And the Winner is: Ron Paul!

Not just the stock market has been rallying strongly since October. So have the fortunes of President Obama. Since the onset of the current bull move, the likelihood of him winning the next election has risen from the high thirties to the low fifties, according to the Associated Press GfK poll. If you want to put your money where your mouth is, the online site, Intrade (click here), is currently taking bets that Obama will win, giving odds of 59.9%.

In fact, the correlation between the president’s popularity and the S&P 500 is almost a perfect 1:1. That’s welcome news at the White House, which has watched with glee as the closely watched index has nearly doubled since Obama took the oath of office in 2009. Obama has delivered the third best stock market record in history, after Franklin Delano Roosevelt (1933-45) and Bill Clinton (1993-2000). His political advisors must be wishing that investors’ voting patterns were driven only by their pocketbooks!

It also greatly helps Obama that the Republican Party is committing suicide in the most destructive primary in history. Superpacs are flinging tens of millions of dollars of TV advertising at the candidates to convince voters that their opponents are crooks, incompetents, liars, or Gordon Gecko, and largely succeeding. The end result of this deplorable mud wrestling contest will be to make all of them unelectable under any circumstances. The winner will be exhausted and broke by the time he reaches the finish line at the Tampa, Florida August convention. In the meantime, the president can swan around in Air Force One, looking presidential, gathering oodles of money, but not spending a penny. Such is the power of the incumbency.

That’s all fine if the election were held tomorrow. But it’s not. The election is still eight months away, which in the world of politics might as well be eight centuries. If we get another summer swoon in the markets as I expect, and “sell in May and go away” comes back with a vengeance, the president could suddenly see some tough sledding.

Even if he wins the presidency for another four years, he will have anything but a blank check. The Republicans are expected to take control of the Senate, which Intrade assigns a 61.7% probability. Because of a fluke in the calendar, the number of Democratic senators seeking reelection, and therefore at risk, outnumbers Republicans by three to one.

They are also expected to retain control of the House of Representatives, which Intrade gives a 65.1% chance. According to Republican strategist, Carl Rove, they could lose 25 seats as much of the Tea Party is sent packing, but still stay in charge.

The bottom line is that you can count on another five years of gridlock in Washington. Expect the pointless speeches, the finger pointing, and the accusations to continue until 2017. Look for the number of presidential vetoes to hit an all-time high as a Republican congress passes one symbolic bill after the next.

It just so happens that most Americans prefer this outcome. At the end of the day, most people just want the Federal government to go away. A gridlocked government means the status quo is maintained. There will be no changes in taxes, deductions, subsidies, or any other economic policy. However, since the president controls foreign policy and the military, withdrawal of our troops from abroad will probably accelerate, saving us all a bundle of money and not a few lives. Perhaps this is why the S&P 500 has tacked on 27% in five months, and the Dow Index has just tickled 13,000.

A pacifist foreign policy combined with no new domestic programs sounds like a libertarian agenda to me. It looks like Ron Paul’s policies will win this election, even if he doesn’t.

While you’re at the Intrade site, have a romp, as they offer hundreds of bets you can make with real money on subjects as diverse as entertainment to politics to the weather. Do you believe that the US or Israel will launch an air strike on Iran before the end of the year? They will give you odds of 43.1%. There is an 87.4% probability that “The Artist” will win the Academy Award for best picture. There is a 2% chance that NASA will announce the discovery of extraterrestrial life this year.

What is the best performing bet in recent memory? The likelihood that the Republicans would win the House of Representatives rose from 18% at the beginning of 2009 to 100% just 21 months later.

 

Looks Like Five More Years of Gridlock

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