Wednesday, October 17, 2012

Wednesday, October 17, 2012 - It Could All Come Down to Pahrump

It Could All Come Down to Pahrump
-by Sinclair Noe

DOW + 5 = 13,557
SPX + 5 = 1460
NAS + 2 = 3104
10 YR YLD +.09 = 1.81%
OIL - .19 = 91.93
GOLD +1 .60 = 1750.90
SILV + .24 = 33.30
PLAT + 22.00 = 1672.00

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The best site I've found for election polling data is

A CBS News/Knowledge networks poll of undecided voters who watched the debate found 37 percent giving an advantage to President Obama, 30 percent favoring Governor Romney and 33 percent calling the debate a tie. That represents a narrower lead for Mr. Obama than Mr. Romney had after the first debate in Denver, when a similar poll gave Mr. Romney a 46-22 edge.

A CNN poll of registered voters who watched the debate — not just undecided voters, as in the CBS News survey — also gave the debate to Mr. Obama by a seven-point margin, 46 percent to 39 percent. Mr. Romney had won by a much larger margin, 67 percent to 25 percent, in CNN’s poll after the first debate.

Meanwhile, 73 percent of voters in the CNN poll said Mr. Obama performed better than they expected, against just 10 percent who said he did worse; chalk that up to diminished expectations.

Two other polls gave Mr. Obama a somewhat clearer advantage. A Battleground poll of likely voters in swing states who watched the debate had him winning 53-38.

A poll by Google Consumer Surveys gave Mr. Obama a 48 percent to 31 percent edge among registered voters.

A Public Policy Polling survey of Colorado voters who watched the debate found 48 percent declaring Mr. Obama the winner, and 44 percent for Mr. Romney. Mr. Obama’s advantage was clearer in the poll among independent voters, who gave him a 58-36 edge. However, the candidates were roughly tied when Public Policy Polling asked them how the debate swayed their vote, with 37 percent saying the debate made them more likely to vote for Mr. Obama, with 36 percent for Mr. Romney.

The most recent odds put Mr. Obama winning a second term at 65%, down slightly in the past few days from 67%; but those odds do not include the results from last nights debate. Those are the odds, not the percentage of votes; that calculation is much closer, right about a 2-percentage point advantage for Mr. Obama in popular vote. The actual vote might be closer still. And of course, the winner is not determined by the popular vote but by the electoral college; so, swing states become key battlegrounds. And that means that an individual John or Jane Public in Pahrump Nevada might actually cast THE decisive vote.

NBC News reports that so far, $807 million has been spent on political ads for radio and television: local and national, cable and broadcast. Team Romney is outspending Team Obama by $455 million to $355 million. I say Team, because you have to factor in outside money that is now part of the campaigns due to the Citizens United Ruling. The actual Romney campaign has spent around $164 million. The actual Obama campaign has spent almost $300 million. The rest of the money has come from outside sources, the SuperPacs.

I find the debates and the election hoopla to be lots of fun and very entertaining. The debates are less expensive than going to a movie, so they seem cheap; but sometimes what's cheap is dear.

Few events have reshaped the nation over the last half-decade as much as the housing crisis—particularly in key battleground states such as Florida, Ohio, and Nevada. But neither the Obama nor the Romney campaign has had very much to say about it.

Housing’s absence from the campaign debate has led to lots of head-scratching among pundits, though there is an obvious explanation for why it has taken a back seat: housing is a political loser.

Mr. Romney faces a delicate balancing act. He has criticized Mr. Obama’s housing-rescue efforts as simply kicking the can down the road and says that he would focus on growing the economy instead. But that leaves an impression that he might recommend doing even less for at-risk homeowners looking to the government for more help. If your opponent is unpopular for promising to fix the problem and then falling short, it could be risky to advertise that you would offer even less.Mr. Obama has learned how difficult the housing problem is to fix, while Mr. Romney has discovered how hard it is to talk about in a sound-byte-driven campaign cycle.

The Commerce Department reported housing starts hit a four-year high. Groundbreaking on new homes jumped 15 percent in September, the quickest pace since July 2008. The surge in housing starts was viewed as evidence that the housing sector's fledgling recovery is bolstering the recovery of the broader economy.

And it makes the Federal Reserve look good. In September, when the Fed FOMC decide to announce an open ended mortgage backed securities bond buying binge, QE to infinity and beyond, they ended up propping up an economic sector that was already trending higher.

What came first, the Fed stimulus or the housing recovery? Many Fed officials reckon that as the housing market’s problems have been a big reason why the recovery has been so tepid, targeting the sector with direct aid can make a big difference for the broader economy. On the flip side, the Fed has the good fortune the housing market is showing signs of life when they are trying to stimulate the housing market. Policymakers hope positive housing momentum will help overall activity rise, which in turn should help boost job growth and lower unemployment. It still remains to be seen if the housing recovery has legs, and then if it has enough legs to lift the broader economy; but there is little doubt the housing market once again has momentum.

So does the housing rebound, joined with improving job market data, change economists’ estimates of how far the Fed eventually takes QE Infinity? There is already a lot of Fed monetary policy easing priced into the market and with the data improving there’s a risk the central bank could stop short of what’s expected, which could unsettle markets. Of course, it might be just a bump in a long term nasty market; even with improvements, the housing market remains far from normal. One of the tells would be an improvement in new home construction, that would demonstrate real demand; this month's report is a step in the right direction but not yet a trend.

So, for now, and with today's data, the old axiom, “Don't fight the Fed,” would certainly apply.

The S&P 500 rose for the third consecutive day. 3Q Earnings Season: IBM said revenue fell short of expectations. The stock dropped almost 5 percent, exerting an 81-point drag on the Dow industrials. IBM has an outsized influence on the Dow, which is a price-weighted index. IBM's stock closed at $200.63. Intel lost 2.5 percent to end at $21.79 a day after giving a weak revenue outlook.

Early in the 3Q reporting season 14% of S&P 500 companies have already reported earnings, and of those companies, 65 percent have beaten analysts' expectations, ahead of the long-term average of 62 percent. However, a majority - 54.3 percent - of the companies in the S&P 500 Index that have reported results so far have missed analysts' revenue forecasts, The top line is shrinking even as the companies are delivering bottom line results.

What gives? Earnings expectations have been lowered so far that it hasn't been hard to beat them. Once revenue starts missing and you can't cut costs anymore, I think this is the crack in the armor. If you then see earnings start to miss already lowered expectations, that's when you have a problem. Part of the answer is that the economy is in better shape today than it has been for some years. It is in a turnaround even if it is not as strong as we'd like it to be.

But that's already old news; we're already well into the fourth quarter. How does next year look? Well, companies are cautious about 2013 earnings targets. You can see how a CEO would want to reign in expectations for next year; it would be difficult to push profit margins higher when revenue growth is slowing. Margins are already considered pretty rich. If you have slowing revenues and you've already cut costs as much as possible; and I think it's safe to say that US businesses are running lean; then there's not a whole lot that can be done to grow earnings. 

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