Zak’s midweek commentary – Gaffe Meister Romney

I have to say that I had Romney mapped out as a loser from the start. As a “would be politician” myself (over and above the Rat Pack membership of course), I know enough about the subject (‘A’ grade  at A level no less!) to say that it is always for the contender to beat the incumbent.  Indeed, you have to be a real train wreck to not get re-elected in the modern era – Jimmy Carter only lost to Reagan due to the Iran hostage crisis (yes, them again) and George Bush Senior lost to Bill “Lewinsky” Clinton in the 1990’s and coined the infamous phrase “it’s the economy stupid”. As if to prove the incumbent theory, even the worst prime minister, possible ever -Gordon Brown was only beaten by a Coalition – so not an outright loss.

The final point is that the U.S. Electorate will never vote for a candidate who is bald, a loser or a gaffe master (at least before he becomes President). Luckily, Gerald Ford was airlifted in by Nixon, and hence could only lose to the aforementioned Carter.

On to more important things now like the financial markets, and today we have seen a serious bull trap hiccup for the Dow, and the FTSE 100. This is not too surprising given the usual cliché of it being “better to travel than arrive” as far as a piece of good news is concerned. However, now we really know how threatened investors are by the prospect of the U.S. economy falling off a fiscal cliff. My instinctive reaction here is that given how mind bogglingly bad U.S. finances are the fiscal cliff is likely to be more like stepping off a bus than the Mexican cliff variety. The other point to note is that just as in the run up to summer 2011’s budget fiasco that accompanied the AAA downgrade in August, politicians on Capitol Hill do enjoy playing chicken right up to the wire. 

For today’s stock that stands out, I would suggest Hargreaves Lansdowne (HL.), if only on the basis that as I watch the market, nearly every day in the recent past the financial services group is on the FTSE 100 leaderboard. Of course, the temptation is to go short. But the problem with going short is that it would appear from the daily chart we are looking at no ordinary rally. Indeed, this would appear to be an exponential rise, one even more indestructible than that of that most famous of bear graveyards – Next (NXT). There are perhaps two main points to think about strategically here. The first, is that do you really want to get in the way of this particular locomotive, and second, if there is no takeover speculation here (ditto Next), what we are really seeing is a massive and positive re-rating. On this basis, I would prefer to be a buyer on a dip to say the 20 day moving average now at 720p, than get hit by another blast to the upside.