Wednesday, November 7, 2012

November 7, 2012

U.S. Stock Futures Decline as Obama Defeats Romney for President
by Bloomberg News
November 6, 2012

U.S. stock futures fell, following a two-day advance for the Standard & Poor’s 500 Index, as President Barack Obama won re-election.

S&P 500 futures expiring in December dropped 0.6 percent to 1,417.2 at 1:26 p.m. Tokyo time. The benchmark index rallied 1 percent over the previous two sessions. Dow Jones Industrial Average futures lost 52 points, or 0.4 percent, to 13,149.

“While the elections will determine who will be doing the negotiating, we’ll still have issues such as the fiscal cliff to deal with.,” said Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion.

U.S. voters had to decide between giving President Obama another four years or replacing him with Republican challenger Mitt Romney. Television projections showed Obama winning the electoral votes needed to secure a second term in the White House.

President Obama need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise.

The options market is implying about a 2 percent move up or down in the S&P 500 over the next four trading days, according to Susquehanna Financial Group LLLP’s head of derivatives strategy Trevor Mottl. That’s equivalent to an even-odds range of 1,389 to 1,445 for the close on Nov. 9 based on options prices as of Nov. 5, he wrote in a note to clients.

Day After

While the S&P 500 has risen an average 0.9 percent on presidential election days since 1984, the index had positive returns in only two of seven times on the following day, according to data compiled by Bespoke Investment Group. On average, the S&P 500 has declined 0.9 percent on the day after the polls, the data showed.

Stocks have on average rallied 3 percent in the two months following Election Day after a tight race, according to Thomas J. Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., who cited historical data from the last five elections with close contests. The equity market gains even more if the challenger wins, he said.

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More Government
by John Stossel
November 7, 2012

President Obama has been re-elected. Get ready for four more years of Big Bloated Government.

Hurricane Sandy didn't help.

The New York Times declared "a big storm requires big government," and my liberal neighbors agreed.

My science-challenged mayor, Michael Bloomberg, said the storm makes it imperative that America do something about climate change. He said this even though hurricanes have not increased and little evidence exists that man has much effect on climate. With Obama's re-election, we now will spend billions more on "green" strategies. But the Earth won't notice.

Other politicians say Sandy proves we need a powerful federal emergency management agency. So I invited the man who should be president, Rep. Ron Paul, to come on my show to give a sensible perspective.

Paul said, "We handled floods and disasters for 204 years before we had FEMA, and states and volunteers and local communities did quite well."

Paul's congressional district is on the Gulf Coast, so he knows what he's talking about.

"What we should have is real insurance," he said.

Real insurance means private companies make bets about floods with their own money. But America has little of that.

I know this first-hand. I built a beach house because government encouraged me to take the risk. Private insurance companies wouldn't insure most of us who built on the edges of oceans, and those that did charged high prices. "Too high," said Congress, "so government must insure everyone!" They said they'd price it so taxpayers wouldn't lose -- but as usual, they were wrong. Even before Sandy, federal flood insurance was $18 billion in the red.

And worse, cheap insurance encouraged more people to build on the beach. This is an absurd subsidy that should immediately be abolished.

But I fear I won't have much success convincing people. In "No, They Can't: Why Government Fails -- But Individuals Succeed", I explain how instinct leads us to assume that experts in Washington have the best tools to manage big risks. Most Americans believe that. Even Fox News anchors told me that "flood insurance is a role for the federal government!"

Viewers were angrier. One civil comment: "Libertarian is good on paper, but not in real life. Why would the Govt. turns its back when its people suffer?"

Because government causes suffering.

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Barack Obama Wins Re-Election
by Neil Munro
November 6, 2012

President Barack Obama has been re-elected president of the United States. Now, he is going to serve out four more years as a series of postponed crises and problems come due in his second term.

Republican leaders have said they will not back down on the budget-cutting, government-shrinking goals that they promised voters. The GOP was able to maintain control of the House of Representatives, but failed to secure the Senate.

The first thing on Obama’s to-do list is the “fiscal cliff,” a series of postponed decisions that are coming due in January, when federal income and investment taxes are scheduled to rise and spending is scheduled to slow.

If left unaddressed, that will likely act as a one-two punch to a stalled economy, further boosting unemployment and further endangering a recovery.

Obama’s much-touted solution is to raise some taxes on the wealthy and on businesses, and also to maintain spending on social programs.

But the Republican House majority was elected on a no-tax-hike pledge, and includes a larger contingent of small-government advocates than before.

Obama tried to negotiate a budget deal in 2011, but failed when he demanded too much taxes.

Also, Obama’s regulators have stored up a wave of new regulations that will likely wrap employers in a tangle of expensive health care and environmental rules. Those regulations will provide employment for Obama’s allies in unions and government, but could suck up companies’ spare cash that could otherwise go to job-boosting investment.

Whatever happens with the “fiscal cliff,” there’s no evidence that entrepreneurs and investors are wiling to take more risks as they worry about those regulations.

Those regulatory weights will hit an economy that has already been battered into paralysis by the impact of the housing bubble.

Even before the regulations and the fiscal cliff, national job creation failed to keep pace with the entry of graduates and immigrants into the job market while the economy has continued to slow through 2012.

That slowed economy would likely nudge up unemployment further than the 0.1 percent rise seen in October. If there’s another such increase in December, the formal unemployment rate will return to 8 percent.

Obama’s industrial policies — including his $70 billion of support for the green tech industry — have also stumbled.

Without another wave of federal funding and favorable regulation, more of those companies will go under, likely ensuring a renewed wave of green-tech bankruptcies on his watch.

Even his much-touted success with General Motors is faltering, partly because a huge proportion of its domestic sales are begin funded by sub-prime loans. Many of those loans — and GM’s balance sheet — may go red unless the economy recovers.

The president has also got to deal with a series of postponed international crises.

Those include the expanding meltdown in the Middle East, which may be assisted by his support of the Islamic revivalist parties that have now taken control in Egypt and Tunisia, and his planned withdrawal from Afghanistan despite the growing prospect that the Taliban — and their al-Qaida allies — will return to power.

Additionally, his continued control of the administration will help him keep the lid on numerous scandals — including the Fast and Furious gun-smuggling plan — and perhaps on the obscured circumstances surrounding the events prior and during the jihadis’ successful Sept. 11, 2012 attack on the U.S. consulate in Benghazi.

But the established media will likely continue to be an Obama ally in his conflicts with the GOP’s majority in the House.

“The Congress is about as popular as small pox,” CBS News’ Bob Schieffer tweeted Nov. 6, even before the presidential race was decided.

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