Same president, same challenges

Seems the market was surprisingly surprised by Obama's win. With that uncertainty out of the way, the market's near-term course should become clearer.

By Bill_Fleckenstein Nov 9, 2012 2:57PM

U.S. President Barack Obama holds a news conference from the White House /Larry Downing/ReutersThough President Barack Obama had been reported leading in virtually all the polls for some time, it would seem that the stock market had not been handicapping him as the winner, given that the market gapped aggressively lower on Wednesday in the wake of his victory. In fact, it took less than two hours for the market to shed just under 3%.

 

For those folks who had correctly expected this election outcome, you might have been scratching your head at how the market managed to hold together leading up to an election that was likely to result in dividend and capital-gains tax rate hikes, in addition to the fiscal cliff.

 

Of course, we don't know for sure that we will go over the cliff, as the can may get kicked down the road. But certainly from an economic perspective, there is not much chance that the next couple of years are going to be very different from the last four, i.e., pretty subpar from a gross-domestic-product and job-generation standpoint.

 

Thus, it will be up to low interest rates to keep some sort of a bid in the equity market.

 

I know that the hypnotized never lie

Now that the election is over and the market faces the reality of discounting those outcomes, the near-term direction of the market may be clearer and lower.

 

My recent strategy has been to short S&P futures, which I have done a couple of times for some brief trades. (Given that we have so many crosscurrents, holding any speculative position for very long is difficult and potentially dangerous, and not an advisable strategy for amateur investors to employ. And for the record, for me precious metals are not a speculative position, as that is a sector I have been involved in -- and expect to be involved in -- for some time.)

 

As regular readers know, I expect at some point the bond market will revolt, and though it is hard to say when, I was somewhat intrigued to hear on Tuesday night that a decent chunk of respondents to exit polls thought rising prices were our No. 1 problem. This is decidedly not what one would expect in the midst of a supposed deflationary period.

 

I have noted many times that declining prices in certain asset classes (such as real estate, which has stabilized for various price points and locales) is not deflation, so there is no point in rehashing all of that. And in the meantime, now that we have gotten our election out of the way, we can turn our attention to what the new leadership in China looks like, and what sort of stimulus programs its new leaders might have up their sleeves.

 

And from our à la carte menu, Apple turnover surprise

Speaking of tricks up one's sleeve, I am probably going to shock a few folks, but I decided to buy some near-dated Apple (AAPL) calls early this week (even though, as I said in a recent column, I think Apple's stock price has most likely peaked) after talking to Fred Hickey and reading his newsletter last weekend. (As an aside, if you have not subscribed to The High-Tech Strategist, I cannot recommend it more highly.)

 

As anyone who has read Hickey's most recent report knows, it is very likely that Apple will have an extremely strong quarter, yet, meanwhile, the stock has been in the penalty box. Thus, this is a bit of a contrary trade, and again, it is not a recommended course for most individual investors. But it will give me a bit of exposure to Apple's upside if the market decides it wants to rally in the wake of the election. The reason I chose to buy the calls, which expire before this column will be posted, is that I can limit my risk to a few dollars while Apple itself can swing wildly.

 

While it is very important to have conviction in your investment strategies, it is sometimes even more important to be flexible in your thinking. This trade on my part is certainly an example of that, as well as being contrary, given the recent performance of Apple's stock price.

 

S&P does not support this message

I was curious to see how the 1,400 level would hold on the Standard & Poor's 500 Index ($INX) following the election, as that appeared to be a floor recently. But the first time the Spooz (S&P futures market) traded down to that level during Wednesday's session, it punched through it to 1,385 before bouncing. Meanwhile, the chart of the Nasdaq ($COMPX) looks even worse, as that index is now not only below its 200-day moving average, but gapped through it on Wednesday.

 

This sort of action is precisely the reason I was willing to squander only a few dollars on my Apple calls, which were basically a way to participate on the upside should the market have decided to rally in the wake of a victory for Mitt Romney. 

 

At the time of publication, Bill Fleckenstein did not own or control shares of any company mentioned in this column.

139Comments
Nov 10, 2012 1:22PM
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sounds like the replican trolls (chicken littles) are ganging up on this site. good job of scaring your base you losers
Nov 10, 2012 1:03PM
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Blacks who want free handouts, free food, free day care, free day care business, free healthcare, free housing, free college, free cel phones etc
Homosexuals and lesbians who want to be able to get married when they are not molesting children.
Women in the northeast who want free handouts of birth control pills.
Women who want free abortions, paid for by the government.
Union workers who want government backing when their demands on management are harmful to the company operations. 
Schemers who want free money from the government to support their greed.
Bankers, who want free money from the government to bail them out when their greed and incompetence causes them to financially ruin their institutions.

These people have voted into office a guy who hates the US, its history, its founders and all white people.  They have voted into office a guy whose only known associates during his adult life are a racketeer, terrorists, a communists, socialists and a so called preacher who hates the US and all white people.  They voted into office a guy who, in his first term, appointed tax cheats and people who totally lacked competence and experience in any field to which they were assigned. 

The very sad thing is the people who voted for obama and do not fall into those categories.  People who were so naive that the liberal media was able to manipulate them at will.

I have heard on several occasions that the republican loss was due to Tea Party.  The media has taken every opportunity to discredit the Tea Party in the eyes of the republicans and those on the Right.  I hope that no one will be taken in by this deception, created because they know the Tea Party and its agenda are good for the US and the future of the US.
At the moment Tea Party is the only hope for the United States of American. 





Nov 10, 2012 12:46PM
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so 6 billion dollars spent on this election, but oh my god we will go broke if  so called "job creators" heaven forbid pay a little more and allow miminum wage to increase to a living wage, remember this: its in the bible that a camel will pass through the eye of a needle before a rich man gets to heaven. you can hide your greed and racism behind fear of socialism but in the end you will pay to a higher source.
Nov 10, 2012 12:37PM
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Mrkyte, Obviously the super wealthy artificially pumped up the market before the election so Obama would win. All Republicans secretly new Mitt was a mental midget and bad for America, but He did get Millions of Republicans to nominate a Socialist leader, did you vote for the Socialist MrKyte, if you did you are a Socialist, just to FUNNY isn't it.
Nov 10, 2012 11:37AM
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"Of course the next 4 years won't be any different than the last 4..."

So the Dow is going to double again then. Time to get long stocks!
Nov 10, 2012 11:28AM
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"Seems the market was surprisingly surprised by Obama's win."

Interesting choice of words!

Obviously, they couldn't say Pleasantly, and weren't about to say Alarmingly, so this is what they came up with.
Nov 10, 2012 11:12AM
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Boehner and the GOP already made a huge concession by dropping the Obamacare fight.

Now let's see what Obama is willing to do in response, in order to keep negotiations moving in the right direction. 

Either BOTH SIDES BEND, or OUR COUNTRY'S BROKE in the end.
Nov 10, 2012 9:39AM
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jimisass said;
"I seriously doubt that it was the reelection of President Obama that freaked out the markets so much as the simple fact that 1) we're stuck again with a lame duck congress situation and 2) things in Europe are getting worse not better,"

Ya, "things in Europe" magically got worse in the three days since the election!
Too far down the road to blame Bush.
Don't want to see the truth as it unfolds,
Blame Europe this time around.

Nov 10, 2012 9:33AM
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"Same President, Same Challenges", Same Results...........

Ouch!
Nov 10, 2012 9:13AM
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 Thing's that make you say H'mmmm!

Keep blaming Bush, and Obama did not make happen what he promised from his 1st campaign! No I did not vote for Obama either time, because I did not feel he could get the job done, and didn't! But this whole fiscal crises is a result of people living beyond there means. If you cannot afford it then don't buy it! I've always lived within my means! No mansion, no big flashy cars etc. Home is paid for, cars are paid for, saved for my retirement  no pension. Let's put the blame where it belongs on the people who brought those big home and other item they could not afford, and then defaulted!    

Nov 10, 2012 8:24AM
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Everything stays the same for the next 2 years...grid lock from a president who doesn't know how to compromise.  After the next 2 years and canidiates run again in congress, the picture could be different...America could be gone forever.
Nov 10, 2012 7:38AM
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And 4 more years of failures and lies...

Only see the United States sinking more into debt, in the next 4 years..

Nov 10, 2012 2:51AM
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Obama and the Senate have already passed the tax cut extension for those making under $250 grand per year, which is 98% of all Americans who form the consumer base and fuel the economy. As Warren Buffet said " It's time to stop Coddling the Rich " I make $80 grand per year and pay 13% in federal tax, People like Mitt Romney make $25 million per year and pay 13% in federal tax, why do Republicans feel Mitt should pay a lesser rate than me, which would have happened if He had won, is 13% really to much to live in the greatest Nation the world has ever known, I don't think so.
Nov 10, 2012 12:18AM
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Of course the next 4 years won't be any different than the last 4 except the national debt will increase another 5 trillion dollars.  Welcome to the new welfare communist country of the USA.
Nov 10, 2012 12:09AM
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I seriously doubt that it was the reelection of President Obama that freaked out the markets so much as the simple fact that 1) we're stuck again with a lame duck congress situation and 2) things in Europe are getting worse not better, plus 3) earnings are not looking as rosy as they could  4) unemployment is not getting significantly better,and 5) the "fiscal cliff" which, while most likely is ultimately avoidable, still looms and threatens a credit downgrade. THE CAMPAIGN IS OVER so lets get back to facts and reality and stop campaigning.
Nov 9, 2012 10:56PM
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There will be a compromise so that fiscal cliff the far right has been crying about won`t

happen.Rush,Hannity,O`reilly love to scare the little people that the Dems will tax you to death.

Nobody calls them on their constant lies

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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