Sunday, November 05, 2006

The Upcoming Election and Your Portfolio...

Historically there has been a great deal of buzz surrounding national elections in the US and the possible impacts on the street.

I've heard less talk about this issue this year. The general consensus is that a stalemate in Washington (one house controlled by each party) would start to curtail spending and possibly be a good outcome for stocks.

I think this is a remarkably simplistic view. In a single variable model, perhaps this could be true, but the stock market is a composite of thousands of individual stories that are likely to be unaffected by the election. I'd expect a little 2-3 day rally if Congress is split on Tuesday, but I'll fade that rally.

Other reasons to fade this current rally

- viewership of Kudlow & Co. on CNBC is up 124% y-over-y. A good sign that the little guy is back in the market (generally that is a sign of a top).

- Everyone is pounding the table on tech stocks, again. Different year same story.

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Again, it's just anecdotal, but I was in Lowe's again on Saturday. I bought two 31" bathroom vanity mirrors - originally - $88 each for $6.50. I don't mean to imply that the Watertown, NY store is indicative of the entire Lowe's chain but that's not a great sign.

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I hate to mention politics on the blog because it REALLY gets people fired up, but this story is not really political - it gets back to my point that Congress may not be able to be trusted with our $2.8 Trillion.

After successfully fighting corruption and misuse of funds by contractors in Iraq, the House Armed Services Committee (Isn't our Rep. McHugh on that Committee?) has inserted a clause that will shut the special auditors office in Iraq.

"Investigations led by a Republican lawyer named Stuart W. Bowen Jr. in Iraq have sent American occupation officials to jail on bribery and conspiracy charges, exposed disastrously poor construction work by well-connected companies like Halliburton and Parsons, and discovered that the military did not properly track hundreds of thousands of weapons it shipped to Iraqi security forces.

And tucked away in a huge military authorization bill that President Bush signed two weeks ago is what some of Mr. BowenÂ’s supporters believe is his reward for repeatedly embarrassing the administration: a pink slip."

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