Wednesday, July 30, 2008

$$$$ Markets are Moving $$$$ Polls Are Tightening

Markets Moving

This morning, stocks are moving up. Housing, auto, and financial shares are enjoying the ride. Now that housing "solutions" have been provided, the market focus is back on energy. It has become clear that the congress is going to be forced to vote on energy matters more than once between now and the election. Congress will be forced to vote on off-shore drilling; congress will be forced to vote on the nuclear power agreement with India; and, congress will be forced to accept or to vote on the nuclear power agreement with Russia. If a deal is made with Iran, congress will be forced to vote on a 123 nuclear power agreement with Iran.

Should a peace deal be negotiated with Iran, which will include a 123 agreement, those who oppose the war against terror and nuclear power will be in an awkward position. Voting for the agreement will in effect be an endorsement of the whole Bush strategy in Iraq and the rest of the Middle East. So far, democratic congressional leaders have protected Obama from having to vote on energy matters.

Passing a peace deal with Iran, that takes the production of nuclear fuel out of Iran's control will be hard to vote against. With the prospects of passage being strong, the price of oil could easily trade down to the $70 or $80 range prior to the final vote. Can you imagine a vote against the deal under such circumstances?

Polls Are Moving

Obama leads McCain by a surprisingly low margin. John Kerry lead Bush by a larger margin at this point in 2004. Flip Michigan and Ohio and McCain has the lead. The Gallup Poll of likely voters already has McCain in the lead.

Both parties are fighting over "Reagan Democrats". These middle class white voters tend to be catholics located in the rust belt. They are feeling economic pain. Many jobs in Ohio and Michigan have been lost to automation. Democrats have tried to blame these losses on NAFTA but "facts are stubborn" (John Adams?). My logical arguments, such as the fact that China has lost more jobs to automation than has America, are not persuasive. The family that is hurting wants a friend who is willing to cry in their beer with them.

Both McCain and Obama are political professionals. They each play the game very well. However, in the political game, the best do not appear to be the most polished. The best have an Andy Griffin or Sam Ervin quality. Even today, Bush, our President for the past 8 years, is seen, by many, as a dullard. Obama is a bit too smooth for his own good. McCain has used his "straight talk" to gain credibility. When one of his advisers, Phil Graham, said the recession is a mental recession, McCain was quick to disavow the comments and Graham resigned. McCain knows that he must be sympathetic to the concerns of the down trodden. Larry Kudlow keeps asking the question, why does McCain trash big business. McCain understands that the rust belt, union, middle class view of big business is on par with Kudlow's view of big government. We vote for the person who shares our views. McCain has a disdain for big government that draws Kudlow to his side and he has a disdain for "big business" (corruption, excess pay, excess profits) that draws "Reagan Democrats" to his side.

McCain should bash excessive profits all he needs provided he is for economic policies that will create huge excessive profits; profits that are ultimately shared by all Americans. McCain is correctly in favor of reducing US corporate tax rates to the levels of tax in Europe (and the rest of the world). We cannot expect companies to locate in America and to produce jobs in America if they get better tax treatment in Europe. While it is difficult for the middle class rust belt voter, who has lived in a highly unionized environment, to appreciate the connection between low tax rates and job increases, McCain will not be able to create jobs for these folks unless he is elected. While McCain is not likely to lose many business votes to the left by saying corporate executives make too much money, he may gain a substantial number of "middle voters".

Obama also understands the importance of the rust belt vote. Tim Kaine, Governor of Virgina is reportedly one of the front runners for his running mate. Pundits suggest this selection is about trying to win Virginia, a state that, with the exception of Lyndon Johnson, has voted for the republican candidate for many years. The more important consideration is that as a Catholic, Kaine could help Obama hold the rust belt states.

Only a few thousand votes in Ohio could have produced President Kerry. The talk about McCain's VP keeps bouncing around the rust belt. Tom Ridge of Pennsylvania has been frequently mentioned but McCain is down 7 points in PA and Ridge might not do much for McCain in Ohio or Michigan. The winner of two of three, out of PA, MI, and OH is the likely president. Romney, a favorite son of Michigan, is the odds on favorite. The former governor of Massachusetts has demonstrated an ability to win the middle to the middle left of voters. He also has the ability to raise huge campaign funds. Believe it or not, Romney became the favorite of the far right as the last great chance to dethrone McCain in the primary. He is not a favorite of the Christian coalition. He is certainly not my personal favorite but the investment question winning. Because we are coming into the start of a new real estate cycle and the start of the business phase of the economic cycle, the economy will do well regardless of who is President. The paradox is that McCain's moves to eliminate pork will mean that the markets will do less well during the early years of a McCain Presidency than they would under an Obama Presidency.


Based on my articles about the coming "surge" in nuclear power, one might be tempted to buy uranium miners. That would probably be a mistake. The 45 nuclear power plants to be built in Russia, under the 123 Agreement, will be designed to almost fully burn nuclear waste fuel. Twenty years ago, only 4% of nuclear fuel was burned. Today a lot of plants can burn 5% and new technology from Tobisha will burn 6%, in existing plants. The new plants will burn more than 65%! All the waste fuel that has been stored for the past 30 years suddenly becomes feed stock for these plants; something a true environmentalist should love.

McCain is for nuclear power while Obama has carefully constructed a "for it under certain circumstances position". Obama can be for it if the political mode swings his way. Get ready for a big swing. I predict that Obama will vote for nuclear power between now and the election.

The US Government just made a 7 billion dollar grant to help the US catch up with Russia in regard to burning "waste" fuel. It will take 15 years. In the mean time, Russia has agreed to earn a few trillion bucks by taking in waste fuel from the rest of the world. The needed ratio of "low burn" to "high burn" plants is about 10 to 1. India has a fast breeder reactor under construction now. If Obama and other democrats vote down the agreement with India, India will simply buy its fuel from Russia, Australia or Canada. The deal that has been made with India does not obligate them to use US technology. They would like to but they don't have to. Can you see the predicament the democrats will face? Vote against nuclear and lose business to Russia?

By the way, the 7th largest uranium mine in the world sits idle in Virginia. The people of America are growing tired of paying 700 billion dollars per year for foreign oil when we have resources available in the US!

The deal offered to Iran is not just the best deal in town, it is the only deal in town. The situation is like that of a huge freight train that has pulled out of the station, it is only going 10 miles per hour but it is gaining momentum. Iran must get on board or it will miss the train. They cannot wait for the Russian train or the Chinese train or the European train of the Indian train or the Japanese train. The train pulling out of the station is all of these and more.

The Markets are Moving and the Polls are Tightening $$$

The markets are "smelling" the future. Stocks have started to rise, while the average person knows very little about the "New Age", a time of game changing low cost energy and a time of relative world peace. A short time ago, a common fear was that democrats will raise taxes in order to fund massive government programs. My bet is that McCain is our next President. My bet is that Tom Coburn will continue to force the Senate to show how it will pay for new programs. My bet is that the tax payers will stop paying 35% of the cost of unreliable wind mills and they will drive past ethanol stations in protest of the low fuel mileage. Yes, it will take years for nuclear plants to be finished but Thunder Horse is coming on line now, wells in Iraq are coming on line now, wells in Iran are ready to start pumping again, 30 Trillion Cubic Feet of Gas has started to flow from under Dallas-Fort Worth, etc. Buy stocks now because it only takes a tiny percentage of the knowing to push up prices long before the magnitude of the "peaceful use of nuclear power deals" is appreciated by the public.