisconsin."
"People maybe are discounting the prospects of a return to something like freer if not free markets come the Fall if Romney or GOP decisively wins."
Grant also said he expects a third round of quantitative easing and reiterated that the long-term implications of QE3 are bad. He said the "world has 2008 on it's brain" and the awful memories of 2007 -2009 have the global economy preparing for a replay:
(Excerpt) Read more at businessinsider.com ...
QE3 cold well send the economy back to the crash of 1929.
QE3 could well send the economy back to the crash of 1929.
No one is saying it, but I totally agree.
I’m still waiting for SCOTUS to strike down ObamaCare. If that happens, the markets will take off. If it looks like Romney will win in November, the economy will blast off (and Obozo will try to claim credit for it).
I saw the interview. I couldn’t believe my eyes and ears — but grateful. Maria Bartoromo picked up on the theme and said that as it becomes clearer there will be a GOP victory that the markets could continue to rally!
And then Bambi will claim credit, the media will give him full credit, and he will have a better chance of squeaking out a victory as the sheeple believe it is his policies causing the rally.....
He knows better than that. It was a bear market short-covering rally due to too much pessimism on the option side. But by all means believe whatever suits your fancy. Presidential elections do tend to have run-ups regardless of the probable victor.
I hinted at the exact same thought on another FR thread earlier this morning.
Have any of the business stories in the MSM tied the rally to Walker's victory? I haven't seen any yet.
But the business MSM wouldn't stop going on ad nauseum about Facebook two weeks ago. As usual, the MSM has perverted priorities.
I now see that the tie-in of the rally to the Walker victory was discussed by a couple of brave folks on CNBC.
Well, you can bet that the effect of the presidential race on the markets still won't be discussed in the business MSM anywhere near as much as Facebook was.
Lets plug in some numbers and see what patterns develop.
November 1992: Clinton elected President - Dow = 3240
November 1994: Republicans retake control of the House and Senate - Dow = 3807
June 2001: Jumpin Jim Jeffords gives control of the Senate to the Democrats - Dow = 10,990
November 2002: Republicans retake Senate - Dow = 8,537
November 2006: Democrats retake control of House & Senate - Dow = 12,342
November 2010: Democrats lose control of House - Dow = 11,092
Today, a year and a half since the Democrats lost control of the House - Dow = 12,415
Lets review. During the first two years of Clinton, while the Democrats retained control of the House and Senate, the Dow increased but was relatively flat.
In 1994, the Republicans took control of the House and Senate. The Dow exploded, increasing at an annual rate of almost 18% per year for the next 6 & 1/2 years, the entire period while the Republicans remained in control.
In June 2001, the Democrats gained control of the Senate. The Dow then plunged at an annual rate of almost -16% until November 2002, when the Republicans regained control of the Senate.
From November 2002, while the Republicans controlled both the House and Senate, until November 2006, when the Democrats regained control of both the House and the Senate, the Dow increased at a rate of over 20% per year.
In November 2006, the Democrats regained control of both the House and Senate. During the first two years of Democrat control (from November 2006 to November 2008), the Dow plunged at an annual rate of almost -15% per year. After four years of Democrat control of both houses of Congress, the Dow was down 10% from where it was before the Democrats took control.
In the year and a half since the Democrats lost control of the House, the Dow has gained 12% and is finally back to where it was in 2006, when the Democrats took control of Congress.
Anyone else notice a pattern here?
Republican Control = Bull Market and Prosperity
Democrat Control = Bear Market and Depression
It is not hard to do the math.
Just imagine the market after Obama is defeated in November and the GOP takes the Senate and House. Anyone doubt that it will go up???
Really? That certainly didn't hold true for the period around Obama's election in 2008.
Yes, it is true that over many elections there tends to be a turn-up mid June into the election. Viewed a chart just the other day showing the four year seasonal component with the crest centered prior to election day. I’m not so sure it’s going to happen this year either.
I have immense respect for Jim Grant, but I think he is incorrect, or only partially correct on this point.
The markets had reached very clear technical levels right at 200 MA (moving averages) and the Euro had cratered, sending the dollar very high.
Republicans tend to blow bubbles. Not good. They pop and many get hurt. Slow, steady growth is much better, in stocks, housing and everything else.
There can be many reasons for an event. More than one reason can be true.
6 & 1/2 years is a pretty long bubble.
I would much rather have consistent growth, which is what happens when the Republicans control Congress, than consistent devaluation, which is what happens when the Democrats control Congress.
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