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Sunday, November 07, 2010


Post election musings

There are still some races to be decided, recounted, litigated, etc. but our predictions and pre-election guide to the key races were pretty accurate. As expected, GOP gains in the House were at the upper end of expectations, and when all the races are decided, will be just north of the predicted 60 seat swing. In the Senate, the gain appears to be 6 seats, counting Alaska as an R seat whether it turns out to be Murkowski or Miller. In the area of whether this was an anti-incumbent push or a conservative backlash, as we believed, it is worth noting that only 2 R's lost House seats. The message voters delivered was pretty clear - we object to the D's policies and ramming through unpopular legislation by any means available. And we demand fiscal responsibility.

Of course delivering a clear message does not assure that those preferring to hear different messages will get it right. So ever since Tuesday, we still have D leaders beating their chests about their ineffective communications, and how the voters would have approved of their policies if the communication had been better. This is rank elitism of course, and reveals contempt for the voters, but we have come to expect this and even anticipate such reaction from the left. Of course these are the folks who are so often wrong but never uncertain.

Happiest news of the day is the message from Nancy Pelosi that she intends to stay on as D leader in the House, and with Mr. Clyburn determined to remain the Whip, there appears to be no slot for Stony Hoyer, one of the last of the Blue Dog Dems. The more conservative Dems, who were used to obtain the majority in swing districts the last two cycles, took the fall for Pelosi and Reid, just as R moderates were being purged by tea party candidates. So now we have a Congress where both parties are a bit more extreme, and it will be interesting to see what compromises are achieved. The conventional wisdom is that there will be an extreme form of gridlock, but I think the surprise, if any will be to see more constructive agreement than people expect. Some of that agreement will involve undoing the accomplishments of the last Congress, but that can be a constructive exercise.

I think once everybody sobers up, there will be an understanding that the voters have reasserted their right center bias, and that liberals will be sent to the woodshed to agonize over their missed opportunity to socialize America. Dems will be looking at a 2012 scenario where the president must move toward the center, as Clinton did, or lose the White House. I think there is no hope that D's can retain the Senate in 2012 given the seats they have to defend. As for the House, where the GOP really did damage in this election was in the statehouses and governors' mansions so they will control the redistricting process where it matters. That could consign the Dems to minority status for quite a while. They may have no choice but to make policy adjustments.

R's are also acutely aware that they cannot abuse power as they did during the Bush years and expect to remain in control. This means getting things done on taxes, on health care, and on spending. It means engaging in serious conversation with the Administration about how to make things right. Comments like Senator McConnell's concerning the urgency of winning the White House in 2012 are not really helpful.

I think the scenario goes something like this. D's will not get anything done in the lame duck session that is not acceptable to Senate Republicans, who now have 42 seats (Senator Kirk of Illinois takes his seat immediately). I expect a two year extension of all the Bush tax rules and rates for all taxpayers. R's will not agree to the D's suggestion for decoupling any of the income levels, which is just a trap. There will also be the usual AMT fix. There might be a move to compromise on the estate tax, perhaps making the 2009 rules permanent. This could all happen in the lame duck.

Once the new Congress sits, I think we will see an early, unsuccessful move to repeal the Health Law, followed by more successful measures to starve it of the funds needed to implement. That situation will continue until the states' health care suit gets to the Supreme Court, which might take the case on an expedited basis, today's setback notwithstanding. I think Justice Kennedy will tilt a 5-4 decision against the individual mandate, and that will throw the R's and D's into a room to hammer out replacement legislation that is briefer, better, and constitutional. If that happens, everyone can claim victory.

All of this will provoke consternation on the left, and while the administration will empathize, they will simply take those votes for granted and try to reconstruct a winning electoral strategy. In the meantime, with Pelosi and Reid in place but largely declawed, we on the right have the gift that just keeps on giving.

Election night for me was a mostly cheery affair, though there were some disappointments. You have to admire the Dems' turnout machine, which saved Reid, the governorship in Illinois and probably Connecticut (one of three gains for them against 9 losses, if the vote counts hold), and Senator Boxer in California. To overcome the voter apathy they faced was surely a great challenge. Of course, there were lots of states they just could not win with that ground game, including PA, Ohio, FLA, WI, MO, Michigan and others.

As for R's, they need to improve their turnout game for the day when their voters aren't so charged up. They also desperately need a strategy for appealing to Hispanic and Black middle class voters. Electing several R Hispanics to be Senator or Governor represented a good start. Finally, while the tea party provided so much positive impetus, one lesson learned is that carriers of that message need to be chosen more carefully. R's could have, but didn't win Senate seats in Colorado, Nevada, and Delaware largely because of inept candidates who won primaries.

On to more important things. I have only recently been paying more attention to country music so Friday night, we joined 10,000 or so mostly adolescent or twenty something girls along with the usual cowboy hat wearing old timers to see Carrie Underwood at the Nassau Coliseum. Carrie has become the Diana Ross or Bruce Springstein of country, singing virtually non-stop for two hours, flying over the crowd in a blue pickup truck, changing clothes every few songs, and singing a duet with a filmed recording of Randy Travis. So it's a real event, but a very musical one. She is unquestionably a great talent and the biggest star in country music today.

One of the problems though with country is that it now sounds more like rock or pop than country. The singers aren't backed by pickers any more, they are backed by rock bands and the volume is way up. When they play an arena, that gives them an excuse to turn the volume WAAAY UP, with the usual echo and distortion problems. This was not really a problem for Underwood whose voice is strong enough to overcome it, but poor Billy Currington who led off was rendered all but inaudible, his voice sounding like it was coming from some far off echo chamber. This was so unfortunate given that his songs are fun and humorous, but unless you already knew them and the words, you were out of luck, and so was he.

Nevertheless, it was good fun. For those who care, the CMA awards show is this Wednesday, which unlike most award shows is actually semi-entertaining. We'll see if they give Underwood her third straight Entertainer of the Year award.
-------------------------------------------------------------------------------------One of the NFL's enduring scenarios is where the allegedly superior team gets drubbed for three quarters by the underdog, only to come back in the final period, often pulling the game out in the last two minutes. Over the years, my beloved jets have been on the short end of that scenario more times than not, but this year, we have been the beneficiaries of these late game turnarounds. As it was in Denver, it happened again today in Detroit where the hapless but much improved Lions were left to wonder just what else you have to do to win a game.

Meanwhile, the Giants' roll continued in Seattle. There is no question that this team is playing better than anyone else right now. Even the curse of the bye week had no effect on them.

On November 1, we bought 400 shares of Tat Technologies (TATT) at 6.63, a value buy. We were also greeted with the not so surprising news that Wolverine Tube (WLVT) was filing for a prepackaged bankruptcy. Pretty certain that the common shareholders will net their usual goose egg in bankruptcy, I went ahead and took almost a penny for each of my 13,300 shares of this dog, figuring correctly that was $120 that would not be available a day or two later. This is about the last of my real ugly dogs in the kennel and the loss of some $37,000, mostly from the taxable account, assures that I will not have to make an estimated tax payment for the fourth quarter. On Friday, we bought 50 shares of Honeywell (HON), a zero buy, for 49.00.

Stocks continue to do well in the face of inept fiscal and monetary policy. Quantitative easing by the Fed is entering a second round, but quite a bit smaller than we feared. Still, it means more inflation down the road. The bubble in municipal bonds continues to inflate, and I am seriously trying to come up with a solution for the money in my triple tax free fund. I'm afraid I can't keep it there much longer. The states are all hooked on federal money, and that well is likely to dry up in 2011.

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