Is the Market Bearish on Obama?

I’ve been hesitant to mention this in a post because at this point my data is quite anecdotal.  In order for me to say this with the kind of peer-reviewed, academic authority, I’d have to do an event study and frankly, I’m don’t teach in the kind of school where I could send a grad student off to check out my gut on a whim.  I do have access to Bloomberg numbers, so I may look at this over winter break, but right now I have to stick with my main line of research and finish a few publishable papers instead of ones based on a piqued curiosity that would never go any where helpful.  But I have done the old fashioned on-the-napkin count of the number of times McCain’s gone up in the polls and the market staged a mini-rally and the number of times Obama’s lead widened and the market dropped.  Interestingly enough, the eyeball method shows a pattern.

I’ve noticed that the markets rally on the days that McCain moves up in the polls.  For the last two weeks, just eyeballing the patterns has been pretty amazing.  This doesn’t mean it’s a statistically significant relationship.   Again, I’d have to do some kind of event study and run some statistical regressions to claim that. However, this showed up in today’s Zogby poll which validates my gut.

Pollster John Zogby: “Is McCain making a move? The three-day average holds steady, but McCain outpolled Obama today, 48% to 47%. He is beginning to cut into Obama’s lead among independents, is now leading among blue collar voters, has strengthened his lead among investors and among men, and is walloping Obama among NASCAR voters. Joe the Plumber may get his license after all. “Obama’s lead among women declined, and it looks like it is occurring because McCain is solidifying the support of conservative women, which is something we saw last time McCain picked up in the polls. If McCain has a good day tomorrow, we will eliminate Obama’s good day three days ago, and we could really see some tightening in this rolling average. But for now, hold on.”

The pollsters see a pattern also.

One of the things that I can’t understand about my Shrieking O-pod neighbors is that they just may be voting against their own self interest.  I have one friend that owns  a local bar here in New Orleans.  Another one owns an Inn.  Both would sell their businesses outright for the right price and the properties are quietly on the market.  Of course, the tourist trade is off in New Orleans, and getting the right price would be extremely difficult, but this right price basically means the two of them would have a nest egg to  get some property elsewhere and live a reduced, less stressed life style.  That is, IF OBAMA doesn’t get elected. This is where they start shrieking at me, the minute I try to discuss the errors of their ways.

You see, these friends haven’t built the Obama tax increase on Capital Gains into their price.  They are assuming they could just walk away with the “right amount”.  From what I can tell from the Obama tax plan (which morphs more than Odo, the changeling, on a season’s worth of Star Trek: Deep Space Nine), they may have to double their price to come out where they want.  This would be an almost impossible feat in today’s real estate market, let alone the real estate market in New Orleans for entertainment and tourist venues which has been way off since Hurricane Katrina.  This recession is not helping anything either.  This is something I don’t think they’ve quite placed into their equations or their voting decisions.

I’ve been laughing (that kind of laugh where you really are on the edge of hysterical and want to cry) recently that with the current bad bear market, I’ll be dying at the podium instead of retiring.  My pension plan has lost about 1/3 of its value–paper losses which would translate into capital gains (and taxable big time with the Obama plan) when the market finally recovers.   If this is the case for me and the nose diving market, I bet I’ll be sending my relatives next to the same innkeeper’s for that big bed and down the street to the same bartender for some time. No cushy retirement on the beach for me.

If the Zogy polls are an indicator, investors in the stock market have a similar perception of an Obama Economy and it is not bullish.  These are the folks who make major bucks off of stocks that increase, when companies earn money right?  Well, the speculators can switch their bets and try to make money betting on companies NOT making money too.  (This is basically a short sell.)  So when Obama pulls ahead, they bet on the businesses loosing money scenario.  That’s the consensus of the market and that what causes it to move in a big way.  Let me just say, that I think that increased regulation is coming down the tubes either way, and that investors are actually welcoming this, so while I would put that in as a ‘control variable’, I don’t think it would show up as a signficant one. But again, this is just a discussion at this point and not a look a formulation of a model.

Well, this hunch of mine coupled with the rough numbered count of ups and downs on a napkin appears to be supported by polls.  Just wish I worked at a highly endowed school so I could send some Obot grad student off to do the real analysis for me.  It wouldn’t get published anyway, but at least I could state emphatically that it’s a statistically significant relationship instead of just eyeball economics.