Watch the Stock Market

[Mayo]

According to Merril Lynch if the Democrats take control of the House and Senate, watch the market fall fast. Think they might know something?

 

[mp510]

Yup, I bet the stock market will go down. Maybe it won't crash, but it will drop significantly if the Dems takeover.

 

[orangelo]

Well I know I won't be investing much in stocks, I'll be out buying 100 AR-15 and M14 magazines and 10 AR receivers.

 

[Thin Black Line]

Actually, gridlock with a mixed Hill is good for business.

 

[ArmedBear]

Here's a liberal Democrat pundit's dark take on the Democratic platform:

http://www.slate.com/id/2153062/fr/rss/

He sees huge spending expansions, with no plans for collecting revenue, and a stated goal of "pay as you go." That means they plan to raise taxes, but don't want to say so.

That's not going to help continue the economic growth we're seeing right now.

He also sees that the Democrats are already planning to turn Iraq into Vietnam.

That's going to screw up world trade, among other things, by weakening US power. This will teach our friends and allies (read trading partners like Japan, South Korea, Taiwan) that we can't be trusted, because while we are the only remaining superpower, we don't have the resolve needed to win a war.

 

[Thin Black Line]

Armed Bear, I'm going to skim the pdf referenced in your link, but I doubt it
will say anything new since it starts off with this:

Democrats believe that America needs –
and Americans deserve –
a New Direction that provides
security, prosperity,
and opportunity for all.

They're only continuing historical precendence:

http://thehighroad.org/showpost.php?p=2833742&postcount=9

Not very "new" is it?

 

[ArmedBear]

I didn't say it was new.

I said that it doesn't bode well for business or trade, if they:

1. Take it seriously, which is not certain
2. Take both houses, which is possible
3. Get past Bush's veto pen, which of course has dry ink at the moment

 

[Thin Black Line]

Then again maybe the markets will react to things other than which stuffed
suit smiles on camera tomorrow:

http://www.theaustralian.news.com.au/story/0,20867,20712325-36375,00.html

Investors regroup as swaps panic hits

Paul J Davies, Gillian Tett, London
November 07, 2006

INVESTMENT banks and hedge funds are being forced to rapidly adjust their trading strategies amid a wave of "panic selling" reported in the US and European credit derivatives market last week.

This heavy selling has driven the cost of insuring debt against default in the market for credit default swaps to record low levels - signalling either that investors are extraordinarily optimistic about the outlook for corporate debt, or that prices are so distorted that they are no longer being paid for the risks they are taking on.

Credit default swaps make up the majority of the rapidly expanding $US26,000 billion ($33,000 billion) credit derivatives market.

They offer a kind of insurance against non-payment of corporate debt with the buyer of protection paying an annual premium that is a percentage of the amount of debt covered.

When the price of CDS instruments drops, this leads to mark-to-market losses for those holding the instrument and who have bought protection because they are paying a premium that is greater than the market rate.

The sharp price swings of the past week have confounded many investors who had expected to see the cost of debt insurance rise this northern winter, as part of a broader turn in the credit cycle.

Instead, those who have been buying protection in CDS markets - or expressing a negative view on the outlook for corporate bonds - have been wrong-footed by a so-called "perfect storm" of factors that have affected derivatives prices.

Company results have been strong, US rate expectations have shifted, and there has been a wave of CDS trading linked to a new derivatives product called "constant proportion debt obligation", which was created by some investment banks a couple of months ago.

Taken together, these factors have pushed CDS prices lower and are believed to have caused pain at some major investment banks and hedge funds.

Some of these are now apparently being forced to sell to cover their loses, which has exacerbated the market swing.

"(Recent trends) have led to panic selling of CDS," said Suki Mann, analyst at SG CIB.

Analysts warn that this "panic selling" could continue into this week.

"A number of (investors) appear to have finally thrown in the towel for 2006 and with the market sensing this move, it has further deepened their pain, creating a classic short squeeze," BNP Paribas said in a research note.

The most visible measures of credit derivatives pricing are Europe's iTraxx and the US CDX indices.

In the past two weeks, the main iTraxx index of investment grade companies has seen the cost of protection drop more than 16 per cent - or a change of 4.375 basis points to about 22.75bp, while the index of junk-rated names has fallen more than 7 per cent at 238bp, both record lows.

"panic selling" vs "investors are extraordinarily optimistic"? Ok, I'm lost

 

[Lone_Gunman]

I have been waiting to invest some money in the stockmarket until after the election also. I think the Democrats will win, and the stockmarket will fall some, and we will all have a good opportunity to put new capital in.

 

[Thin Black Line]

I was thinking hard goods like canned food and shotguns no matter who "wins."

 

[JohnBT]

I'm buying every month no matter what. Market is going up - great. Market is going down - great, shares are cheaper.

It takes less work this way. Think of all the hours I've saved over the past 25 or so years by not trying to time the market.

John

 

[hnk45acp]

The market has known for a while now that the Dems will gain seats and the market has kept going up so I doubt there will be any sort of crash.

 

[Mayo]

The market has known for a while now that the Dems will gain seats and the market has kept going up so I doubt there will be any sort of crash.

It's not the house alone they are worried about--it's losing the House and Senate that would cause the decline. To date most have thought the House would go Democrat and Senate stay Republican.

 

[real_name]

3. Get past Bush's veto pen, which of course has dry ink at the moment

Not true, he vetoed a stem cell bill in July.

LINK to story from the GOP News Network.

 

[jnojr]

And you know he wanted to pocket veto the border fence bill. Only intense public pressure and the upcoming elections got that signed.

If I could, I'd probably be buying magazines, ammo, etc. But our Democratic overlords in Sacramento have already seen to it that that's not an option for me, so I guess I'll have to fund my IRA instead

 

[ArmedBear]

Not true, he vetoed a stem cell bill in July.

True. He probably had to borrow a working pen.

Now if he just vetoed some OTHER dubious Federal expenditures now and then...

 

[cracked butt]

I'm pretty sure that the marrket is topped out or very close to it already, it has been for the last 2 weeks. Usually when it tops out and can't push any higher, it declines. The elections might have prolonged upward trend by a few weeks, but its not going to have any long term impact on it.

 

[cracked butt]

According to Merril Lynch if the Democrats take control of the House and Senate, watch the market fall fast. Think they might know something?

They might know that they are lying about their prediction in order to dump their holdings on every sucker willing to buy.

 

[Mayo]

Who in their right mind would actually start buying if the Democrats take control of the House and Senate? Not very good foresight if they do.

 

[bclark1]

cracked butt, that's going to encourage people NOT to buy.

DJI: 12,156. Let's see what happens.

 

[Justin]

The market may very well bobble as a result of the outcome of the elections.

But it won't crash.