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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president, Bob Olstein, Olstein Funds chairman & CIO, and John “Bradshaw” Layfield, Northeast Securities senior vice president.
Trading Pit: Wall Street Rooting for Third Party in 2008?
The Dow’s been hitting new highs again and again — and ending the week at one. This as more and more Americans are fed up with partisan politics. Is Wall Street saying forget the Dems, forget the Republicans, a third party to win in '08!
JOHN "BRADSHAW" LAYFIELD, NORTHEAST SECURITIES SENIOR VICE PRESIDENT: The public definitely wants and third party and I believe the market would applaud it too. I voted for George Bush and spoke at the Republican Convention for him, and I would again. However, if the best we have in this country is the choice between Kerry and Bush, we are screwed. That is why Jesse Ventura became governor in Minnesota and how Arnold Schwarzenegger was elected in California. The public wants a change, and the market would love it.
SCOTT BLEIER, HYBRIDINVESTORS.COM PRESIDENT: While a third political party would by exciting for politics in general, it would inject tremendous uncertainty into the marketplace. It might get people out to vote, but it would slow investment risk-taking until the candidate’s true colors are revealed.
BOB OLSTEIN, OLSTEIN FUNDS CHAIRMAN & CIO: People are ignoring that there are third and fourth party candidates within the Dems and GOP right now. Senator Joe Lieberman, D-Conn., ran as a third party candidate, but is back to being a Democrat. Wall Street could care less about a third party candidate because you cannot predict politics. A third or fourth party candidate does not matter. What matters is the candidate’s politics.
GARY B. SMITH, EXEMPLAR CAPITAL MANAGING PARTNER: A third party could be great for stocks. I think it would be great if someone ran with the free market qualities of Milton Friedman, strong national defense policies, and could work in a lot of Democrat social policies, other than Social Security. There’s no one out there like that and it would galvanize the market. If someone could combine free market and small government, kind of like Ronald Reagan did, the stock market would shoot up.
TOBIN SMITH, CHANGEWAVE RESEARCH EDITOR: Wall Street would love a third party candidate because the only person who could run would be someone really, really rich. I’m talking about a self-made zillionaire, who would certainly be pro-business. This is the only person who could afford to do it — and Wall Street would love it.
PAT DORSEY, MORNINGSTAR.COM DIRECTOR OF STOCK RESEARCH: I agree with Toby that the person would have to be very wealthy, but I don’t think they would have to be pro-business. For example, Ross Perot was very anti-free trade. That plays well in Peoria, but it’s a very populist stance — which would help them get elected — but it’s very bad for the economy.
Powerle$$ Pelosi: Good or Bad for Stocks?
Nancy Pelosi’s pick for House majority leader slapped down by her Democratic colleagues. If she’s a powerless House speaker, is that good or bad for the stock market?
Gary B: It’s bad for the stock market. I was pulling for John Murtha, D-Pa., because he is such a wing nut. It would have exposed how silly the Democrats are to put him in the majority leader position. Steny Hoyer, D-Md., is from Maryland and he’s a middle of the road guy and will most likely be more levelheaded than I would like.
Scott: Nancy Pelosi is going to make peace with her brethren. The Democrats will unite because they have something to do: make sure their man or woman is elected in ‘08. This group is going to make things sound so bad, which is not good for the market. Until we get to 2008, all we’re going to hear a drumbeat of negativity.
Bob: The Democrats don’t want to rock the boat at this point in time. They’re making some progress politically. The worst thing they could do going into 2008 is rock the boat, so it’s really good that Murtha didn’t get in. For Wall Street, it’s an excellent thing because we don’t want any radical politics. Let’s get back to earnings. The market is fairly valued here and it’s a stock picker’s market.
Bradshaw: Wall Street absolutely loves this because Wall Street loves being in charge. The worst things that could happen would be the Democrats having the power to push through items that are anti-market. I don’t think they will get that because George Bush has a lot of ink left in his veto pen. After the 9/11 Commission, the only thing that got an “A” was the impact of the market. The market is very efficient and politicians are not. The more that politicians stay out, the better the market is.
Pat: We could see less spending in this environment. Under a divided government, real per capita government spending has gone up about 1 percent. Under a unified government, real per capita government spending goes up about 5 percent. I know which one I like.
Tobin: I like the drumbeat of negativity, which has taken us from Dow 10,000 to almost 12,500. This is the wall of worry. If people are really worried that Nancy Pelosi is going to miraculously screw up this economy, please be worried! Give me another 2000 points. She is not as powerful as people think.