GM Kills $10 Million Facebook Ad Campaign Because It Didn't Work
JCPenney's Ron Johnson: 'Customers Don't Get Our Pricing Strategy'
The mid-term elections on Nov. 7 are now less than a week away. Polls indicate that Democrats are coming on strong. In fact, a Wall Street Journal/NBC News poll released today found that 52% of voters hope Democrats will control Congress vs. 37% who root for Republicans.
Looks like we may be in for a bout of governmental gridlock -- when opposing parties control the executive and legislative branches. Traditionally, investors cheer at this prospect (indeed, that may be one reason the market has fared so well in the past month). The theory is that when there is gridlock, the Federal government isn't able to get that much done and investors don't have to worry about pesky issues like healthcare reform, tax increases or major policy shifts of any kind.
That's the theory anyway. But it doesn't quite pass the smell test, if you ask me. Is it really the best thing for our country, economy and stock market at this point in time to have an ineffectual Federal branch? I don't think so...
Sure, simple numbers back up the gridlock gibberish. In an Oct. 25 report, The Schwab Center for Investment Research found that in calendar years in which there was gridlock, stocks returned 14.08%. But in years where the same party controlled the legislative and executive branches, the average annual return was 10.41%. Still, Schwab analysts conclude on deeper analysis, "There is no statistically significant relationship between political control of Washington and the stock market."
Truth is, a growing cadre of analysts, including the folks at Stock Trader's Almanac, are arguing that the mid-term elections this time around may have the most in common with 1994. That was the year when Clinton was President, Democrats lost control of Congress, and stocks fell in the five days leading up to the mid-term elections for the one and only time since 1934. The Almanac's analysts warn investors today, "enthusiasm that lifts stock prices may dissipate within days of the final tally." Hence -- even if there was a pre-election gridlock euphoria in the market lately, chances are you've already missed it.
Here's an even scarier take: Doug Roberts worried recently on Blogging Stocks that a Democratic Congress and Republican president could be a terrible combination for the stock market. He conjured up a future where a Democratic Congress is spending on social programs to earn fans in advance of the 2008 Presidential election at the same time President Bush continues to cut taxes to boost the Republican cause. The result would be even worse fiscal imbalances than we already have. That would inevitably lead to higher interest rates down the road, Roberts argues. Egads.
There's even a case building in these final pre-election days, that ever-confident Republicans may surprise us all by winning a majority in Congress yet again.
The market has had a great run in the past month. But one reason it has wobbled in recent days may be because investors are already starting to wonder if the "gridlock is good" theory is all its cracked up to be. Even if you still buy it, keep in mind, it is probably too late to play that investment card, anyway.
[Photo: Richard Summers]
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 2 of 2)
11-02-2006 @ 11:09PM
Gert Hoffman said...
If America screws up, and elects Democraps into the house, I hope you will all starve, like I know we will from idiots running the country into the ground, like Pelosi, Ford, and other losers who will cut and run, and let all the terrorists know, AMERICA IS FULL OF COWARDS, JUST KILL A COUPLE THOUSAND, AND THEY WILL RUN LIKE CHICKENS! I want to know, if America is stupid enough to give us wimpy leaders, and con artist liberals, who make me vomit, with their bullshit talk.
11-02-2006 @ 11:29PM
Dave Armand said...
I like this liberal talk. Bush is the biggest liberal. For everyone except America. Only stupid ingrates believe the propaganda Republicans spew. Using catchy advertising phrases like "cut and run" "flip flopper" and "stay the course" just don't cut it anymore. If you and your republican friends know exactly what terrorists think -you sure think you know what is going to happen in the future- then why dont you figure out how not to get Americans killed.
Taking resources from those who are wealthy (the US) and giving to those in need (the people of Iraq) in the name of spreading democracy and "liberation" is the essence of being a Liberal.
Go to school and learn something.
11-03-2006 @ 10:02AM
Pat Shaw said...
Right now, the market -- like politicians -- is a lot of smoke and mirrors! Why should Google be at $475, when Yahoo! is under $30 and AOl at $20? They all do the same thing! I can get exactly the same information and links regardless which I use, because they all pool from one another. Google just caught the imagination of the investor, who really believes it is "different" and "special." Doesn't that sound like the politicians campaigning these days? We're all suckers for a good performance, aren't we?
11-03-2006 @ 12:26AM
Chris Lesniak said...
One of the greatest rights we have as Americans is the right to vote.
WE elected (then re-elected) President Bush.
If WE do not like the gridlock in Washington, WE need to change it.
Change is difficult, but America has always been able to work through difficult periods and remain the most powerful and adaptable country in the world.
At some point the citizens of the country will find a way to correct the system. We always have in the past.
Vote.
11-03-2006 @ 12:41AM
S. in Kona said...
Another Halloween story. Be scared, vote Republican. Yet...
How can the Democrats possibly do WORSE with Congress? The legacy of this congress is graft, corruption, enormous helpings of pork, ethical and moral degradation, and poking its nose where it doesn't belong (Schiavo case), all while rewarding the top 2% of taxpayers (or tax scoffs) and cutting benefits for veterans. That's sure showing compassion for our troops.
How sad that Americans have as their supreme leader a man who has never truly succeeded in any previous endeavor. He has always been bailed out by money or daddy or Jim Baker. He doesn't even have a real accent -- it was borrowed to get elected in Texas.
He and his pals have squandered(or misused)our reputation in the world, our troops, our energy, our money, our budget surplus (brought to you by Demorats, thank you), and Congressional pages, and with them in charge, we are in the process of doing the same with our environment, healthcare, laws (what was it I learned in elementary school? No one is above the law! Ha!), children (no child given a good chance, more like), judges (remember that we have had Democrat presidents for only 12 of the past 38 years, so most sitting judges have been appointed by Republicans), energy policies (brought to you by Exxon and BP -- BRAZIL as a world leader in energy? Yikes!), and elected official ethics. The work of the Republican-controlled do-nothing-good Congress will take years to repair.
If there is a recession or depression in the next 5 years, thank this Republican Congress and W for their irresponsible fiscal policies.
11-03-2006 @ 4:33AM
debbie said...
Wooohoooo Demo's...we will take control,,and at least we are NOT rebuilding country's and then rebuild again,when the money should have stayed in USA to begin with,most of you running your lips are seniors more then likely,and have NO children at home and dont know what its like without that tax credit,this is just a Scare to try and NOT get the DEMO's into the chair,,will Not work!..We will take Control,,and all the way at the top as well..one step at a time,,Take care of USA first ,,then worry about outside if there is more,we dont take care of our own people why should be take care of the world,,we are america...
11-21-2006 @ 7:05AM
Anise.Roe said...
AffordableEssays.com uniquely combines high-quality customer service with affordable prices to produce the kind of volume other essay-writing sites can only imagine