So, Wednesday morning -- assuming we know the election
results by then -- how will events and markets break from months of unnatural
quiet?
1. We'll know by then. The 2000 election was a coin toss
like this one, but the damned thing won't land on its edge again ... not twice
in four tries.
2. Who? Obama has an Electoral College edge, but that edge
has narrowed steadily. Iffy polling results this year seem to make even the
pollsters queasy. This one may more resemble '48 and the Chicago Tribune's
"Dewey Beats Truman!" -- but either man could be Truman.
3. With no forecast to work with, markets can't discount
either outcome. Wednesday could be an explosive trading day, but maybe not. If
it's Obama, things are going to happen fast; if it's Romney, no matter what he
says after winning, he still won't be in office for almost three months.
4. Fiscal cliff. If it's Romney, then Obama and Congress
will punt 90 days. If it's Obama, markets will begin to trade rapidly on
prospects for a deal. If Obama sticks with his
ethereal hope that "Congress will reach a compromise," find something big and
solid to hide under.
In our system of government -- intentionally designed so
that it's hard to get things done, and so that nothing at all gets done in a
hurry --either the president leads, putting his reputation on the line and
giving cover to legislators of his own party, or nothing of substance ever
happens.
If we seem in for a replay of 2011, markets aren't going
to like it. If we get a deal -- a real one -- markets will like it no matter how
tilted Left or Right.
5. No matter who gets elected, Tim Geithner will be gone
from Treasury. He has wanted to leave for a year, and the White House has not
explained why it begged him to stay. Anybody can do nothing. It's been a
challenge to annoy Right, Left, and Business Center, but the Prince of
Procrastination has been up to it. Whoever replaces the Wizard of Waiting cannot
do less.
6. Any pop the economy gets from an Obama resolution of
the fiscal cliff will be smothered in its crib by runaway regulation. Romney
might overdo regulation relief, but it would take many years to do harm: Really
bad financial actors and practices are long gone. Even Vikram Pandit is gone.
The link from regulation to the economy is finance. Somebody is going to have to
decide, quickly, whether we want Dodd-Frank and Basel III risk-based bank
capital rules, or want loans. A or B.
7. Housing. Finance is everything, and the most damaged by
the "regulation bubble." Edward J. DeMarco, czar of Fannie and Freddie, must be
either removed or recalibrated. There will come a day to privatize these two,
but squeezing the life out of them before a private supply exists makes a broad
housing recovery impossible. Oh, by the way, the FHA needs a $50 billion to $100
billion bailout.
Housing's benefit from the election? I don't see any.
Obama's record is clear: nothing. However, Romney is fond of the privatizing
nincompoops. Worse than nothing.
8. The new guy will nominate the next Fed chairman. There
are many able candidates, but this is a tough stream in which to change
horses.
Lou Barnes is a mortgage broker and
nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.
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