Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

Congress's Dysfunctionality and the 2012 Election

So we find ourselves with highly partisan politics on the eve of the election of 2012. As this book goes to press, it is clear that the 2012 federal elections will be the most viciously fought in the memory of anybody alive. To make matters worse, Congress's utter dysfunctionality will be on full display in the fall. In August 2011, having had more than half a year to negotiate a bipartisan debt ceiling, Congress found itself unable to make any meaningful short-term cuts in the budget, and instead delegated its power to a “super-committee” consisting of 12 selected senators and congressmen. The super-committee was charged with reaching a bipartisan solution by Thanksgiving. Unable to compromise by Thanksgiving, the super-committee lapsed into allowing the “default” cuts in the budget agreement to fall solely on Medicare and the defense budgets to trigger automatic cuts beginning in 2013. The only thing the budget agreement promised is that we had bought enough time to get the budget issue past the 2012 elections. You would think that was the one thing neither political party wanted to have happen. But just as the Cash for Clunkers program was designed to last for four months but ran out of capacity in six days, Congress has likely managed to put itself in the position of having to lift the debt capacity. In January 2012, the debt ceiling was quietly lifted an additional $1.2 trillion based on Congress's failure to object to President ...