2012/11/01: Wait for it… heeeere it comes: US General Election Delay?

© 2012 ROHR International, Inc. All International rights reserved.

Yes, indeed, we know. This is something that a few folks have noted before, only to see it immediately refuted by the powers-that-be. But when you think about it…

…does either side have any interest in going forward if it is possible that any major portion of the Northeast remains dysfunctional on Tuesday in the wake of Super Storm Sandy? The Democrats surely wouldn’t want one of their bastions of electoral strength to be left without full and fair representation.

And what about the Republicans? Well, there are areas where they are very strong and the election is critical in Appalachia and elsewhere. Even if the powers-that-be on each side of the political divide allow that it might all average out, isn’t this a dangerous precedent for the standpoint electoral enthusiasm? In an America already suffering from an unhealthy level of voter apathy (at least up until 2010), is a “Don’t worry if you didn’t get to vote; it’ll all average out” a quality ethic for either party?

And there is one more very good reason. Almost all informed observers allow this is more of a battle for the very soul of the United States than the election of any particular individual. While Mr. Obama and Mitt Romney are the standard bearers at the top of each ticket, the stakes are more so the basic philosophy of government that may well dominate the US for a generation.

Is it going to continue to become increasingly statist along the lines of the Obama approach (with a major assist from his predecessor’s abandonment of some cherished Republican precepts)? Or is it going to go back to the more self-sufficient ‘classic’ American tendencies that Mitt Romney and Paul Ryan assert (rightfully or not) they will be able to put back in place?

And there is an important accelerant on all that partisan perspective that neither side has been very vocal about throughout the entire process, precisely because it is the most important prize. The truth that nobody dare speak too loudly is that…

 

 

…it is not just what you can legislate. It is increasingly what stands up to now ubiquitous US legal review of almost everything of any substance that both federal and state legislatures decide. And how many Supreme Court justices are going to be appointed in the next four years? Enough to influence what the legislative branch of government even attempts to accomplish on various types of reform for many years to come. That includes social policy as well as taxation and regulation.

And that becomes an economic issue as well. It goes to the point that Jack Bouroudjian and I have raised since more than two years ago. The problem with the Obama agenda can be boiled down to one term: Taxulationism¹.  That is the combined impact of taxation, regulation and protectionism imposed to an oppressive degree as official policy.

Our evolution of that term came out of a mid-2010 discussion of how the government had become so unmoored from the successful low taxation and regulation precepts of Dr. Arthur Laffer. Mr. Obama, and his minion’s implementation of his views, collectively seems the ‘Anti-Laffer’. While some may disagree this is the actual impact of Obama administration policies, Corporate America has chosen to vote with its rather fully stuffed collective wallet: by keeping it shut tight.

[¹Taxulationism © 2010 Alan Rohrbach & Jack Bouroudjian. All international rights reserved.]

All of that said, in such a highly charged partisan environment the Republicans cannot afford any taint of an election purloined by a lack of effective voting in the Northeast… even as tempting as the prospect might seem on the surface. And as such, this is the one instance where we would agree with Mr. Obama declaring a national emergency to put it off for, shall we say, 2 weeks.

While there would be howls from the Right and maybe even some on the Left, it would only be a matter of the Roberts’ Court not wanting to look like they stole the election for the Republicans in the midst of a national natural disaster. And it has already shown it is in favor of letting the people decide when it came to the health care program. No doubt this even more extensive and important issue would have any modest delay likely withstand a legal challenge.

AND there might be a very positive kicker… and I must give wife (a worldly and politically astute individual) credit for this one: If a delay actually comes to pass, she says there should be an advertising ban during the extension period. That would avoid any unfair advantage to the better funded campaigns, as their opponents likely already spent their last nickel into November 6th.

Imagine for a moment everyone going to the polls in a US general election without having been inundated by those (for the most part) stupid and misleading negative TV ads. And the networks would need to put together extended coverage of actual candidate appearances for the last week or two. As most of our readers are likely aware, some countries already have advertising blackout periods prior to elections… and it would likely be welcome by everyone (except for TV advertising sales executives) here as well.

Might that actually occur? Keep an eye on how long it is taking for the repair of the basic infrastructure in the Northeast. Yet, with millions of people in neighborhoods that are not ‘officially’ scheduled to get electric power (forget potable water or repair or rebuilding of heavily damaged structures) back for a week to 10 days as of today (Thursday), how are they possibly going to have properly organized and monitored polling places set up by next Tuesday?

And wouldn’t that just cause a bigger backlash? Imagine you are one of the folks without power that includes no heating, possibly with standing water in your basement, your employer is in a similar situation so you’re not earning any money at present, and transportation is still completely inadequate (if indeed available at all)…

…and you’re told to get over to your temporary polling place that they diverted precious resources to set up while the rest is still untenable? I certainly wouldn’t want to be the precinct captain who tried to ‘get out the vote’ under those circumstances.  I’d be telling my party leaders why they need to re-establish the basic necessities prior to expecting people to care about voting.

General Market Observations

Sandy is a human disaster, but ultimately not an economic one. The rebuilding effort that will be funded by the federal government flood insurance and other programs along with hefty insurance company payments (a transfer from Capital to Labor) will ultimately be stimulative in the short term. And that will boost otherwise lackluster US Q4 GDP.

And it waseminently clear from the significantly truncated electronic equities trading of the previous couple of days. December S&P 500 future did not exhibit any ability to reach, much less breach, the key 1,389-87 support Tolerance. The lowest electronic trade we saw was at 1,393. As noted recently, in this case there was (and ostensibly still is) a question of whetheritcan break another $40-$70 on top of $70+ it will have already broken since the previous week’s 1,460 high into that 1,389-87 area (if it should get there.)

And that remains important because even allowing there is interim support as nearby as 1,375 area, the next significant support is not until into the 1,350-1,320 range; with more major supports below that. Of course, the more pressing decision now that is has indeed pushed back above the top of last Tuesday’s gap lower on the opening at 1,417.00 (i.e. last Monday’s low) which it barely missed trading up to last Thursday is whether it will also push up for a daily Close above the higher next resistances in the 1,425-30 range. If so, the extended resistance is not until the 1,445-50 area, and even somewhat above it.

EXTENDED TREND IMPLICATIONS

Yet, even a recovery to test that resistance would have implications for the other asset classes. The most obvious of which would be another bout of weakness for primary government bond markets and US Dollar Index. It is of note that the latter pushed up to a new seven-week high Close Monday, only to immediately give it up yesterday when it became apparent that the equities were going to remain firm. And along with the resilience of the euro, that works hand in glove with the govvies stalling and key resistance levels.

▪ The December US T-note future recovery from a vigorous test of 132-00/upper 131-00 area was not surprising,and neither is the current stall out near 133-00. December Bund future has been the other resilient government bond market of late. Yet, it is still stalled at no better than its month-long test of the 142.00 area, with bigger resistance waiting up at 142.30-62. And weak sister December Gilt future that had already revisited its critical 118.50-.25 has also stalled once again at no better than its relatively depressed 119.52-.30 resistance on the current rally. All of which leads us to suspect they can take some pressure if equities remain at all resilient.

▪ Recent trend activity is very similar for the euro slippage back down below EUR/USD 1.3000-1.2950 congestion, even if mid-low 1.2800 recent basing area is a natural buffer. The US Dollar Index isalso now languishing back below .8000 again after pushing above it temporarily Monday on anticipation of storm-related equities weakness that never developed. However, there as well the more critical resistance is up into the .8050-70 area, and that was certainly never challenged. And just to point out the convoluted nature of the ‘drifting’ trend in many areas foreign exchange, the US Dollar Index daily MACD has remained UP since shortly after recovering from the .7860 mid-September low, even as weekly MACD remains well DOWN (even if basing to some degree at present.) And the mirror image situation applies to EUR/USD.

▪ While damage has been rightfully pronounced, December Gold futuremajor failure from its serial attempts to overrun 1,775-86 resistance only brings it back down to important support levels. While there is some congestion and weekly MA-13 support in the 1,700 area, even if it should spill further on renewed equities weakness that would also only leave it headed back toward the far more critical UP Break, congestion and weekly MA 41 in the 1,675-65 area.

Thanks for your interest.