Well the market was rather mild building steam and "hidden" volatility for a hyper move - pretty much regardless of outcome. Obama has the early poll lead this morning (depending on what poll you look at) - expectations by the media is a easy Obama victory and according to a NPR news story - if it is anything BUT an easy Obama victory they expect violent riots! What, are they kidding? The report reminded me of the Rodney King beating in LA - while I lived in San Francisco. I guess there is something to that NPR story, if a drugged out black man getting beaten by the police after a high-speed chase can cause riots in major cities, can you imagine an old stogy white man beating the first popular black presidential candidate? One story took the opposite side, that if Obama wins would could have riots, again I said WHAT? In this other story they said - have you seen Boston after the Red Socks won the World Series. Ok I see the point there too. I guess the point of the NPR story was there is lots to be mad about if he losses and lots to celebrate if he wins - their expectations are for a riot either way. I would "hope" the Americans are brighter than that - regardless of outcome. Who knows - let’s just hope people vote and celebrate in a non-violent and responsible way regardless of out-come.
So the message this morning - go out and vote! That is the important thing....and stay safe. Let's just hope NPR is wrong....and leave the rioting to those Boston Red Socks fans.
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Patience is the key
I in the middle of David Enihorn's book "Some People Fooled All of the Time" and I must say his firm Greenlight capital is very patience and knows when they are wrong. I keep coming back to the simple philosophy that while some may wish to IGNORE math at the end of the day you can't AVOID math. Enihorn's book is a key example of that as CFO after CFO he interviews avoids questions or give answers that are more assumption and opinioned based. The scary part of the book is the deep relationships between these firms, SEC, Treasury, Politics, etc. The back scratching is definitely raised to an art form.
Anyway - I keep thinking that Enihorn should write another book (or maybe I should - if I had the time) called "The Sheeple" - because these politicians and the government are playing the same game that Allied Capital and many other firms that Enihorn had issue with. Namely - ignoring math!
My concerned is that we (the sheeple) have not learned our lesson and neither has the politicians that control trillions of dollars. Capitalism didn't fail nor did the regulations - it was the government that failed - from intervention to regulating. Think about that for a second - the two biggest lending firms Fannie and Freddie (also happen to be the biggest lobbyist) - had failed a decade ago and involved in one of the biggest accounting scandals. Of course because those companies are so deeply rooted in Congress and donate lots of money to candidates - not a single person went to jail. In fact both Obama and McCain have hired on Fannie and Freddie's ex-CEOs, CFOs, managers, lobbyist, etc to help with their campaign - the same people that caused, responsible, accountable, and liable for the accounting scandal and the collapse of these firms. What does that say about Obama and McCain? But it is worse than that - Barney Frank, Nancy Pelosi, Hillary Clinton, and Chris Dodd (note all receive support from Fannie and Freddie) - believed that these companies could buy up the toxic paper and save the housing crisis in late 2007 and early 2008. They were warned that toxic paper is toxic paper - and it doesn't matter if you move it from one lending firm and putting on another - it doesn't get rid of the toxic paper. They believed that Freddie and Fannie were fine (already at over 20:1 leverage) and that they could increase their leverage close to 40:1 or 60:1 or even 100:1 without any problems. They decided to IGNORE math - and in the end it bite them VERY HARD and thus hurt US (the Sheeple - or Tax Payer). While - it was the Democrats leading the charge this time as per Freddie and Fannie taking on more debt, the Republicans are not without fault as well. Many voted along with Nancy Pelosi, just like the many Democrats voted to go to war. It is very hard to blame Republicans or Democrats - when both parties have to take liability and responsibility.
The problem though is getting worse - the economy is facing a serious meltdown and so far the answer has been to lower interest rates to 1% and flush the system with trillions of dollars (being printed out of thin air and unfinanced). The "HOPE" is that the Treasury and the Fed can finance it in the future - hoping that foreign nations will buy down our debt. However, China already made it very clear in Jan 2007 that they would NOT be renewing over a trillion in US treasuries and have already started buying Euros, Francs, and Yen - and are now one of the world’s largest buyers of Gold. Has China lost faith in the US Dollar? Well - actions do speak louder than words and combine the massive amount of printing of unfinanced dollars in this country - it certainly is NOT attractive.
In Enihorn's book he realizes the market is very knee jerky and his investments usually take 1-3 years to see their returns as he is focuses on the math to win in the end. The conclusion is simple - we as a nation from consumers, businesses, and most importantly our government continue to IGNORE math, but as Enihorn points out in his book at the end of the day you just can't avoid it.
The sad thing is that "Some People Fooled All of the Time" could just as easily be about our own Government in place of Allied Capital.
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Futures Pre-market
The futures are getting a good boost to the upside in the pre-market and front running the cash. Expect the ARB traders to short futures into the opening if the spread remains and buy the basket - causing a good little pop to the upside at the opening.
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Support / Resistance
In the resistance band - do we get a break out? Expect volatility and watch the close and levels intra-day
INDU 9250/9500 (It's a very narrow band and we could break out - the market is looking to rally right now - but watch the close. Today is about knee jerks not fundamentals.)
NDX 1300 / 1350 (Again a narrow range a good breakout is in the cards - it is about the close.)
SPX 950/975 (Another narrow range)
RUT 530/550 (Another tight range)
Expect a breakout at the opening - the question is does it continue and watch the close. We have had a recent narrowing of the trading range. This is a knee jerk either way - don't expect this to be a sign of things in the long-term.
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Conclusion
Let's all vote and hope that NPR's riot predictions are nothing more than just silly talk. It would be a sad day if that were to happen regardless of the outcome. It would be nice if both parties could work together, but with so much Bush hating in this nation and if a Super Majority outcome happens it will most likely be a one sided "F-U" situation. If we do get a Super Majority and Obama is the president - will he be strong enough to move towards the center and reach across the aisle or will he move to the left. If has voted 97% along party lines compared to 90% McCain. He also has a historically very "Left" agenda and record. However - I am more concerned about the economic picture rather than the social issues. He is already (along with Pelosi) ready to issue another 200-300 billion dollar stimulus check prior to Thanksgiving to boost spending. That just puts the government further behind the eight-ball and tells foreign nations whom we HOPE buy our debt - that we are on a spending spree.
Vote and remember to also think locally.
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