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.
As a complete amateur when it come to the stock market, would a learned FReeper please school me on what the term 'discounting' means here? I do not understand how 'discounting' means the market rose significantly.
Imagine if the gop grew a set after being voted in and IMMEDIATELY announced the dismantling of Department of Education, IRS,Homeland insecurity, ATF, and EPA... woah nellie...
Here is how I understand it...
This is the premise that the stock market essentially discounts, or takes into consideration, all available information and present and potential future events.
When unexpected developments occur, the market discounts this new information very rapidly.
The fact that the stock market is essentially a discounting mechanism explains the wild swings in stock indexes following unexpected events such as a natural disaster or a terrorist attack, or an earnings miss in the case of an individual stock or maybe in the case of Scott Walker’s victory, a harbringer for this November’s elections.
Of course, efficiency of the stock market as a discounting mechanism has been vigorously debated over the years. I am not going to get into that.
Well the Financial Times say stocks rose on hopes of a stimulus, but I’m like you and believe Walker’s win was a big influence.
No doubt at all!!
SeekAndFind gave a good response, to which I would add: In order to benefit from market moves, one has to be IN the market BEFORE the move happens. Yes, it is true, that today, had you bought the open of the market and rode the all-day rally, you would have been golden. But that is generally not the case, getting in late is normally called “chasing” a move. That bears the risk of getting involved in the profit-taking that may occur while the early-inners take positions off as the market rises. Yet chasing, IMO, is probably the best-odds non-fundamental-based approach. (Of course, holding while the market is doing nothing, or still declining, before the move, which you have to do to be in the move) bears its own risks.
Subpoint being, there is always a tendency of “latecomers” to chase a move. There is always a tendency for shorts to scatter (which means they have to BUY, increasing the intensity of surprise up-move) should an up-move begin and gain force.
Real point being, the best position is to front run a move. If you can. To be in before it occurs. Whether that move is a longer-term, sustainable move, or, a mostly a one-day orgy plus probably a little follow through of buying after a period of revulsion as was today.
One-word answer, “discounting” means “anticipating”. There is also a proper technical explanation, primarily applied to “discounting a note” which means, if you are the owner/recipient of say a mortgage and want to sell it and get cash today instead of your stream of payments over time, a buyer of your note generally will not give you full value. The obligee/payor may decide to pay the note off early, leaving said buyer of your note without the interest he may anticipate. The buyer may default, leaving him with a loss and the hassle of a collection effort.
Facebook was another example. [The price of Facebook stock on its IPO] discounted the glorious future of having every person on earth using their service. Those who bought the stock at the open that day paid for all the possible growth the company was anticipating, of course, painting a rosy picture of the future.
Oil went up. Another day of government dumping of pension money polluting the so called “market.”
BS. The market spiked due to the Walker/GOP victory. If it was NOT the Walker/GOP victory, the Dow index wouldn't have budged an inch....or, most likely, it would have gone down quite a bit.
The Media spins anything 180 degrees if it's favorable to the Republicans or Conservatives.
I don’t doubt it one bit. Just purging the Obamabastard from the oval office serve as a purgative for the American Body Politic and restore the intestinal vigor of a moribund economy.
I’m with you - Walker;s victory was a big factor in markets going up.
Scott Walker victory news is fading faster in MSM than snow flakes in July.
Now pins and needles while awaiting SCOTUS' decision on Obamacare...wait and see what the markets do after that decision.
” Have any of the business stories in the MSM tied the rally to Walker’s victory? I haven’t seen any yet.”
Neither have I, and I was looking.