Tuesday, October 12, 2010

Election’s Impact on Stocks, Gold, Oil, Currencies and More

From Martin Weiss Research.

The article is a transcript of a conversation between Martin and John Zogby (of the Zogby polls). Here are the pertinents:

"The entire world is watching, and make no mistake: Global investors are already voting with their money, already dumping the U.S. dollar, already rushing to nearly any asset that can go up when the dollar goes down.

Will these trends continue after the elections? Or will they suddenly reverse? How can you protect your wealth and build it in the face of global investor reactions to our elections? What are the most profitable enduring trends ahead?"


"I see three possible scenarios: In the first scenario, fiscal conservatives sweep into Washington. A growing number of Republicans, Independents and even Democrats — whether incumbents or newcomers — come to town with a mandate to block any new spending programs or even cut the size of government.

In the second scenario, neither party gains operational control of either the House or the Senate.

And in the third scenario, Democrats retain a majority, but only by a very slim margin. So even in this third scenario, they are unable to ignore the public rebellion against bailouts, and it becomes next to impossible to pass more bailout laws."


"My take-away is that this boils down to just one single scenario which is the most probable: A tug of war. Everyone else calls it GRIDLOCK."


"Which side is going to win? Neither! For a while after the elections, it may look like austerity is the big winner. But as soon as investors realize that means a collapse in the economy, they’re going to sell like crazy and run for the hills. And as soon as markets fall apart, the politicians are going to get cold feet and they’re going to back off. That’s the tug of war. I don’t care how fiscally conservative they are. Politicians are politicians. When they see things falling apart, they’re going to scramble to do something about it."


"...if Congress and the administration are locked in a tug of war or if you see gridlock in Congress, you have to ask: Who or what is going to step in to fill that power vacuum? What is the only institution that still has the power to act? Ben Bernanke! The Federal Reserve!

Exactly. As soon as it looks like markets are falling apart again, Bernanke will jump in with a second major round of money printing."


"The problem is they can print all they want whenever they want … but they have no control over where that money goes! So instead of going into the U.S. economy, investors pour money into other things."


"...if there’s a major Republican victory, you’d see a correction in gold … and then you’d get another rally if the Fed steps in."


"So the question boils down to, how low could the dollar go? To brand new, all-time lows."


"Right now, I see three opportunities. The first is gold. We’re already in gold and we’re doing great. But if you’re not in the gold market now, I’d wait for the correction. Then buy a gold ETF like GLD. Second, I’m watching the currency markets very carefully, and the great thing about the currency market is that there’s at least one bull market in currencies all the time. Which currencies? Which ones are going to be the biggest beneficiaries of the political changes we see ahead and of the falling dollar?

They will be countries that are big commodity exporters, such as Australia and Brazil. I want to wait for a correction and then buy the Australian dollar ETF, symbol FXA. This gives you a pure play on the Australian currency itself — no stocks, no bonds.

The third major opportunity I see is in the agricultural commodities. Again, you don’t have to buy the commodities themselves. You can simply buy the PowerShares DB Agriculture ETF, symbol DBA. They diversify across the agricultural commodities."

In other words, your pantry-stocking time is up in November. You think it's bad now, wait until AFTER the election! Gridlock will mean two things:

1. There will be no further deterioration of policies by Obama and his gang.

2. There will be no progress toward undoing the damage that's already occurred, and will occur in 2012, 2014, and afterward. For that, we're going to need a new president, and one that isn't Democrat.

In other words, we're going to be stuck in a situation slightly worse than this one for the next two years. If you haven't stocked up, paid off debt, moved your savings, and found something else to invest in (like yourself and your home), then I guess we won't be seeing each other until 2012--you'll likely have to cut the internet so you can eat. I presume you've already cut the TV.


Inflation won't be coming from the Fed, but WILL be coming from corporations and companies who produce things--higher prices, shrinking product size, and dwindling-to-dying availability. It will also be coming from states and localities with higher taxes and new taxes. You'll find that what little paycheck you brought home before will be even smaller after November, in spite of the Fed's quantitative easing, coming further bailouts, and coming stimulus checks.

When the Fed finally pulls it's head out and raises rates, that will be ON TOP OF all the other hiked taxes, fees, and new revenue creations. You'll be lucky if you have anything to bring home! Your paycheck won't be worth the paper it's printed on.

Welcome to Europe.


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