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Democrats have a track record of getting fiscal legislation through a Republican-led House by cutting deals. Will they be able to pull off the same trick when it comes to averting a slew of budget cuts and tax increases that will otherwise kick in at the end of the year?
Macro-strategist Michael Hampden-Turner has some thoughts on this — the $600bn “fiscal cliff” — which he shared with us on Wednesday morning (video below). Read more
Just a few resources for our readers staying up to watch tonight’s activity…
– A chart from RBC Capital (data from RealClearPolitics, CBS, and RBCCM US Market Economics) showing what time the polls close for the toss-up states: Read more
Excited about the election? Well, tomorrow you’ll have to face reality. Reality and ducks:
After US elections on November 6, Washington’s focus will shift to the fiscal cliff. The outgoing Congress will meet for another two months in what is traditionally called the ‘lame duck’ session.
We’ve written before about odd goings on in the spread betting world where US elections are concerned, namely last week’s big spike in Mitt Romney’s chances offered by InTrade.
If you can figure out a way to make it work, then perhaps more interesting is this little (ok, microscopic) arb opportunity: a Romney election win is being offered at 34.7 per cent on InTrade and 31 per cent on IG Index… Read more
Election watchers and political junkies who obsessively study every poll or other releases of electoral data must have had a moment of consternation this morning as they checked Intrade, the online prediction market.
Despite the widespread perception that President Barack Obama got the better of Mitt Romney in last night’s televised debate, the Intrade market pegging Romney’s chances of winning the election spiked from roughly 41 per cent to nearly 49 per cent in just a few minutes early Tuesday morning. The prediction market then swung back in Obama’s direction within minutes, and is now roughly where it started the day. Read more
It’s an indirect path from one to the other.
Gawker on Thursday unloaded some 950 pages of filings from Bain Capital-affiliated offshore funds in which Mitt Romney has invested his fortunes over the years. We’re still reading through the docs, though Dan Primack (who’s already read through them) thinks there’s not much to the issue. Read more
The fiscal cliff and “Taxmageddon” are terms for what might happen at the end of this year, when various US tax cuts and benefits expire, and the automatic “sequestration” spending cuts agreed as part of last year’s debt ceiling/Super Committee deal are due to kick in. (Cardiff explained it in more detail back in November if you want a refresher on the scale and messiness of it all.)
There have been several estimates of how this might play out — Nomura for example forecast that the expiration of the Bush tax cuts alone would reduce GDP in 2012 by 1.5 percentage points. Now the Congressional Budget Office, a non-partisan agency, has published its own analysis, which paints a picture of all of the fiscal restraint measures and expiring tax cuts shaving a massive 4 percentage points off GDP growth in 2013, making for a recessionary first half: Read more
Mitt Romney and Newt Gingrich, rivals for the 2012 Republican nomination for presidential candidate, clashed angrily in a fiery campaign debate, feeding off attacks on each other over immigration, housing and their personal wealth, reports the FT. Mr Romney said an advertisement by the Gingrich campaign saying he was “anti-immigrant” was “inexcusable and inflammatory and inappropriate.” “The idea that I am anti-immigrant is repulsive,” he said. Mr Romney adopted a harsher tone on immigration in earlier debates but appears to have softened in Florida where there is a large Hispanic population more sensitive to the issue. The Florida primary is crucial, with the eventual winner likely to take substantial momentum into the campaign in February. Both men have one primary victory under their belts and share the lead in polls of Republicans in the state ahead of the primary on January 31. The WSJ reports on a poll that showed Gingrich with 37 per cent support versus 28 per cent for Romney. However, the poll also revealed that many Americans, particularly independents, have negative feelings about former House speaker Gingrich. In addition to which, Romney is viewed by many to be a better candidate to face up against Obama. Read more
Republican presidential candidate Mitt Romney’s tax records, released on Tuesday, indicated that he will pay $6.2m in taxes on a total of $42.5m in income for 2010 and 2011, Reuters reports. The tax records were published after criticism from political opponents over the amount of taxes paid by the former private and consultancy executive. The relatively low effective tax rate stems from the majority of Romney’s income being from investments, which are taxed at 15 per cent, rather than from his salary, on which top earners are taxed 35 per cent. Romney was defeated in the South Carolina primary on Saturday, after accusations by rival Newt Gingrich that he was out of touch with most Americans. Read more
Republican Presidential candidate Herman Cain is set to hold a news conference on Tuesday to address the latest sexual harassment allegations that threaten to torpedo his campaign, Reuters reported. Cain – before the recent outbreak of allegations – led successive opinion polls in the race to be crowned Republican nominee in the November 2012 elections. However, his candidacy has been undermined by a wave of allegations into his conduct. On Monday, Sharon Bialek, a single mother from Chicago, became the latest to accuse Cain of impropriety. Striking a defiant note, the candidate said: “I will talk about any and all future firestorms, because here’s one thing people don’t know about Herman Cain: I’m in it to win it and I’m not going to be discouraged by any of this stuff,” in comments recorded by Reuters. Cain’s news conference is scheduled to take place in Phoenix at 3 p.m. local time (5 p.m. ET). Read more
The Republican takeover of the US House of Representatives has sparked fears in the derivatives and clearing industry that the implementation of landmark reform of OTC derivatives markets could be held up or even derailed as opponents seek to water it down, the FT reports. US regulators are scrambling to produce detailed rules to implement the so-called Dodd-Frank act, which promises the most radical overhaul of privately traded OTC derivatives since they were created over 20 years ago. Reuters reports that Spencer Bachus, who is likely to take over as chairman of the House financial services committee, has asked regulators to consider whether a rule which will curb risky trading may handicap US banks globally, according to a letter obtained by the news agency. The news agency also reports that US regulators will meet an advisory panel today to discuss the May 6 ‘flash crash,’ which saw markets abruptly plunge and rebound earlier this year. Read more
Americans went to the polls on Tuesday for Congressional elections that are expected to hand control of the House of Representatives to the Republican party and significantly diminish the Democratic majority in the Senate, an outcome that will be seen as a repudiation of the Obama administration’s first two years in office, the FT reports. As polling booths opened across the country on Tuesday morning, pundits were looking to turn-out for clues of whether the expected Republican “wave” will amount to a tsunami or more of a gentle lapping. Read more
A Reuters/Ipsos poll has found that fifty per cent of likely voters said they will choose a Republican candidate when they vote while 44 per cent said they will pick a Democrat. Republicans are likely to win some 231 seats in the House and take control of the chamber, the poll suggested, and Ipsos pollster Cliff Young predicted Democrats would hang on to control of the Senate with either a margin of 52 seats to 48 for Republicans or 53-47. Meanwhile the WSJ reports on some sharp words in the final hours of election campaigning across the country. Read more
We’ll have more next week on the elections and their potential impact on the markets, but for now we’ll pass along some thoughts from the strategy team at RBS — thankfully free of the silliness that often accompanies analyses of this kind.
First a quick primer: Read more