WASHINGTON – US investors face a rocky pre-Halloween hell ride as they try to survive the wonderful world of stocks and bonds. Both the White House and the House of Representatives have been impersonating Shakespeare’s Hamlet for the better part of October, constantly avoiding an answer to the cosmic question, “To stimulate? Or not to stimulate?”
Both sides claim they’re getting closer and closer to a “deal.” But, to switch metaphors, House Speaker Nancy Pelosi, Washington’s own Wicked Witch of the West, looks more like Lucy holding the football for Charlie Brown before she snatches it away, causing Charlie to kick himself aloft before hitting Mother Earth, back-first, with a predictable, resounding “WHUMP!”
Except that here in the Swamp, President Trump plays Charlie Brown. The POTUS, alas, keeps conceding more and more to Pelosi. In doing so, he gets dangerously close to accepting her attempt to bail out the Blue States. Nearly all of them remain shut down in order to dull America’s already quite robust coronavirus recovery. Because Trump.
Pulling the football away
Our prediction: either recovery legislation gets passed that’s at most $100-200 short of Pelosi’s ridiculously budget-busting goal, only to be killed by the more realistic US Senate; or, the legislation simply doesn’t get passed. Either way, it’s now too likely that even a decent Stimulus II bill won’t move the electoral needle much anyway, which was Pelosi’s main goal anyway: screwing Trump’s re-election chances.
The reason this charade remains important is its compelling, yet absurd impact on the overall flavor of the US stock market. If widely followed financial new site CNBC flashes a mildly optimistic stimulus headline on its front page, Mr Market gets a sharp kick in the pants and promptly rallies. But if that headline predicts gloom and doom, as in “no stimulus ever,” or some such lede, down Mr Market goes and where he stops, nobody knows.
It’s stupid, of course. But it’s also the best indication yet that we’re working with a market that makes its sharpest moves based mostly on headline news. Fake or not. And, frankly, any news broadcasting an imminent Stimulus II deal more than a few hundred dollars less than the Wicked Witch demands has 90% odds of sinking without a trace. Parties were once supposed to compromise to deliver reasonable goods to the American people. Now it’s the Pelosi led Commie-crats’ way or the highway. You can trade on this headline driven market. But you can’t invest in it.
Trick or Treat! Is a Halloween hell ride in store for US investors?
Keep this in mind in the coming week. The trading days might alternate, without warning, between Trick and Treat. The Founding Fathers would be appalled at this spectacle. But it’s likely too late for them, or for simple common sense, to intervene.
Best advice for US investors is to hang out the yellow caution flag for this entire trading week. It will be a confusing one, and it’s probably best to increase cash positions at least somewhat on bullish days, if we actually have any.
The reason why? The chaos is very likely to increase sharply after November 3. Unless President Trump somehow wins a second term in a Reagan-style landslide, the lawless vote-counting and gathering operations in a number of key states – particularly Pennsylvania – will be prolonged as long as possible. That will enable Pelosi’s Commie-crats to create as many votes as they need to overcome any GOP lead. This has been a Democrat specialty since the days of Franklin Roosevelt. (Watch out for those House and Senate seats as well.)
But wait! There’s more!
During this period of time, Mr Market’s Halloween hell ride will really get underway. Watch as the heroes of Antifa and BLM commence to destroy the US cities they haven’t yet destroyed. They’ll be fueled by plenty of funding from Iran, those lovable Chi-coms. That’ll teach those Deplorables!
And, of course, these fully fascistic Commies will also get substantial financial aid (and custom-delivered pallettes of bricks) from that really rich dude with dual citizenship that likes to install District Attorneys that won’t prosecute Antifa and BLM members who burn down stuff and beat up people they don’t like. We can’t mention his name, or you won’t be able to find this article via the world’s largest search site. (Sadly, they continue to demote CDN anyway, along with any other site that’s even a millimeter to the left of Pol Pot.)
Basement Biden for President! Hell ride dead ahead…
In the end, we’ll all be relieved at long last when Basement Biden wins the tally, fair and square. Right? That’ll make those demonstrators stop, for sure.
Once again, the watchword this week, particularly for serious stock market investors, is “Caution.” If any of us remain overexposed to stocks and if Antifa and BLM don’t like what they’re seeing next week, there will be hell to pay, and Mr Market will reflect that. Big time.
We’ll update the markets pretty much daily this week as we watch this treacherous investing situation unfold. We hope there’ll be good news to relate. But we’re not counting on it. Neither should US investors.
– Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection. Slightly resized to fit CDN format.