As stated in the last update the Donald has to be viewed as the new VIX factor; the month of October is also usually one of the most volatile months of the year. The markets appear unstable, to the untrained eye but they are reacting to the soap opera (our elections) and seasonal events. October is the month of unpleasant surprises so traders are naturally wary.
We stated many times that the current elections were essentially a soap opera on steroids and so far that appears to be the case. Regardless of the winner, the process is going to ensure that this nation will be more divided than before. That by the way was is one of the things the top players hope to achieve. When emotions are running loose, you can lie, cheat and do what you want and the majority will miss it because they will be too busy fighting an illusory battle.
Few developments suggest that the action after the elections could be even more explosive than what’s taking place now.
If Trump Wins
Market plunge because of the uncertainty factor; we would view this as an attractive opportunity to load up on stocks. Trump is not part of the regular establishment, and that makes Wall Street nervous as they essentially have most of the politicians in their pockets. We are talking regarding sentiment and not whether Trump would be good or bad for the country; that is a separate issue. The only thing that matters is perception; if the masses perceive something to be true, then whether it’s true or false does not matter. People act on what they believe to be true and not what is true.
If Trump Loses
Well, the typical reaction would be to expect a rally, and that might be the 1st response. However, there are indications that Trump will not accept the results and challenge them in court. Unlike previous battles, the most notable being the one between Bush and Gore, this could turn out to be downright ugly. Translation, there would be no president so as to speak as the courts would have to decide that. This leads to uncertainty; traders, not markets hate uncertainty. Markets go up and down based on traders reactions.
There is already evidence that a lot of nonexistent voters have been registered to vote and have voted for the years; one count has the total at 18 million. Imagine if Trump and his crowd can prove that some of the votes were fraudulent and push for a new recount. Can you imagine what kind of effect that uncertainty would have on the markets? Short term it would equate to a very healthy correction which we would embrace with gusto, but that is a different story. Brexit proved that market overreactions should be embraced. In the short term, newspapers would have a field day building up all sorts of doomsday scenarios.
Here is one of many articles that cover the issue of voter fraud
Yet as the election approaches, more and more cases of voter fraud are beginning to surface. In Colorado, multiple instances were found of dead people attempting to vote. Stunningly, “a woman named Sara Sosa who died in 2009 cast ballots in 2010, 2011, 2012 and 2013.” In Virginia, it was found that nearly 20 voter applications were turned in under the names of dead people.
In Texas, authorities are investigating criminals who are using the technique of “vote harvesting” to illegally procure votes for their candidates. “Harvesting” is the practice of illegally obtaining the signatures of valid voters in order to vote in their name without their consent for the candidate(s) the criminal supports. These are just some instances of voter fraud we know about. It would be silly to assume cases that have been discovered are the only cases of fraud. Indeed according to a Pew Charitable Trust report from February 2012, one in eight voter registrations are “significantly inaccurate or no longer valid.” Since there are 146 million Americans registered to vote, this translates to a stunning 18 million invalid voter registrations on the books. Further, “More than 1.8 million deceased individuals are listed as voters, and approximately 2.75 million people have registrations in more than one state.” Numbers of this scale obviously provide ripe opportunity for fraud. Full Story
For those of you, that like Lou Dobbs here is a video of him covering the issue of voter fraud