Gridlock? Buy!

  • Election winner? Still up in the air…
  • … but pollsters made fools of themselves
  • The Gray Lady tips her hand
  • Biden embraces problematic endorsement (oopsie)
  • Fast, accurate election results: a case study
  • The market and the illusory “blue wave” 
  • The Fed and S&P 500… Coincidence? 
  • Pollsters’ south Florida foul-up
  • Readers say “Cheers!” to The 5’s Election Day episode… Another asks: “Is your brain functioning?”… And more!

So we don’t know who the winner is… but we do know the pollsters made blithering idiots of themselves. Again.

Glenn Greenwald

The question answers itself, right?

But it’s no surprise if you were with us last Thursday, when our Jim Rickards unpacked the problems with polls — including the problems that hadn’t been fixed since the 2016 debacle.

Nor does the elite impunity end there. Before the first polling places closed last night, America’s “newspaper of record” assigned itself and its media brethren a solemn and weighty task…

NYT

Having let the mask fall a bit too much, the Gray Lady deleted the tweet and tried walking it back: “The news media projects winners and reports results; it does not declare the winner of the election.” Heaven forfend…

As we write, seven states are still either “too close” or “too early” to call — a new distinction the media are making this year, it seems.

While Michigan overall is still up in the air, here in the Upper Peninsula the results are final from Gogebic County. It’s one of the 200 or so “pivot counties” across the country that went for Barack Obama in 2008 and 2012… and flipped to Donald Trump in 2016. For whatever it’s worth, Trump improved slightly on his 2016 margin there, winning with 55.6%.

If it all comes down to Michigan, and if Joe Biden loses… well, let’s rewind two months…

Michigan Republican

The Biden campaign gleefully accepted the endorsement of former Republican Gov. Rick Snyder. Never mind Snyder is widely believed responsible for the infamous lead-in-the-water-pipes catastrophe in Flint.

We can just imagine the thought process of Biden’s campaign team after touting Snyder’s support: OOOH, LOOGIT ALL THE SUBURBAN WINE MOMS IN OAKLAND COUNTY THIS’LL IMPRESS! Oh wait, the Blacks in Flint won’t hold this against us, would they? Uh, it’s not like… a critical mass would actually stay home on Election Day or something, right? Uhh… OH S***!

If the glacial pace of the vote count strikes you as the stuff of third-world countries, you’d be mistaken: Many developing countries tally their results much faster and with less question about their validity.

Take Latin America’s biggest country: “Brazil — a much poorer and less technologically advanced country than the U.S., with a much shorter history of democracy — holds seamless, quick vote counts about which very few people harbor doubts,” writes the American journalist Glenn Greenwald, who took up residence in Brazil 15 years ago.

“For the 2018 presidential run-off election that led to Jair Bolsonaro’s victory, 90% of all votes were counted and the results released by 6:00 p.m. on the day of the election: the time the last state closed its polls. The full vote tally was available within a couple of hours after that.”

But in the United States, “no matter what the final result, there will be substantial doubts about its legitimacy by one side or the other, perhaps both. And no deranged conspiracy thinking is required for that.”

Meanwhile, “any residual authority the U.S. claims to ‘spread’ democracy to lucky recipients of its benevolence around the world is close to obliterated.”

Wall Street has quickly adjusted itself to new assumptions, now that a “blue wave” sweep of the White House and Congress is out the window…

Drone Strikes Saudi Oil

Yesterday, in that blue-wave anticipation, the Dow notched a 555-point gain — its best performance since July. But today, at last check, it’s tacked on another 568 points. (We’ve always been at war with Eastasia, right?) The Big Board is back above 28,000.

The S&P 500 is up even stronger at 3,460. The tech-heavy Nasdaq is strongest of all, up nearly 4% at 11,585.

Precious metals are meandering, with gold clinging to $1,900 and silver a penny below $24.

“Markets love gridlock,” elaborates our Greg Guenthner.

Assuming the scenario described above, “we won’t see a huge push to break up big tech and we won’t have to ‘reset’ our thinking to incorporate sweeping new infrastructure legislation.

“The focus can return to stimulus, earnings and all the other mundane news items the financial media leans on to fill the 24-hour news cycle.”

Oh, and the Fed. The Federal Reserve begins two days of meetings today, after which it will issue its latest “policy statement” tomorrow afternoon.

Of course, the Fed will leave its benchmark fed funds rate at near-zero levels. More revealing will be any clues the Fed drops about its $7 trillion balance sheet.

We’ve been paying heed for months now to a chart of the balance sheet… but look what happens when our resident quant Jonas Elmerraji overlays it with a chart of the S&P 500…

Drone Strikes Saudi Oil

“As the S&P plunged due to the COVID-19 pandemic, the Fed went on a buying spree,” Jonas reminds us – “and ever since, their actions have correlated almost perfectly with the price action in the S&P.

“The massive inflation of Fed assets drove stocks higher this spring, and as that buying spree has cooled off, so too have stock prices.

“That’s not at all surprising. The Fed has made it clear that they’re willing to take unprecedented steps to shore up the economy in the face of the pandemic. And they’ve decided to use stock prices as one of their key benchmarks for how well they’re doing that job.

“Whoever winds up winning the White House when all the votes are counted, that game plan from the Fed isn’t changing,” Jonas ventures.

“If you’re a tech investor, the Fed has been your best friend all year long. The massive allocation to tech stocks in the S&P 500 coupled with a shift to passive investing strategies have created a perfect environment for the big tech names to get even bigger – and for buying opportunities in small, undercovered technology stocks.

“I think that’s very unlikely to change.”

And then there are the pot stocks.

The cannabis ETF with the ticker symbol MJ jumped big-time yesterday and the day before. It’s pulling back a bit today, but not much.

Perhaps the cannabis sector is a bit less sanguine at the prospect of the Dems in the White House and the GOP controlling the Senate — less likelihood of reform.

“But even if nothing were to happen at the federal level when the election dust settles (an outcome I doubt), there is still a lot going on in the states,” says our Ray Blanco.

Voters in four states passed referendums yesterday legalizing and taxing recreational marijuana — New Jersey and Arizona, as well as red-state South Dakota and Montana.

“A sweep of these states would add $9 billion to the size of the U.S. cannabis market according to analytics firm New Frontier Data,” Ray tells us.

“New Jersey going legal could tumble a line of dominoes all along the populous northeast, flipping states like New York, with a population of nearly 20 million, Pennsylvania and its nearly 13 million and Rhode Island and Connecticut with their combined 4.7 million. Altogether we’re talking about 13% of the U.S. population.” Stay tuned…

If the presidency is still up for grabs, at least we can say good riddance to Donna Shalala.

Back in April, we spilled a bit of digital ink on a key plank of the CARES Act, the big pandemic relief bill: Congress punted on its basic duties in deciding how to spend $454 billion in bailout funds — outsourcing the responsibility to the Treasury and the Federal Reserve.

The bill did provide for a bipartisan commission of congress members to supposedly exercise oversight. One of the Democrats named to the panel was Shalala — Bill Clinton’s secretary of health and human services and, in more recent years, a representative from south Florida.

The problem was that Shalala owned shares in many companies that could potentially benefit from the bailouts… and she failed to disclose those positions as required of congress members by a 2012 law.

Bad look — even by D.C. standards. It was one of several issues her Republican opponent hammered her with during the campaign. And when it was all over last night, well, here’s the tally courtesy of Miami’s ABC affiliate…

District 27

The Miami Herald calls the victory by former TV journalist Maria Elvira Salazar “an upset that neither party anticipated heading into Election Day.”

You mean the experts got it wrong again? Say it ain’t so!

“Excellent e-letter yesterday, Dave! You made my day,” a reader enthuses in a short note.

Another one went a bit over the top. “Kudos to Dave Gonigam for his superb piece on Election Day. It was as fine a piece of political and sociological analysis as I have read in a long time.”

May we suggest reading a bit more widely? Heh…

“Is your brain functioning?” reads a counterpoint that we fully expected. For some readers, it seems our long-standing “pox on all of ‘em” position is out of step with the EXISTENTIAL CRISIS vibe that provides a sense of meaning in life they can’t find elsewhere.

“Apparently, some people don't use the gray cells in their cranium! Why? Who knows?

“Trump is not the savior, but he is trying to save what little freedom in the U.S. and to a degree in the world remains. Are you so brain-dead that you prefer tyranny and socialism/communism?

“The globalists/elitists have had their way far too long and if it is not stopped now, then forget any kind of freedom on this planet. But it looks like all the duds glued to their smartphones have lost touch with reality and prefer to live in a virtual world.

“I for one will still fight with my last breath for the freedom that is inherent to living a normal life. I only hope that I am not alone.”

“This election is between freedom and oppression. Between a constitutional republic versus Socialism/Communism,” adds another.

“Where have you been? Don’t you ever read and study the facts?

“Sorry – bad article. You make light of our future and the future of all Americans. America is going to get what it deserves. I hope it picks wisely.”

The 5: We lost our constitutional republic long ago — perhaps as far back as 1898 with the Spanish-American War. Or at the latest 1947, when our leaders decided the nation must adopt a state of permanent mobilization for war to counter the Soviet menace — ignoring the warnings of “Old Right” types like Robert Taft, never mind Founders like Madison.

If Donald Trump wants to demonstrate he’s serious about restoring a constitutional republic, he can start by pardoning Julian Assange (and Chelsea Manning and Edward Snowden).

Anyway… we are not oblivious to the hard left and its bottom-up “long march through the institutions” strategy inspired by Antonio Gramsci.

But we daresay their time hasn’t come — regardless of who wins. Joe Biden is a centrist Democrat hack and so is Kamala Harris. The Democrats’ donor class who installed them as the party’s nominees have proven extremely adept to date at keeping the hard left in line. Look how they throttled Bernie Sanders for two straight election cycles.

This year, they mobilized the Sanders-Warren forces by forever invoking the specter of “Orange Man Bad.” The lefties rationalized playing ball with the centrist corporate Dems by saying, “Once they’re in, we can push them aside.”

But as a wag on Twitter said yesterday, it’s far more likely that the centrist corporate Dems will quickly pivot from “Shut up and help us get rid of Trump”… to “Shut up or do you want another Trump?”

More tomorrow…

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. Just a thought, courtesy of our acquaintance Scott Horton, the tireless podcaster: If Trump loses, it might be because he spent too much time hammering away at “socialism” — which doesn’t ring true with anyone other than true believers — and not enough time reminding people that for nearly a half century, Biden was an integral part of the system that failed them.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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