Democrats crushed, Wall Street bulls celebrate the news

Mitch McConnell
Incomining Senate Majority Leader Mitch McConnell doing the Daniel Boone thing at CPAC 2014. Who knew he was serious about taking scalps? (Credit: Gage Skidmore via Wikipedia)

WASHINGTON, November 4, 2014 – Elections have consequences as Barack Obama likes to observe. And so it was with last night’s epic Republican blowout, which helped the GOP stage a handy takeover of the despicable Harry Reid’s do-nothing, vote-on-nothing Senate as well as cementing an even larger majority in the House.

More substantial political consequences may be yet to come. But for now, we can rest assured that our now very lame-duck president will go out of his way to wreak as much havoc as possible on the formerly constitutional republic he was taught to loathe and hate early in life. It will be interesting to see how the upcoming assemblage of Republican congresspeople will parry this irrational thrashing about.

As far as Wall Street is concerned, traders decided not to worry and be happy today. But stockholders can already see the consequences Tuesday night’s blast is having for certain sectors.

READ ALSO: Republican midterm election blowout juices stocks, bonds.

Along with big oil, coal stocks, for example, are experiencing one of the nicer up-days in recent memory. It’s not a particular surprise, given that incoming Republican Senate Majority Leader Mitch McConnell of Kentucky and his new pal from neighboring West Virginia, Republican Senator-elect Shelly Capito won decisively last night, given the massive unemployment this administration’s coal-persecution complex has caused in each state.

Expect the pair of them, and many of their new majority colleagues, to blunt the Marxist EPA’s drive to eliminate coal and other fossil fuels from middle America’s energy diet, massively driving up prices for everyone in the process.

Meanwhile, the equal and opposite reaction is happening in the wonderful world of taxpayer subsidized solar energy companies. All of them fell quite sharply in Wednesday’s action, even before current darling Solar City (SCTY) reports. That stock plunged some 8% this morning before recovering 4% of the loss just prior to Wednesday’s close. SunEdison (SUNE) and SunPower (SPWR) experienced substantial drops as well.

And, alas for the IPO-loving Maven, last month’s solar IPO, Vivint Solar (VSLR) took a hit as well. We picked up some shares in that IPO, figuring it was worth a month’s gamble even though we’re cynical about that heavily taxpayer subsidized sector.

Unfortunately, trading in VSLR opened below that IPO’s $16 price and tanked for the remainder of October before attempting to get back to break-even. But as of today’s close, it’s back down 5% from Tuesday’s close, last trading at $14.12. We have to decide whether to hold on a bit more, or dump this loser. So it goes with IPOs, particularly when the political winds change on a formerly majority-favored sector like solar, which a great many Democrats have invested in.

Look for Republicans to put the pressure on the administration for ending the anti-Keystone XL pipeline nonsense. Enough is enough. All the EPA’s enviro-freak policies are doing are raising energy prices through the roof even as fossil fuels have begun to get cheaper, courtesy of the fracking boom which, of course, the EPA and its Democrat investors supporters have also essentially opposed.

Taxpayers are apparently seeing through the global warming energy ruse at last, realizing that with rising fuel prices and stagnant to nonexistent salaries, their way of life is slowly being strangled. Today’s market action in energy was at least a fleeting acknowledgment of what’s been going on. Elections have consequences.

Lower oil prices are actually good for the U.S. economy, at least to a point. Dropping fuel prices at the pump function as a major tax cut, putting money back into consumers’ pockets. Good thing, too, since getting a raise of over a penny an hour is like pulling wisdom teeth out of a fat cat CEO who’d rather keep that penny for himself.

This is money that might actually get spent for stuff now instead of being drowned in the gas tank. Perhaps this will do something to get the moribund economy off its duff. Not that the administration ever cared.

It’s estimated that oil stocks can actually make a good profit these days, even on unconventional oil, if the price remains above $70 bbl., which thus far it has. Meanwhile, if those slugs operating gas stations would get on the ball, we could see prices at the pump approaching $2.25 per gallon by Christmas. Ho, ho, ho! Wouldn’t that look like the missing stimulus we were supposed to have had?

As CNBC bad-boy Jim Cramer put it on his show, “from a consumer standpoint, if you fill up your gas tank twice a week and it used to cost $80 each visit when oil was above $100, it now costs $60. That’s $40 a week pocketed, which amounts to $2,000 a year.” Nice. To east coast oligarchs and filthy-rich west coast techies, that’s nothing. To Joe the Plumber and his friends, that’s real money. It’s the raise they’re not going to get. Elections have consequences.

Oil stocks were actually brutalized this week by freaked-out HFTs, trading on the price drop news and terrified even more by the Saudi price cut. But these out-of-control clowns—their supercomputers, actually—trade strictly on the headlines, not the numbers.

It’s likely that something resembling orderly markets will return shortly, setting oil majors, minors, drillers and suppliers back on a winning track throughout the fuel-intensive winter months.

Air lines and their passengers will benefit as well, via lower fuel costs and (hopefully) lower fares. More knee room? Well, that’s another story.

Other benefits are more subtle. Grocery prices at your friendly local Safeway might come down a bit, courtesy of lower fuel prices for the trucks that transport grocery products from central warehouses to individual stores. Maybe shipping costs billed by Amazon and others might be capped for awhile, too, just in time for Christmas.

Elections have consequences. The Republicans won. Big time. Deal with it.

Today’s trading tips

These are actually Thursday’s trading tips, since the market closed as we put this column together.

As we broadly hinted above, selective buys in the energy sector could be productive here, particularly if oil’s price plunge at least plateaus for awhile. And indeed, per bbl. prices were up about $2 today, having dipped below $76 bbl. recently. Mostly-domestic producers are in our sights, including Anadarko (APC) and Hess (HES), both of which we’ve been white-knuckling for a week. Given the current environment, these aren’t for the faint of heart, however.

In the area of coal, Peabody (BTU) might be worth messing with. It’s been hanging around its historical lows since forever. The Obama EPA’s destruction of the coal industry has been rapid and thorough. But even a modest reprieve here could boost the Peabody bottom line as well as the balance sheets of others.

Furthermore, if somebody somewhere could goose international economies out of their sleeping sickness, international demand for American coal is still quite robust and could increase substantially.

Ancillary income plays could also benefit, including certain master limited partnerships (MLPs). One we’re in and out of has been Calumet (CLMT), which boasts a 9%+ yield and also is into oil specialty products as well as asphalt, which could experience a robust period if the U.S. ever decides to do something about the nation’s deteriorating roads instead of telling people to buy bicycles.

And who knows? Maybe retail will get a real Santa Claus boost here, assuming Obama doesn’t muddy the political waters with revenge executive orders during Congress’ upcoming lame duck session. Macy’s (M) is well run and could be happy in this space. Others may also benefit.

But stay away from Sears (SHLD) whose feckless ownership only cares for the real estate these stores are sitting on and not the stores themselves. More as it comes this week.

Happy days. At least for today.

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