President Biden by Nightfall?
Multiple data points are considered today by any American investor this morning that will shape our future. An “Unfortunate Series of Dominoes” to play off the Lemony Snicket phrase.
Beginning from then, we can outline the nightmare like this:
- Joe Biden has jumped to 253 Electoral votes overnight. Donald Trump is langhishing at 214.
- If Biden can win Nevada’s 6 votes and Arizona’s 11, those 17 will put him at 270 Electoral and that will be the decision.
- Except, it won’t be: Donald Trump is on the attack on two fronts: Attacking on social media and prepared to throw cadres of lawyers and demands for recounts into the mix.
- As we’ve warned, the election violence is swirlying around the edges. In the breakaway drug state, Oregon Activates National Guard Amid ‘Widespread Violence’, 11 Arrested In Portland As Police Declare Riots.
- Most regrettably, reports Business Insider “Trump is trying to claim the presidency by saying ‘we hereby claim’ key states but that is not how elections work”
Specifically, the 16-hour old Trump Tweet on this begins:
“We have claimed, for Electoral Vote purposes, the Commonwealth of Pennsylvania (which won’t allow legal observers) the State of Georgia, and the State of North Carolina, each one of which has a BIG Trump lead. Additionally, we hereby claim the State of Michigan if, in fact,…..”
Which Twitter flagged with a disinfo warning.
We find this interesting: is there is symmetry in human thinking? Has Donald Trump may taken notes from the Clinton ‘Sour Grapes plan.’
Worst Possible Outcome, Tho?
We are not specifically worried about Biden’s win. It’s all about what follows it when taken with two other factors, under-rated in our view.
Specifically, despite the hopium on Wall Street, the Senate – as of this morning – is split evenly 48-48. While it’s accurate to envision republicans taking the slim majority, we still have a Georgia run-off in January to contend with.
The problem – for America in 2021 – will be that the president of the U.S. Senate will (likely) be Kamala Harris. As to the role of a VP in the upper chamber?
“Other than to succeed to the presidency upon the death or resignation of a president, a vice president’s only constitutional duty is to preside over the Senate. Vice presidents cannot vote in the Senate, except to break a tie, nor may they formally address the Senate, except with the senators’ permission. “
While today’s early “happy talk” goes to the idea of a “split congress is good for business,” we think that a number of bills – including the Trump Tax Cuts – could be headed for this kind of tie-breaker setting. There’s no question where Kamala’s vote would go.
“That’s Bad Because?”
Not all Americans – but a good many – have outsized capital gains that can be taken. Two branches in the logic-of-future here:
- If you believe Trump will hold off the [apparent, likely today] Biden victory – likely through the courts – then holding off on the sale of overpriced securities into 2021 (to postpone taxes) makes sense.
- However, if you observe Biden winning, and figure it will only take a one or two senators “flipping” on the tax cut repeal, and given that Harris is a potential tie-breaker, then unloading stocks in the 2020 tax year could make a lot of sense.
A number of readers have inquired “How could you possibly see the S&P drawing down to 3,000 – or lower – before year’s end?”
Well, a lot will depend on investor judgement as to the likelihood of a tax cut repeal and higher rates – and perhaps even doing away with the capital gains tax entirely – would be the “deal points.”
Frankly, though I have benefitted (bigly and hugely) in the past from the long-term gains provision, that was decades back when markets (and the world) were far more stable than today’s. (Why, we’re so old we remember “predictable!”)
The purpose of long-term gains being taxed at a preferential rate was to encourage capital formation.
In a Nation quickly burying itself in paper (pretending to be money), capital formation is a joke. Dial-a-Fed can make up all the money in the world. And literally has – to some degree. A review of M2 money velocity screams too much capital, not enough reinvestment.
“But the Big Rally!”
Don’t go stupid on me.
A LOT of the present rally has been a FOREX-driven event.
As we continually warn, when the dollar’s value goes down, it take more (of the “cheaper, more debt-laden paper) to buy the same assets.
Bitcoin, the rest of cryptos, and the Euro are not “going up in value.” Intrinsics don’t flop around on a daily basis. They are merely being repriced to a failing dollar.
Good for gold and good for notional money.
That’s the deeper problem most people can’t seem to fathom.
Let’s run a number, shall we?
The Dollar this morning (early) would buy 0.852 Euro. Then, the dollar weakened further such that around 6:30 AM Central time, it had dropped to as low at 0.8460. That is, the dollar retained only 99.29577464788732 percent of its purchasing power.
Since the S&P 500 closed Wednesday at 3,443.44, we can divide our long percentage change into that and see a “currency-only” market price. It suggests 3,467.86 is a reasonable figure. S&P up 24.42? Currency impact. More? Hype.
Futures were up more than this (3,505) but we expect some of the pricing is based on hopium and hype.
The confusing part of this? Big Spending Biden will water down the currency – which it will take more of – which will give the illusion of rising markets.
Until it doesn’t, but don’t ask me to call that one to the day, let alone minute.
Two wild cards this afternoon:
- FOMC rate decision (guiding toward firming of rates would not surprise us, in order to push the dollar up) and the…
- H.6 Money Supply. Our sense it we will see there was a drop – briefly – in the money flow ahead of the election (ergo, the sell-off last week) but next week, we’d expect the spigots back on which fueled this week’s “rally” and the resulting decline in dollar valuation.
With no election pressure, could the Fed guide higher on rates to save the Buck? It would cream markets, but election pressure is off…
Jobs Really Matter
Political hysteria aside, the big miss in the ADP Jobs number Wednesday was swamped by political BS and that’s a shame.
The expectation was jobs would grow at a 650,000 rate, but it came in a lousy 365,000. On the other hand…
This morning, the Challenger, Gray, and Christmas Job Cuts report has just come out:
“October marked the lowest number of layoffs in seven months, as U.S.-based employers announced plans to cut 80,666 jobs from their payrolls, according to a report released Thursday by global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc.
October’s total is 32% lower than the 118,804 cuts announced in September. It is 60% higher than the 50,275 cuts in the same month last year. October’s total is the lowest since February, when 56,605 cuts were announced.
So far this year, 2,162,928 job cuts have been announced, 320% higher than the 515,144 cuts announced through October last year. It is the highest annual total on record.”
Tomorrow, we will get the “official” Labor Department national employment data. For today, there’s the weekly filings report to tide us over:
“In the week ending October 31, the advance figure for seasonally adjusted initial claims was 751,000, a decrease of 7,000 from the previous week’s revised level. The previous week’s level was revised up by 7,000 from 751,000 to 758,000. The 4-week moving average was 787,000, a decrease of 4,000 from the previous week’s revised average. The previous week’s average was revised up by 3,250 from 787,750 to 791,000. “
In tomorrow’s federal report, we’ll be looking at the total number of people employed because there are six-ways-to-Sunday the rest of the statistics can be jiggered.
One more, you say? Employment Costs, then…
“Productivity increased 4.9 percent in the nonfarm business sector in the third quarter of 2020; unit labor costs decreased 8.9 percent (seasonally adjusted annual rates). In manufacturing, productivity increased 19.0 percent and unit labor costs decreased 18.2 percent. “
Futures are up another crack-headed 365 Dow points.
Color us skeptical of the future:
- With a Biden win (likely, but just let’s say) then China could move to take Taiwan as early as January. The reason for the timing? Trump’s team may go down the “scorched earth” path during transition and offer little more than “you figure it out.” With many pieces of bureacracy missing, can you think of a better time to “reunify?”
- Pay attention to the movement of hardware: China warns U.S. after drone sales to Taiwan.
- Adding to the idea of “Taiwan in January” is the report Taiwan President Urges Calm As Pro-Trump Citizens Panic Amid Biden Vote Surge. As they should. Thing is, though, Biden could “play it lightly” and blame Trump for hiding the needed administrative resources.
- Here’s another indication on how Taiwan is girding battle: Taiwan’s Tanks Blend In To Urban Scenery Disguised As Diggers And Scrapheaps.
The U.S. – likely facing a serious recession (or worse) early in the Biden presidency – has only the ONE BIG easily manipulated economic lever to pull. That’s playing of the War Card.
We continue to advise readers to “think ahead of the problem” and load up on Chiense goods ahead of time. I’ve been “investing” in 1.75 mm filament for our 3D printers, for example.
Next, we might beef up our one-sided PCB stock for the CNC machines. Resistor and capacitor stocks?
We are terribly China-dependent and fools for being maneuvered into that corner. New UHD television (used as a monitor due to my sight impairment) for the office? Section 179 it this year?
Latest forecast map: South Florida rains ahead:
Meanwhile, been a delightful fall.
Smoke advisories are possible west of Boulder as “Increased smoke activity possible from East Troublesome Fire.” Colorado’s wild weather swings are alive and well.
Son George II is heading back to his home department in Eastern Washington from the Troublesome, Colorado fire this morning. Manpower requirements back in the home department. Kid’s been all over the place this fall – fires in Washington, Oregon, and Colorado. Not our idea of “tourism” but if you’re an adrenaline junkie…. Spa’s are more our speed. That is, if there were any still open…
Speaking of Covid
(Since Covid’s G II’s specialty on the fires): CV-19 and Higher Ed is a key area to watch. Take this story: Local colleges and Covid-19: Here are the numbers is pretty interesting reading.
At the macro level, it will be interesting to see how CV-19 impacts overall cost of education. In my time as a college exec. director, we spent hours wondering how to “make the numbers work” if massive online education came along. Yet, here it is, and no one is talking about harvesting the lower costs of product delivery. And if anything, higher ed. is actually raising tuition blaming the virus effects. Feels somehow “scammy” – online being cheaper than buildings…turbulence of the marketplace?
Brain food offerings:
From Popular Mechanics: “Earth Keeps Pulsating Every 26 Seconds. No One Knows Why.”
Listening to the skies: “First mysterious radio burst discovered in the Milky Way reveals extreme origin.”
Neat Live Science article, too: “Ancient burial of fierce female hunter (and her weapons) discovered in Peru.” From the pictures, looks like it’s the wrong side of the Andes to be the bases for the Amazonian Women tales, but interesting.
Big 3D Printer Article Sunday
When we’re not trying to out-guess markets, the shop calls. So does our growing interest in 3D printing as one of the smarter roads to the future.
A lot of this is covered on my Ultra-Make website (https://ultra-make.com ), This weekend I’m doing the “build companion notes” for a Creality Ender 3. Our December build notes will involve the larger Creality CR-10 V2.
Just having all kinds of fun with ’em. And ham radio parts? Always been easy to cobble up circuits and such, but enclosures? Well, this technology really does change everything .
We will come to a day when parts will be emailed. January, we’ll take a stab at the 3D scanner technology, too. Because if you can scan something and then reprint the scan, you have arrived at a “replicator” from SciFi realms.
To us, seems like a totally cool future to be stumbling into.
Write when you get rich(er),