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Tug of war
November 12, 2012 03:18:46 | 0 comments

Last week Obama won the election and the stocks sold off. Four years ago, when Obama was elected for the first time there were also a sell off immediately after the elections but that was 2008, meaning, there was also a financial crisis. So the recipe Obama – financial crisis wasn’t good for stocks. This time around the combination of Obama with the upcoming fiscal cliff seems to explain the selloff. The market’s understanding is that, after spending 6 billion dollars in the election, nothing has changed. The democrats have the White house and the majority in the Senate (although the republicans can continue to use the filibuster) .The republicans control the  House. The debt ceiling discussion last year, the lack of agreement and its impact in the market is in everybody’s mind. There is a sense that we are stuck and regardless of the good numbers of the economy, we are about to take another hit. Normally I would agree with this view because I don’t believe that politicians can be rational. However, in this case I think Obama has more leverage. If the republicans don...

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Stocks still down.
November 08, 2012 17:40:59 | 0 comments

The good economic news in the morning was not enough to change the direction of the stock market this morning. Both the initial claims jobs and the continuing claims were less than expected and the trade balance deficit was also smaller. So I am going to stick to what I wrote yesterday. I can’t see a good reason for this behavior. If Obama is not good for the stock market, why the Dow was up more than 60% since he took office? Why, during the summer, when Obama had a big lead in every poll, the stocks rallied? Another argument is the proximity of the “fiscal cliff” and the impact on the economy. Is this something new? I mean, we know that since November 2011! I always hear the marker anticipates events and adjust prices accordingly. So somebody has to explain to me why this didn’t happen. One can argue that if Romney had won, there would not be an increase on tax. However the so called “sequestration”= mandatory cut on expenses could have happen anyway because the democrats still hold the majority in the Senate. Keynes used to say that the markets can stay irratio...

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A nasty sell off.
November 07, 2012 16:16:17 | 0 comments

The “market” didn’t like Obama’s reelection. Wall Street was a big believer on Romney’s victory. Romney himself went to Boston to wait for the results only with a victory speech; he didn’t prepare a concession speech. The sell off today is nasty and might have several causes. As the configuration of the Government is the same- Republicans control the house, Democrats control the Senate, and Obama is the President - nothing will get done. There will be no agreement in Washington so there will be a tax increase and cut on expenses that will have a negative impact on GDP between 0.5% and 1%. There will be more regulation; the health care reform is here to stay and so on and so forth. I believe there is one big difference and it lies exactly on the proximity of the fiscal cliff. I believe there is enough interest at stake from both parties so they will try to avoid the fiscal cliff. Republicans don’t want a tax increase and cut on defense expenses. Democrats don’t want cuts on social programs. As the two parties have more to gain with a deal than without one, there is mo...

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What if it doesn't end tonight?
November 06, 2012 15:46:41 | 0 comments

I have this strange feeling that the election might not end today. The Business School of the University of Iowa has an electronic market where people bet with real money, meaning that there is risk involved. On this market, Obama has been the winner since the beginning with a small lead and that is what is expected to happen.  Some states will be critical for the victor and a small difference in votes ,with so much at stake, can cause a recounting. Ohio is a candidate for that. The Ohio Secretary of State, a republican, is trying very hard to restrict voting rights with decisions that impact the low income voters, theoretically more favorable to Obama. There is an army of lawyers already waiting to fight. Ohio has more than 200.000 provisional ballots that will be counted, by law, only after November 17. Those 200.000 may make a difference. Also, some states have laws that make a recounting mandatory depending on the difference. In Ohio if the difference is 0.25% there is an automatic recounting. I hope I am wrong because if that happens the markets will suffer. To see the Iowa presidential quo...

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Romney-Biden?
November 05, 2012 18:56:27 | 0 comments

    My humble opinion is that if we know who will be the President on Wednesday, the stocks will continue to go up, regardless of who is the winner, just because the economy is improving and the uncertainty ended. However, we might not know who the President is because there is always a chance of a recounting of the votes. I still don't understand why the USA doesn't have an electronic system for voting. What is even worse is the possibility of a tie in the number of Electoral College votes, which would make the decision fall in the hands of the Congress. The house would pick the President and the Senate would pick the Vice president that is why we could have a Romney Biden presidency. At the same time, due to the different time zones, potentially we could know who the winner is even before the polls close in California. It will be a very tense and exciting Friday. I still believe that Obama will win and I certainly hope so.  

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Stocks will go up....
November 01, 2012 19:18:18 | 0 comments

A republican friend sent me an article with the title “Israel Says Iran Pulls Back Nuclear Effort”. The subject of the email was, and I quote, “this news item, along with the likely Romney victory next Tuesday, will be greeted by the equities market...1500 S&P by year-end would not be surprising”. Several things are interesting. The first is that for the Republicans’ disappointment it looks like the sanctions are working. The second is how far apart opinions, expectations are, depending on your point of view. My friend will probably be very surprised and disappointed if Obama, as I expect, wins. I could have sent the same article saying on the subject line: “this article proves that the President is once again right and with his victory stocks will go up”. I guess that the only thing I share with my friend is that stocks will go up, regardless of who wins.  

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Romney's luck
October 29, 2012 14:55:45 | 0 comments

Romney is really a lucky guy. One week before the elections , with a big storm approaching the east coast, he can continue campaigning. Obama had to suspend his campaign to oversee the problems that the storm will bring and be ready to respond. The calendar shows Romney in Iowa and Wisconsin and nothing for Obama......

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Things that amazes me:
October 29, 2012 13:53:01 | 0 comments

In the US: How can someone be impressed by Romney’s performance in the debates and then vote for him? I would understand if they were voting for the academy awards. He would win the Oscar for impersonation and for the role of chameleon.Why Romney didn't disagree with Obama’s foreign policy? Because he really thinks it is right or because he thought that would win him more votes? How can someone compare the US economy to the Greece economy and say that the US will end up like Greece? In Brazil: How can someone vote for Fernando Haddad for mayor of São Paulo instead of Jose Serra? How can someone still vote for the PT after the “mensalão” scandal?  

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Despite the bad news the markets are up.
February 15, 2012 13:44:03 | 0 comments

As the tension in the Middle East grows, the oil price grows too and so the price of gasoline at the pump. We really don’t need that when the economy is still in slow mode recovery. The morning started with some not-so-good news like the rise in oil prices, the fact that the Ministers of Finance in Europe postponed their meeting to approve the Greek measures, and the news that the economy in the Eurozone contracted 0.3% in the last trimester of 2012. Despite that, the markets in Asia and Europe are up and so are the futures in the US.  During an interview in the morning, the Governor of the Bank of England said that the Europeans have to act fast to avoid chaos, and that nobody is prepared for a Greek default. England’s economy contracted 0.2% in the last trimester of 2011. Back to the United States the good news is the possibility that the congress approve the extension on payroll tax cut , which would leave more money  in the hands of  about 160 millions of Americans.  

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The Greek drama continues
February 13, 2012 14:07:50 | 0 comments

The reaction to the approval of more austerity measures in Greece was received with a violent riot. Not surprising, considering that the recession hit Greece hard with a retraction of 6% in the GDP in 2011. The expectation is that  after the implementation of the measures, the GDP should shrink another 7% in 2012. Markets are celebrating, with the European stocks  and the  futures in the  USA up. Rally?  Not so fast. The deal has to be approved by the Finance Ministers on a meeting scheduled for Wednesday. In the USA, President Obama sent the budget proposal to the Congress and we should expect long debates and no resolution. Meanwhile and despite Obama’s change of the bill, the catholic Bishops are not happy about the contraceptive rule. People are crazy and it looks like they just can’t see the problem limited to what it is: who should pay for the pills? There is nothing to do with religion freedom or conviction. If one works in a Catholic institution- and this person is not necessarily catholic- one should have an insurance plan to buy the pills. Isn’t that simple? I finalize ...

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