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 28, 2012 10:06AM
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"You can't fix stupid", Ron White.
Nov 18, 2012 3:30PM
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We are in the same boat without a paddle as the last four years. Investment dollars will come away from the sidelines in high risk investments if this Administration has its way with increasing taxes beyond what the new health care law will incorporate. Bad thing is these investment dollars will only affect the job markets in an anemic way and the Feds attempts at keeping low interest rates will only keep the Banks feeding the gambling addicts at the expense of the small investor and 401k holder. Its has to be about main street USA if we are expecting a real recovery to take hold and not slip into a Japan style lost decade. The Nation already has witnessed almost 5 years of slow growth and a decline of wealth for most average working class citizens and in order to push the Nation into a positive economic direction Congress must take substantial measures to promote growth related policies plus expand revenues by tax reform.
Nov 15, 2012 5:29PM
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Sure looks like the market had priced Romney in to win.What in your opinion is the magic debt number that causes the ball to drop on the dollar for good?
Nov 12, 2012 5:01PM
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Those rich SOBs at Apple need to be taxed at 100% (PAY THEIR "FAIR SHARE").

If they don't like it, just quit or take a salary cut.  After all, they are not contributing any more than the heroes working on the Foxconn production line.

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I just need to know (in advance) when that policy and legislation kicks in.  I expatriate, mortgage everything, buy long dated Apple PUTS and clean up.

All that remains is me laughing and my middle finger to the U.S. progressives.  
Nov 12, 2012 3:25PM
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This health care is a simple fix. Everyone pays into a pool every paycheck. Based on your salary, you pay 2,3,4,5 dollars every week or two weeks that goes directly into a American HealthCare Tax. Leave the businesses out of it and let the American workers pay into it. Even people who collect an unemployment check would pay 2 bucks a week.

 

With 100 million workers, you would generate almost a billion dollars a month.

 

Done. Have a nice day and "don't forget to tip your waitress on the way out."

Nov 12, 2012 12:34PM
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We will have 4 more years of the same lying and skirting the issues. At this point the Dems have had either control of Congress or the presidency for 6 years and our decline began at that point. I expect unemployment to go back up and we head into another recession under Obama because with him it is his way or the highway.
Nov 12, 2012 8:20AM
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Until the american people return to taking responsibility for themselves and pride in earning their own way the socialistic ways will continue. Most voters don't even take the time to research who they are voting for, but rely on the jaded media to inform them of their choices. Personally I think our country needs MAJOR tax reform (Flat tax would be right way so EVERYONE pays a share regardless of income, but that is unlikely to happen as we would be cutting alot of tax preparers, accountants, and the IRS out of the picture), I also feel if you don't pay taxes you shouldn't vote(You would't be allowed to play at a poker game if you don't put in your ante so why should people who aren't contributing be allowed to say how the pot is spent), and lastly entitlements and social programs need to have DEFINITE time limits (Helping hand YES, Way of life, NO!).
Nov 12, 2012 5:03AM
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Wonder who Obama will blame when his next four years are up. After 8 failed years in office, beating on Bush will be have been beat to death. It'll be all his fault.

Nov 12, 2012 3:56AM
Nov 12, 2012 3:16AM
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"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-produ​ct and job-generation standpoint."
The above clip from the article says it all in a nut shell!!!! The next four years of the same BS, too little investment, too few jobs, and far too much taxation.  More spending of borrowed money and a national debt spiraling out of control.  I hope those that voted for the president are prepared to lose what they have, because if he lives up to his promises they will be much poorer when he is done.
Nov 12, 2012 1:03AM
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"Same president, same challenges."

 

Same lame Wall Street.

Nov 12, 2012 12:14AM
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The next 4 years will be slightly different from the last 4 because the Republicans blew it last summer.

 

All the President has to do now is make damn sure that the Republicans are on the record against tax increases and the he can let the Bush tax cuts expire and spending cuts occur on Jan 1 2013 with the peace offering of reinstating tax cuts for the middle class if the spending cuts are renegotiated. The Republicans can't hold out for reinstating all the tax cuts or they'll being shooting themselves in the butt

 

Next the President can offer to modify Medicare and Social Security eligibility by increasing age by 1 year over the next 12 years for people under 55 years of age. Finally, we'll be out of Middel East wars by 2014 and hell will freeze over or 2016 will occur before we get into another one.

 

Get ready to pay increased taxes on capital gains and dividends and be out of the market by 2014 when the Republicans take over and interest rates start to go way up.

Nov 11, 2012 10:42PM
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Welcome to the welfare communist country of the USA!!!!!!!!
Nov 10, 2012 11:00PM
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A wise friend years ago said " When  20 people are in the wagon the other 80 can pull it easily but when 50 are riding and 50 are pulling then the system is near breakdown!"
Nov 10, 2012 9:04PM
Nov 10, 2012 8:54PM
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   Isn't it great to live in America ?
Nov 10, 2012 8:53PM
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Same President same promises....now that the latinos put Obama in office, they expect more amnesty for illegal mexicans....More of your tax dollars going to support illegal mexican health care and food stamps.
Nov 10, 2012 8:38PM
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as a hard working Conservative,we must hold strong our values that out founding fathers held so dear.. and call out any wrongs that the left progressive liberals ,such as patrus removal and take away his honorable discharge ,to dishonorable ,take away his god dam pension,
eric holder try that sob for murder,and empeach the president.
but i am not bitter just very disappointed in this country called the usa!!!
Nov 10, 2012 8:21PM
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I am a firm believer in the people. if given the truth, they can be depended upon to meet any national crisis. the great point is bring them the real facts.

Abe Lincoln

This is not true with most of our news organizations NBC, CNBC, CNN, ABC, CBS to name a few.Covering up for Obama. The Benghazi incident where they left Four Brave Americans behind to die. Iran shooting at our drone in international waters Nov. 1, not release till after the election. The moderator from CNN who sabotaged the second Presidential debate. Case closed

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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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