#12 Markets, Polls and Pundits

On January 9, 2008

Hello Everyone,

As a result of all that conspired to raise my expectations, I was disappointed with the New Hampshire results, as I’m sure most of you were.

As I seek some perspective, I thought I’d share some random observations with you.

Markets. Let me start with some ideas from our son, Peter, who is a professional equity investor. He has started to notice the parallels between presidential campaigns and stock markets. As a long-time investment banker, they really resonate with me.

  • The multitude of forces at play are too numerous and interact in such complicated ways, that explaining – let alone predicting – short-term movements is impossible.
  • Nonetheless, it is human nature to search for quick and simple explanations for such movements. Think of listening to the radio at rush hour while an “expert” explains why the market was up or down today, or forecasts what it will do tomorrow. The expert is expected to have plausible answers even though the reasons are unknowable.
  • Even in bull markets, stocks never go straight up.
  • When things seem to be too good to be true, they probably aren’t true.
  • Meeting or exceeding so-called “earnings expectations” often are more important in the short-term than actual results (for example, if a company’s actual earnings are up substantially, say 19%, but analysts’ expectations were for 20%, the stock’s price will usually plunge.)

Pundits. Returning to politics, it seems to this political novice that none of us should have expected Barack to have locked up this presidential nomination in the space of six short days! Yet, the pundits – and human nature – led us to expect that, after the surprise in Iowa. Group think prevailed. Expectations became inflated. “Rush hour” analyses and predictions were plentiful. We should have known better.

Polls and Perspectives. In past Obamagrams, I have warned us about taking the polls too seriously. I didn’t believe them when I didn’t like the results; I shouldn’t have believed them when I did like the results.

But let’s put things in perspective.

Barack has made enormous progress in a very short time. According to Gallup, less than two months ago, he trailed in New Hampshire by 14 points. He lost by only three points. During the same time, a 17 point gap in the national polls has evaporated. At least, that’s
what the polls say.

Votes. So far, in the first two states, it appears that more people have “voted” for Barack than for Hillary. He won in Iowa by nine points and lost in New Hampshire by three. (The number of people who caucused for Barack could be estimated as 38% of the
approximately 225,000 Iowa caucus-goers; he received 103,000 votes in New Hampshire.)

And now, as they used to say on “Cheers,” everybody knows his name. All across the country. And it’s effectively become a two-person race, down from the eight that started. Who would have believed it possible last January?

Is This a “Bull Market” for Barack? I have long believed that presidential elections are more of a “matching” process than a “selling” contest. That the electorate, especially at major turning points, picks the right candidate for the needs of that time.

As Barack says, “There is something happening in America.” I agree.

Others do, too. One example is the “Bipartisan Forum” held at the University of Oklahoma last Sunday and Monday. As many of you know, it brought together 14 current or former senators, congressmen, governors and mayors from both parties. The group most notably included New York Mayor Michael Bloomberg who reportedly is considering a self-financed campaign for president as an independent.

In their transcript http, this group:

  • Calls for rejecting pessimism,
  • Asks for stopping politics as usual which seeks to divide us for political gain,
  • Pleads for bringing us together,
  • Argues that bipartisanship is possible; it is not some romantic dream.

Sounds like Barack Obama to me!

This is the antithesis of the cry from Hillary in Iowa to “turn up the heat” on the Republicans.

I am more convinced than ever that we have the perfect candidate for this historic moment in our country’s history. We all need to be patient and persistent as this bull market runs its natural course.

Please “pass it on.”


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adobe pdf file Attachment: Bipartisan Forum


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