Wednesday, October 24, 2018

Last Call For That Sinking Feeling

Stocks plummeted on Wednesday as a sharp drop in tech shares and worries about corporate earnings added fuel to this month's steep pullback.

The Dow Jones Industrial Average dropped 608.01 points at 24,583.42 and erased all of its gains for 2018. The S&P 500dropped 3.1 percent to 2,656.10 and also turned negative for the year. The Nasdaq Composite fell 4.4 percent to 7,108.40— entering correction territory — as Facebook, Amazon, Netflix and Alphabet all traded lower.

"An increasingly murky macro picture is clouding the 2019 earnings outlook leaving investors to largely shrug off a solid start to the third quarter earnings season," said Alec Young, managing director of global markets research at FTSE Russell. "While valuations have certainly come down in recent weeks, at 16 times forward earnings for the Russell 1000 index, they aren't in the bargain basement by any means, especially if earnings growth slows more than expected next year."

Stocks have taken a beating this month. The Dow has dropped 7.1 percent in October, while the S&P 500 has pulled back 8.9 percent. The Nasdaq, meanwhile, has tumbled 11.7 percent.

Netflix tumbled 9.4 percent as investors second-guessed valuations for the once high-flying video streamer. Facebook and Alphabet both fell more than 5 percent, while Apple dropped 3.4 percent. AT&T, meanwhile, dropped more than 8.1 percent after releasing its quarterly results.

Worries about a slowing economy under pressure from rising interest rates grew after the Commerce Department said new home sales fell to a two-year low. The data also hit homebuilder stocks.The SPDR S&P Homebuilders ETF (XHB) dropped 3.5 percent.

"The housing numbers were not good," said JJ Kinahan, chief market strategist at TD Ameritrade. "There's a lot of uncertainty heading into the end of the year. It just feels like people feel more comfortable spending short-term rather than long term."

We were in correction territory in March, but the Dow recovered and set a new record earlier this month.  Since then, in the last 3 weeks, the markets have dropped 10%.  I don't expect a full-on 2008 crash, not yet at least, but I sure as hell don't think Trump's people can prevent one from happening, not when the full impact of tariffs hit.

The cynical man inside says that this is being done on purpose, to create chaos in order to take advantage of it.  We know that's the Trump m.o. when it comes to his escape plans.  Should things turn against the GOP in three weeks, that chaos will be very handy.

It's far from the darkest time in our history, but it's the worst it has been for a while, and there's a fair distance down we can still go.

The Blue Wave Rises, Con't

Nate Silver reminds us that predictions of Democrats taking the House (and Republicans keeping the Senate) are only as good as the accuracy of state-level polling, and the accuracy of state-level polling is only as good as the likely voter models in those polls. In 2014, 2015 and 2016, state-level polling underestimated Republican turnout because likely voter models were wrong, especially here in the Midwest.

The forecasts are in, and they say the 2018 elections can go any number of ways.

If you’re following election coverage and forecasting models, you know the conventional wisdom at this point: Democrats are the favorites to take the House, and Republicans are the favorites to hold on to the Senate.

FiveThirtyEight’s “classic” forecast — which has become the gold standard in elections forecasting — gives Democrats an 85.6 percent chance of retaking the House and Republicans a 81.3 percent chance of holding the Senate, as of Tuesday evening.

So both of those are highly likely to happen, right?

Well, one person who’s been trying to complicate that assessment is FiveThirtyEight founder Nate Silver himself.

One point Silver has made over and over again in recent weeks is that even if you take his House and Senate forecasts at face value, when you think about both of them together, there’s around a 40 percent chance that one of them will be wrong.

He elaborated on this on Twitter this week, making a point that’s important to understand — that a “very normal-sized polling error” in either direction could result in a dramatically different outcome.

That's a major issue.  If those state-level polls are once again underestimating Republican turnout as "likely voters" by 2-3 points, then a lot of those 29 GOP tossups I talked about yesterday become Republican leaners and the proposition of the Dems taking half of those tossups and the House becomes Republicans defending the vast majority of those seats and limiting their losses to 15-20.

In the Senate, that means that Republicans defend Nevada and Arizona and pick up North Dakota, but it also means they pick up Indiana, Missouri, Florida, Montana and maybe, just maybe New Jersey, one of Minnesota's seats (Tina Smith's), and Joe Manchin, Tammy Duckworth, and Debbie Stabenow have very, very long nights.

On the other hand, if this goes in the other direction, then yes, we see the Blue Wave scenario where Democrats pick up 40-50 seats and maybe more, and in the Senate, Dems defend nearly all of their Trump state seats and pick up Nevada and Arizona, and maybe even Tennessee and dare I say it, Beto slays a troll in Texas, and suddenly Dems have 51 or 52 in the upper chamber to go with it.

So yeah, I take Nate at his word when he says there's a decent chance one party takes Congress.

We should vote like we have that chanceEarly voting started in Florida on Monday and continues.

Arkansas, Alaska, Idaho, Massachusetts and Texas also opened their polls for early voting Monday. They will be followed by Hawaii, Louisiana and Utah on Tuesday; West Virginia on Wednesday; Maryland Thursday and the District of Columbia Friday.

Kansas and Oklahoma will start early voting next week.

A large swath of states -- including Arizona, California, Georgia, Virginia, Minnesota, New Jersey, North Carolina, Ohio, South Carolina, South Dakota, and Tennessee -- have been voting early for weeks.

The time to cast your early vote in these states is now.  Do it today if you can.

That Little Domestic Terrorism Problem Of Ours, Con't

Somebody sure doesn't like Democrats and the media, to the point of, you know, targeting them in the mail with suspicious explosive packages.

Explosive devices were sent to former President Barack Obama and former Secretary of State Hillary Clinton, as well as to CNN’s offices in New York, sparking an intense investigation on Wednesday into whether a bomber is going after targets that have often been the subject of right-wing ire.

The three devices were similar to one found Monday at the home of George Soros, the billionaire philanthropist and liberal donor who has come under fierce criticism from conservatives and conspiracy theorists.

None of the devices harmed anyone. Law enforcement officials said they were investigating whether all the devices were sent by the same person or persons.

In a statement, the Secret Service said it had “intercepted two suspicious packages addressed to Secret Service protectees,” who were identified as Mrs. Clinton and Mr. Obama.

The device addressed to Mrs. Clinton in Westchester County was found late on Tuesday by a Secret Service employee who screens mail for her, the statement said. The package addressed to Mr. Obama was intercepted early on Wednesday by Secret Service personnel in Washington, who screened mail for the White House.

Shortly after the Secret Service made that announcement, the Time Warner Center, a major office complex in Midtown Manhattan, was evacuated after a similar device was discovered to have been sent to CNN’s offices there.

By the end of the week, Republicans will be screaming that Clinton sent them to herself as a false flag, tens of millions will believe it because it keeps them from having to deal with reality, and that maybe if they had exploded, America would be better off. 

Then they'll call Democrats a "violent mob" for the next forever while the very same media targeted for violence warns Democrats not to do anything rash and to blame the left for not being subservient enough to Angry White Working Class Voters™.

We know how this plays out.  The chance to edit this script is at the ballot box.


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