The Lemon Fool

Hi Folks,

I wondered what people's views are on the above. There is certainly some discussion of this feeling in some of the media outlets:

https://www.aljazeera.com/economy/2020/ ... en-victory

I also speculate that some of recent highs seen in the Asian Markets, whilst partly explained by optimism regards the possibility of a Global economic recovery, are also in part due to predictions of easing trade conditions which could arise if Mr Trump loses the White House.

Matt

I think it is more of the "stock markets hate uncertainty" vibe.

As the Biden victory becomes more certain, I saw 83% chance of victory for him yesterday, then stock markets calm down a bit.

They still have some enormous covid headwinds though.

It seems odd that any rational pricing analysis could have the stock markets in the US priced at the same level as pre covid.

John

redsturgeon wrote:I think it is more of the "stock markets hate uncertainty" vibe.

As the Biden victory becomes more certain, I saw 83% chance of victory for him yesterday, then stock markets calm down a bit.

They still have some enormous covid headwinds though.

It seems odd that any rational pricing analysis could have the stock markets in the US priced at the same level as pre covid.

John

I am wary of political polls given how last time even UK betters paid out on a Clinton victory. There is now also a sizeable postal vote that will need to be counted and will delay the election result for days if some of the articles on its size are right.

US elections are determined on electoral college votes, not on the numbers of folk voting. Last time Hilliary got more votes than Trump but lost in the electoral college and so to predict the US election one has to get the swing states right and that is not easy as was shown last time.

As I look at the stock markets they are pricing in a secular change in how people work and are rewarding business that will serve these new ways of working and at the same time are punishing business that will suffer. If these trends continue I expect banks to be in trouble with all their commercial real estate.

I am not sure if the president matters as much as both sides like to argue. One criticism of Trump is how little he has done, making all the claims of how the would destroy the US economy ring hollow.

If Bidden wins he will need both houses as well if he is to push through a radical agenda. He might get them, but it has not been that common for US presidents to be so blessed.

A Biden win would probably be bad for UK equities as it will make a UK/US trade deal more difficult and I would not be surprised to see UK markets slump on a Bidden win in the short term although the Brexit negotiations that look very unlikely to end on Thursday as originally scheduled are likely even bigger influences on the UK market.

Regards,

TheMotorcycleBoy
I also speculate that some of recent highs seen in the Asian Markets, whilst partly explained by optimism regards the possibility of a Global economic recovery, are also in part due to predictions of easing trade conditions which could arise if Mr Trump loses the White House.

Sorry, forgot that part.

Yes, a Biden win would probably be good for Asian markets, although if trade conditions are eased it may be seen as bad for US based business.

Regards,

redsturgeon wrote:It seems odd that any rational pricing analysis could have the stock markets in the US priced at the same level as pre covid

Here's one. Just look at the substantial fall in American long-term interest rates during 2020. Falling interest rates = rising stock markets

The 30-year treasury bond yielded 2.26% on 1st January. Today it is 1.58%, which represents a fall in yield of almost 30%. That's a heck of a driver behind rising share prices.

Add in the dominance of American companies in internet technology, internet shopping, internet [INSERT SECTOR] etc., combined with the sheer size of the likes of Amazon and Google causing them to dominate the S&P500, and it's not too hard to justify a rising US stockmarket. Or falling stockmarkets elsewhere.

As to pricing in a Biden victory, remember that the overwhelming majority of political pundits (and economic forecasters) said that the election was as good as won for Clinton in 2016, and that if Trump won it would be a disaster for the economy and stock market. Yet again their accuracy made Star Wars stormtroopers seem accurate in comparison.

If anything today I see quite a few parallels with the dotcom boom. The glut of heavily promoted mobile phone share trading apps during Sky's coverage of the Indian Premier League (which I am glued to), which are targeted to get newcomers into the stockmarket, reminds me of the dealing services which popped up in the late 1990s to encourage newcomers to invest in anything "internet" or which had ".com" at the end of its name.

It's probably got a while to run though; so far I haven't seen anyone pop up on TLF asking how they can invest their life savings (and maybe more) in the latest IPO - there were quite a few of these in the last few months of the dotcom boom on TMF.

I've moved quite a bit out of America recently, mostly into Canada and Japan, after seeing Democrat Mayors and Congressmen actively encouraging rioting in cities such as Portland, New York and Minneapolis, resulting in a lot of property damage. IMHO this is a big signal that property rights and the rule of law will be weaked under a Biden administration (bad for investors, who like strong property rights).

Last week I put a bet on for Trump, I bet for Clinton last time, the UK to stay in the EU, a Labour government and Ronnie O'Sullivan in the 2016,17,18 and 19 Snooker World Championship.

SalvorHardin wrote:

redsturgeon wrote:It seems odd that any rational pricing analysis could have the stock markets in the US priced at the same level as pre covid

Here's one. Just look at the substantial fall in American long-term interest rates during 2020. Falling interest rates = rising stock markets

The 30-year treasury bond yielded 2.26% on 1st January. Today it is 1.58%, which represents a fall in yield of almost 30%. That's a heck of a driver behind rising share prices.

Add in the dominance of American companies in internet technology, internet shopping, internet [INSERT SECTOR] etc., combined with the sheer size of the likes of Amazon and Google causing them to dominate the S&P500, and it's not too hard to justify a rising US stockmarket. Or falling stockmarkets elsewhere.

As to pricing in a Biden victory, remember that the overwhelming majority of political pundits (and economic forecasters) said that the election was as good as won for Clinton in 2016, and that if Trump won it would be a disaster for the economy and stock market. Yet again their accuracy made Star Wars stormtroopers seem accurate in comparison.

If anything today I see quite a few parallels with the dotcom boom. The glut of heavily promoted mobile phone share trading apps during Sky's coverage of the Indian Premier League (which I am glued to), which are targeted to get newcomers into the stockmarket, reminds me of the dealing services which popped up in the late 1990s to encourage newcomers to invest in anything "internet" or which had ".com" at the end of its name.

It's probably got a while to run though; so far I haven't seen anyone pop up on TLF asking how they can invest their life savings (and more) in the latest IPO - there were quite a few of these in the last few months of the dotcom boom on TMF.

I've moved quite a bit out of America recently, mostly into Canada and Japan, after seeing Democrat Mayors and Congressmen actively encouraging rioting in cities such as Portland, New York and Minneapolis, resulting in a lot of property damage. IMHO this is a big signal that property rights and the rule of law will be weaked under a Biden administration (bad for investors, who like strong property rights).

All that, and a Federal Reserve that has basically said it will pump however many trillions as it takes into the economy and the markets to prop them up. The Fed has even been buying corporate bonds, junk bonds and bond ETFs. Long term pain perhaps, but "don't fight the Fed" has a pretty good long track record of success.

Biden ain't going to win.

kempiejon wrote:Last week I put a bet on for Trump, I bet for Clinton last time, the UK to stay in the EU, a Labour government and Ronnie O'Sullivan in the 2016,17,18 and 19 Snooker World Championship.

18 months ago I put a bet on Biden.

I look at FiveThirtyEight (https://projects.fivethirtyeight.com/20 ... -forecast/). with its 86/13 split, but they were wrong in 2016. But if they are right about Biden and a Democrat Senate, there should be much rolling back of the Trump damage at a faster pace than he could inflict it with a Democrat House. (The exception being Human Rights in the Supreme Court, but that is less of an issue for investors)

Its less a question of Biden winning than Trump refusing to lose that worries people.

kempiejon wrote:Last week I put a bet on for Trump, I bet for Clinton last time, the UK to stay in the EU, a Labour government and Ronnie O'Sullivan in the 2016,17,18 and 19 Snooker World Championship.

I've put a bet down for DJT to win (at about 10/11 a few months back). It's an "emotional hedge", i.e. if a DJT makes me feel emotionally down, at least I'll be a few hundred quid better off.

odysseus2000 wrote:I am wary of political polls given how last time even UK betters paid out on a Clinton victory.

But the aim of bookies is to make money, not predict outcomes, and betting odds measure the weight of money, not public opinion. That was particularly noticeable in the EU referendum betting where a relatively few remain high(er) rollers outweighed, £ wise, the much more numerous leave smaller betters.

"And the bookies all agreed that while three-quarters of the £40 million eventually gambled on the referendum was placed on Remain, when it came to counting individual flutters, bets on Leave far outnumbered punts on staying in the EU." https://www.independent.co.uk/news/uk/p ... 00856.html

It seems the same thing happened for Trump v Clinton: https://www.wsj.com/articles/trump-vict ... 1478703088

odysseus2000 wrote:

redsturgeon wrote:I think it is more of the "stock markets hate uncertainty" vibe.

As the Biden victory becomes more certain, I saw 83% chance of victory for him yesterday, then stock markets calm down a bit.

They still have some enormous covid headwinds though.

It seems odd that any rational pricing analysis could have the stock markets in the US priced at the same level as pre covid.

John

I am wary of political polls given how last time even UK betters paid out on a Clinton victory. There is now also a sizeable postal vote that will need to be counted and will delay the election result for days if some of the articles on its size are right.

US elections are determined on electoral college votes, not on the numbers of folk voting. Last time Hilliary got more votes than Trump but lost in the electoral college and so to predict the US election one has to get the swing states right and that is not easy as was shown last time.

Trump has already positioned himself to claim that the postal vote will be fraudulent and it was legally confirmed in Bush versus Gore that there is no legal requirement for States to respect the vote when selecting electors for the electoral college they can revert back to their original practice of just selecting electors something which Republican's could easily excuse by citing fraud in the vote. That might even lead to some states selecting two sets of electors to send to vote in the college (one set for Trump and another set for Biden each supported by different branches of state government). Such a catastrophic standoff isn't just a theoretical possibility it actually happened once before in 1876/77.

https://www.theatlantic.com/magazine/archive/2020/11/what-if-trump-refuses-concede/616424/

We are accustomed to choosing electors by popular vote, but nothing in the Constitution says it has to be that way. Article II provides that each state shall appoint electors “in such Manner as the Legislature thereof may direct.” Since the late 19th century, every state has ceded the decision to its voters. Even so, the Supreme Court affirmed in Bush v. Gore that a state “can take back the power to appoint electors.” How and when a state might do so has not been tested for well over a century.

Trump may test this. According to sources in the Republican Party at the state and national levels, the Trump campaign is discussing contingency plans to bypass election results and appoint loyal electors in battleground states where Republicans hold the legislative majority. With a justification based on claims of rampant fraud, Trump would ask state legislators to set aside the popular vote and exercise their power to choose a slate of electors directly.
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Foley, the Ohio State election scholar, has mapped the ripple effects if Republican legislators were to appoint Trump electors in defiance of the vote in states like Pennsylvania and Michigan. The Democratic governors would respond by certifying the official count, a routine exercise of their authority, and they would argue that legislators could not lawfully choose different electors after the vote had taken place. Their “certificates of ascertainment,” dispatched to the National Archives, would say that their states had appointed electors committed to Biden. Each competing set of electors would have the imprimatur of one branch of state government.
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Four states sent rival slates of electors to Congress in the 1876 presidential race between Democrat Samuel Tilden and Republican Rutherford B. Hayes. When a special tribunal blessed the electors for Hayes, Democrats began parliamentary maneuvers to obstruct the electoral count in Congress. Their plan was to run out the clock all the way to Inauguration Day, when the Republican incumbent, Ulysses S. Grant, would have to step down.

Not until two days before Grant’s term expired did Tilden give in. His concession was based on a repugnant deal for the withdrawal of federal troops from the South, where they were protecting the rights of emancipated Black people. But that was not Tilden’s only inducement.

The threat of military force was in the air. Grant let it be known that he was prepared to declare martial law in New York, where rumor had it that Tilden planned to be sworn in, and to back the inauguration of Hayes with uniformed troops.

Just read another slightly relevant article, describing recent price moves of green energy stocks.

'Blue wave' U.S. election expectations trigger green stocks frenzy

LONDON (Reuters) - Growing expectations of a strong Democratic victory in U.S. elections have prompted investors to snap up renewable energy stocks, amplifying a recent rush seen after the European Union’s fiscal splurge earmarked for green investments.

Investors are acting on expectations of trillions in fiscal spending over the next few years, triggering a “green wave” of investment that is drawing comparisons to the blistering rally in technology stocks.

While President Donald Trump is taking the United States out of the Paris climate accord aimed at combating climate change, Democrat Joe Biden, who hopes to beat him in November’s election, has promised to set a U.S. goal for net-zero emissions by 2050.

BofA Global Research said last week in its weekly flows report that the surge in solar exchange-traded funds (ETFs) reflected investors’ expectations for a “blue wave” on the Nov. 3 election. Blue is the color associated with the Democratic Party, versus Republican red.

https://uk.reuters.com/article/uk-stock ... KKBN26Y1BS

TheMotorcycleBoy wrote:Just read another slightly relevant article, describing recent price moves of green energy stocks.

'Blue wave' U.S. election expectations trigger green stocks frenzy

LONDON (Reuters) - Growing expectations of a strong Democratic victory in U.S. elections have prompted investors to snap up renewable energy stocks, amplifying a recent rush seen after the European Union’s fiscal splurge earmarked for green investments.

Investors are acting on expectations of trillions in fiscal spending over the next few years, triggering a “green wave” of investment that is drawing comparisons to the blistering rally in technology stocks.

While President Donald Trump is taking the United States out of the Paris climate accord aimed at combating climate change, Democrat Joe Biden, who hopes to beat him in November’s election, has promised to set a U.S. goal for net-zero emissions by 2050.

BofA Global Research said last week in its weekly flows report that the surge in solar exchange-traded funds (ETFs) reflected investors’ expectations for a “blue wave” on the Nov. 3 election. Blue is the color associated with the Democratic Party, versus Republican red.

https://uk.reuters.com/article/uk-stock ... KKBN26Y1BS

Energy is business with large initial investments and returns over decades.

Now that renewables are in many cases cheaper than hydrocarbon energy, the entire industry, irrespective of who is in the White House, will move towards renewables. This secular trends suits everyone except those involved in the hydrocarbon industry, but it is now so clear that renewables are the future that big oil etc is also beginning to focus on renewables. I doubt we will see any new refineries or other big capital projects fossil energy projects and a slow but steady move away from all the business that have supported fossil.

Regards,