In the past year, President Barack Obama has been introduced to Washington's realpolitik. As MarketWatch Washington Bureau Chief Rex Nutting aptly put it: This is how Washington works. The truth is, most times, it doesn't.

In theory, congressional lawmakers and the executive branch should be able to find common ground, aided by that long-standing American habit of compromise, to solve the nation's problems.

Continue reading This Is How Washington Works: Most Times, It Doesn't

This Is How Washington Works: Most Times, It Doesn't originally appeared on BloggingStocks on Sat, 20 Feb 2010 09:40:00 EST. Please see our terms for use of feeds.

To paraphrase Gordon Gekko from the 1987 movie Wall Street, "Gridlock is Good." As I mentioned in my earlier post The October Surprise: Poll news may be more important than Fed news for the stock market, the stock market tends to react quite positively to gridlock. It restrains the extremes of both parties from spending to pacify their respective bases. Without the ability to pass major legislation, fiscal responsibility is enacted automatically.

Remember that when the Democrats lost control of Congress in 1994 leading to divided government, the Boom of the 1990's began. I am not saying that a similar scenario will unfold here if the Democrats take control. However, gridlock has historically been quite positive. I discuss this in The U.S. Stock Market: Five reasons 2007 is looking like 1995.

Continue reading The 2006 election: Gridlock is good!

The 2006 election: Gridlock is good! originally appeared on BloggingStocks on Tue, 07 Nov 2006 12:31:00 EST. Please see our terms for use of feeds.

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...

Continue reading The elections: Why gridlock could hit stocks

The elections: Why gridlock could hit stocks originally appeared on BloggingStocks on Wed, 01 Nov 2006 19:00:00 EST. Please see our terms for use of feeds.