October 27, 2008
We are entering the final week of the longest Presidential campaign in our nation’s history. At the same time, the world economy continues to flirt with chaos and our nation’s equities market indices are diving at a faster pace than Superman’s swooping down from the sky to save Lois Lane from a potential rapist. Some stockbrokers believe that an abrupt and decisive nosedive in the markets might have a cathartic effect and finally bring us to the long-awaited “bottom”, from which there would be only one place to go: up. Rock musician Tom Petty wrote a song about the death of his mother, called: Free Fallin’. That song has recently become the theme for America’s stock markets. The situation has become so bad that many fear it may be necessary for the feds to suspend equities trading until all of the nervous investors and frenzied hedge fund managers have a chance to gather their wits. Would the government really intervene and close the stock markets for a day or more?
There is one authority who earned quite a bit of “street cred” when our current economic crisis hit the fan. He is Nouriel Roubini, an economist at the Stern School of Business at New York University. He earned the nickname “Doctor Doom” when he spoke before the International Monetary Fund (IMF) on September 7, 2006 and described, in precise detail, exactly what would bring the financial world to its knees, two years later. As reported by Ben Sills and Emma Ross-Thomas in the October 24 edition of Bloomberg:
Roubini said yesterday that policy makers may need to shut down financial markets for a week or two as investors dump assets. Trading in futures on the Standard & Poor’s 500 Index and the Dow Jones Industrial Average was limited today after declines of more than 6 percent.
This week brings us more earnings reports and new housing starts that could send already skittish investors (as well as terrified hedge fund managers) on a “panic selling” binge. Could this trigger a market shutdown by the government as predicted by Dr. Roubini? If so, we may find the markets closed for the final days before the Presidential election. The Republicans and their media trumpet, Fox News, would likely seize upon such a development, characterizing it as validation of their claim that the investing public fears a “socialist” Obama Presidency. In reality, there would be no way to measure the impact of the election results on the equities markets under such circumstances. If the markets were kept closed until after the election, there would be quite a number of investors, chomping at the bit to dump their portfolios during the hiatus, ready to do so as soon as the markets re-opened. On the other hand, Stuart Schweitzer, global market strategist at JP Morgan Private Bank appeared on the October 24 broadcast of the PBS program, Nightly Business Report, and explained what to really expect about the impact of the Presidential election on the securities markets. Schweitzer believes that regardless of who is elected, once we get past Election Day, there will be a sense of certainty established as to who will be making economic policy going forward into the new Presidential term. This fact in itself, regardless of what that economic policy might become, will eliminate the element of uncertainty that breeds some degree of the fear in the hearts of investors.
If the stock markets really end up being closed during the final days before the election, we would likely see more havoc than calming. The timing would prove too irresistible for conspiracy theorists to ignore. Some would see it as a plot by the Republicans to conceal how bad the economy really is. Others might see it as a ploy by “Washington elites” (a term used by some in reference to Obama supporters) to conceal widespread fear of putting a “communist” in charge of our nation. The smartest course from here would be for the Federal Reserve Board’s FOMC (Federal Open Market Committee) to undertake a responsible, public relations role when it meets on Tuesday. They should be ready to explain to the public what has really been happening in the markets: an unregulated species of investments called “hedge funds” has been causing mayhem on the trading floors. Many (if not most) of these hedge funds are going broke and they are attempting to secure a place in the line for Federal bailout money. They have caused equities trading to function more like eBay: the only market movement that matters over the course of any given day is what takes place during the final three minutes before the closing bell, when the hedge fund managers dump stocks. On eBay, the winning bid for an item is usually made during the minute before an auction ends. Unlike eBay, the stock market numbers can go up or down. These days, the index movement prior to the closing bell is usually seismic (in one direction or the other). It was never like this before. These trading patterns often trigger pre-established “stop loss orders” to sell stocks, usually established by individual investors upon purchase of those stocks. The result is an avalanche of “sell” orders at the end of the day. The FOMC needs to explain this disease to the public and let us know the Fed is working on a cure. Closing the markets in the final days before a Presidential election will not be a cure. Such a move will just create a scab that will quickly be picked away by an investing public that needs to ease up on the caffeine and go out for a walk.
The Voting Begins
October 30, 2008
The long-awaited 2008 Elections are finally underway. According to the Early Voting Information Center website, 32 States allow in-person early voting. As the voting proceeds, we are seeing an enormous number of people opting to cast their votes before November 4. On Tuesday, October 28, Gary Langer (polling director for ABC News) reported that as of that morning, 9 percent of “likely voters” had already voted. As reported in the October 30 Washington Post, Michael McDonald, an associate professor at George Mason University who compiles early-voting statistics, observed that his running total of early voters now tops 16.5 million. USA Today reports that approximately 25 percent of Georgia’s registered voters have already cast their ballots. In Florida, Governor Charlie Crist extended the hours for early voting. Prior to Crist’s executive order, Florida law allowed for early voting 8 hours per weekday and a total of 8 hours over the weekend. The polls in Florida will now be open 12 hours per day, through Sunday, the last day for early voting. The Miami Herald reported that prior to Christ’s signing of the order, the long, winding lines at the polling stations resulted in waits of as long as four hours to get to a voting machine. The Herald reported that as of Tuesday morning, 10 percent of the state’s registered voters had already voted. On Wednesday, October 29, Susan Saulny reported in The New York Times that there have been rumors circulating in Jacksonville, Florida’s African-American community that early voting could not be trusted because the votes cast early would be discarded.
By this point, there are already reports of voting machine problems and irregularities. Martina Stewart reported for CNN that in Jefferson County, Texas, the County Clerk admitted to receiving “about half a dozen calls” that touch-screen voting machines were recording votes inaccurately. Apparently, the candidates’ names are so close to each other on the screen that there is a possibility of pressing the wrong name when making the selection. The machines have a “summary screen” where the voter can verify that the correct candidates were selected before finally hitting the button to actually cast the votes. Similar problems were discussed by a reporter named Bill Murray at WSAZ in West Virginia. Murray’s report pointed out that long fingernails and contact with the screen by bracelets could result in erroneous votes.
On Monday October 27, The New Mexico Independent reported that in Albuquerque, the American Civil Liberties Union filed a lawsuit against a Republican state lawmaker, alleging violations of the Voting Rights Act and disclosure of confidential information about voters, including Social Security numbers. The article discussed the efforts of a Republican State Representative, Justine Fox-Young (a defendant in the suit) to support claims of voter fraud in the state’s June election. The Independent had previously reported that Republican Party attorney Pat Rogers had hired a private investigator named Al Romero to make contact with voters whose registrations were under scrutiny by Republican activists. The article discussed allegations by two legally-registered Hispanic voters, that they had been intimidated by Romero. Pat Rogers had been cited in the U.S. Department of Justice report about the firing of U.S. attorneys and was described as one of the New Mexico GOP activists who complained to the Department of Justice about then-U.S. Attorney David Iglesias. Iglesias was one of the U.S. Attorneys fired by Attorney General Alberto Gonzales for political reasons. The firing of Iglesias was a result of his failure to pursue a politically-motivated, bogus “voter fraud” investigation.
If Barack Obama defeats John McCain by a narrow margin, we can expect protracted recounts and microscopic inspections of voter registration documents. My concern about this was reinforced when I read a quote from McCain speechwriter, Mark Salter, in a Washington Post article by Michael Leahy, on Thursday. Speaking about John McCain, Salter said:
So, don’t expect McCain to be a “gracious loser”. Unless there is a landslide on Tuesday, there could be a long, ugly fight, reminiscent of the election fiasco of 2000.