The technology sector's view on the presidency

Currently, InTrade has the chances of McCain winning at 38.8%, and Obama at 61.0%. The way the system works is that currently you can buy a share of Obama's stock at $61, and if he wins you'll get back $100, but if he loses you get back nothing.

Is Obama's current lead a good thing for the tech sector? Sonia Arrison believes that it is not, and that McCain's proposals would be better for the technology industry. But isn't Obama a big aficionado of text messaging? How could his policies not be pro-tech?

In her article, she cites a few major issues, including Obama's proposals for increased capital gains tax, his relative reluctance to increase the number of H1-B visas, and his desire for more regulation on how companies manage their pipes. Time and time again it seems that McCain's policies are more in line with what the market is looking for.

No Free Lunch in Obamanomics

The problem with Mr Obama's tax and fiscal proposals is that he keeps changing it, as Glenn Hubbard explains. Earlier he had planned to make Social Security solvent by eliminating the caps on payroll taxes. Now his economic advisers plan to only unveil payroll taxes that affect the top 3% of earners, which is much more restrained, but he still plans to shore up Social Security. So which is it?

One argument is that either candidate's plan will go haywire once January 2009 rolls around, because they will be facing a macroeconomic crisis. But if judgment in times of (relative) calm predicts judgment in times of crisis, we may have reason to fear. This is an investment blog, so I'll make myself perfectly clear. Wall Street seems to prefer Mr McCain's economic proposals, and Wall Streets movements predict the success of the economy as a whole. You could argue that Mr Bush's terms proved that Republican economics is failing, but I would take issue with that counterfactual because you haven't controlled for any other variables.

The question becomes, how can Mr Obama make his policies more friendly to investors? Or perhaps more appropriately, will he do so?

The Streisand effect in analyst suits

In 2003 Barbara Streisand sued Pictopia.com for $50 in order to have satellite pictures of her beach front property taken down. The suit backfired, because as soon as the suit became public, the pictures became extremely popular on the internet. The explanation was that as soon as Streisand admitted she didn't want people to see the pictures, it made everybody else want to see them more.

Barry Ritholtz has a post today about MBIA, an muni bond insurance company, that is suing analyst Bill Ackman for making "untrue" statements about their solvency. As Ritholtz points out, it isn't a good sign for the company that they are reduced to suing their critics.

The parallels between this suit and the Streisand effect are obvious. In the internet age, the best way to deal with criticism like this is to downplay and discredit it. Overreactions such as this silly suit will only lend more publicity to the original criticism.

Marty Feldstein on the economy

He says that the Bush tax rebates from earlier this year has not been effective. The tax rebates in May gave $48 billion to consumers, and spending rose by less than $6 billion, while in June the rebates gave $28 billion to consumers, and spending rose by $5 billion. That equals a total of $76 billion dollars in rebates and just less than $11 billion in increased spending. If the original goal of the tax rebates were to boost consumer confidence and spending, it failed. Only 14% of the money infused was put back into the economy.

He goes onto explain how Obama's tax-rebate plan is based on similar tendencies. Based on these percentages, $65 billion dollars in rebates (which he proposes) will only yield $10 billion in increased spending. Perhaps Obama should rethink it.

Addendum: Greg Mankiw relays some analysis from a friend of his at the white house:

"Prof. Feldstein assumes that the growth in consumer outlays would have been flat had there been no stimulus. He then observes that consumer outlays actually grew by $12 billion more from Q1 to Q2 that they did in the prior quarter, and attributes that to the stimulus. Many observers think that, without the stimulus, consumer outlays would have grown more slowly in Q2 than Q1. If this is the case (and we believe it is), then the effect of the stimulus is bigger than $12 billion."

Interesting, but they are presupposing a pre-stimulus decline in consumer spending of $55 billion in May and June, which seems a bit excessive.