Bloodletting

• Posted by Adam Warner
• on January 19th, 2010

Beware of business pundits talking politics. Like Cramer.

Can we just call this session off until we see who wins in Massachusetts? Can we see what will happen in the Senate rather than what will happen with IBM or Citigroup? We know that everything from the Cadbury surrender to the Brink’s job means nothing if Scott Brown beats Martha Coakley, the woman who called Curt Schilling a Yankees’ fan in some gaffe that should cause all of Beantown to switch to the GOP. I can’t stress how important this election is because we have a dual-issue president, health care and bank basher, and neither plays out all that well among the investor class.

I realize he talks to mom and pop in Cramerica and likes to spell everything out in sound bites and linear relationships, but in the real world the market actually anticipates. To the extent the Massachusetts election will impact the market, today’s action will fully reflect it. As per Nate Silver, Brown’s very likely to win. Never say never, but I really doubt we explode on news that the market will have almost entirely discounted already.

In the real world, there’s relatively little uncertainty as to the outcome, and it appears the market does not care as much as Cramer does. My evidence? Volatility, as evidenced in VXX, is getting slammed ahead of the “news”, and to the extent if effects health care stocks, they’re already moving. Hospitals are down, insurers and pharma are up. Banks are just moving with the market. Whether you agree with the current policies or not, there’s also no objective evidence Obama and a 60 vote Senate exactly destroyed the market to begin with.  My personal opinion is health care’s going to pass in some form anyway, and the bank stuff is a lot of populist rhetoric about all sorts of actions that will play to the pitchfork crowd but never happen. In case no one noticed, you get a lot of noise whoever is in power, but at the end of the day business interests magically win out.

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