Tuesday, November 04, 2008

The end of voting season

Over the past few weeks I've felt like a kid waiting for Christmas- stuck, as time seems to pass slower and slower.

"Are we there yet, Daddy?"

Yes we are.

The day I've been waiting for has arrived.

"Voting" season will pass....and weighing season will commence.

Threw you a curve on that one, eh?

While election day was one of the milestones on my calendar, a more pressing issue was the election mind-set wherein impressions and popularity outweigh reason. After the elections markets, recalling Buffett's quip about voting and weighing machines, are more apt to weigh- which would be a welcome change.

A glance at election cycles past informs me that election years (up to election day) are those least likely to contain "unwelcome" surprises while the 12 months thereafter are far more likely to contain those same surprises.

"Hey," you might be thinking," didn't the Nasdaq crash in 2000 and what about this year?"

A closer look at equity price action in 2000 shows that the Nasdaq did crash in April of 2000 (I still vividly remember getting that phone call in Motown, a bar in Roppongi, Tokyo) but recovered substantially into September and didn't break into new low territory until after the election.

The Nasdaq lost another 65% (double the % losses during the earlier "crash") in the 10 months after election day.

As to this year, we'll just have to see how the next 12 months unfold. I suspect the worst is yet to come.

In addition to election day, I've been waiting for the Treasury's refunding statement, which was issued (in part) yesterday. The Treasury plans to borrow $550B this quarter- a record by large measure. Tomorrow they should inform us how they plan to borrow, i.e. what mix of bills to notes to bonds.

Within the next few weeks the Treasury will then begin implementing their plan, and finding out how much appetite exists for US debt.

At the end of the month, we'll see if the COMEX has enough Gold warehoused to met delivery desires for the widely held December Gold Futures contract.

Yes, this November should be like Christmas to a finance geek like myself.

Let's hope I have reason to give Thanks when the month ends.