This blog post originally appeared on RealMoney Silver on Oct. 27 at 7:35 a.m. EDT.
"Hyperbole is the currency of presidential campaigns, but this year the nation's future truly hangs in the balance." -- New York Times, Oct. 23, 2008
As indicated in
, Senator Obama appears well on his way to a comfortable win over Senator McCain. Moreover, large Democratic gains (even a filibuster-proof majority of 60 seats in the Senate and material House gains) seem inevitable, providing a likely exclamation point in the November 2008 election.
Not surprisingly, the recent widening of the Democratic lead has coincided with the depth of our nation's economic problems over the last two months.
Voters are now clamoring for change. They are
and don't want to take it anymore.
The conventional view is that an Obama win next Tuesday will have a negative impact on U.S. equities, as the Democratic party is seen as the party of higher taxes for the wealthy, trade protectionism, etc. It was my view, as well, up until recently; I now disagree, however, as circumstances have changed and so has my investment conclusion.
"The fundamentals of our economy are strong." -- Senator McCain (September 2008)
This is not a
, but speaking realistically, the severity of our financial crisis has been greeted by the Republican campaign with trivia and with a singular lack of understanding of the economy, while the Democratic campaign has responded with gravitas. While I am being overly simplistic, Senator McCain's campaign has been highlighted by continued clumsy and disorganized responses to our financial woes. (He did it
yesterday on "Meet the Press.")
While Senator McCain focuses on earmarks and pork barrel spending (a relatively trivial factor compared to the scope of the world's financial crisis) and Governor Palin talks hockey moms and pit bulls, the Obama/Biden campaign (which in its infancy was full of vague uplifting rhetoric) has morphed into pragmatic and solution-oriented mode (e.g., the recent caucus with seasoned financial types such as Buffett, Rubin, Buckley, Summers and Volcker) in an attempt to put needed flesh on financial policy and much needed reform.
(Turn and face the strain)
Don't tell them to grow up and out of it
(Turn and face the strain)
Where's your shame
You've left us up to our necks in it
Time may change me
But you can't trace time.-- David Bowie, " Changes"
The need and virtues of
regarding today's economic problems has not escaped the American voters. Given the depth of our financial problems, it appears increasingly unacceptable to voters (the majority of whom are investors) to endure the Bush Administration's (and Senator McCain's) current crash course on regulation (laissez faire) and its hastily crafted, ad hoc, dated and sometimes incoherent economic remedies, which have given little weight to their unintended consequences. Worse yet, the initiatives have given the electorate the impression of siding with the small cabal of avaricious, stupid and/or risk-insensitive investment bankers and bank executives who sold out America, many of whom have played a central part in turning the world's financial system into a
on Wall Street and are beneficiaries of the current Administration's Paulson-led Treasury programs.
Every day it grows a little more than it was the day before.
Oh, how it grows and it grows.
And where it's gonna stop I'm sure, nobody knows.-- The Temptations, " It's Growing"
Most seem to agree that it is now time to approach unconventional problems and risks with unconventional solutions and policy. Based on the polls, to many voters (and investors) today, the Democratic party seems far better suited to tackle the enormity of the risks.
Next Tuesday, investors will likely see economic reality with a Democratic bias, deciding that it's now time for change.
The consensus remains that an Obama/Biden win is a hostile stock market event, even more so if 60 seats in the Senate go to the Democrats.
By contrast, I have a variant view, as I look toward a different (and more salutary) market outcome than is generally expected following a Democratic win. In essence, there could now be such broad-based dissatisfaction with the current lack of leadership and poor decisions by the Bush Administration that investors could greet a Democratic win as setting a new stage of leadership capable of reversing the current view that U.S. economic and political preeminence is on the decline. Decisive, creative and coherent moves by a newly elected Democratic Administration could further engage investors in 2009.
In summary, a Democratic victory will underscore the seriousness of the economic challenges (both here and abroad) and I expect investors, perhaps surprisingly, to respond in kind, with optimism.
Doug Kass writes daily for
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Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.