It's The Economy

Investors were looking for specifics from candidates on their major economic concerns.

It’s unquestionably the premier business and investing television network, so it would make sense that CNBC would host a debate between Republicans vying for their party’s nomination. It also would make sense if that debate was focused on business and the economy, and aimed at addressing the concerns of individual investors. But how much did investors learn about how each Republican in the field would approach the titanic tasks of spurring economic growth, creating jobs and bringing stability back into the financial markets?

My read here is that we learned a lot about the candidates’ big-picture approach, but little about how each candidate would actually attempt to solve these problems.

Now in fairness, the debate format isn’t conducive to a detailed policy analysis, so we shouldn’t have expected a lot on that front. Still, what we, as investors, wanted to hear was some specifics on how each candidate would address the major economic concerns of the day.

Here are some of the comments that stuck out in my mind as being representative of the evening’s repartee.

What Say You?GOP_Debate_Pic-300x204

The leadoff question by moderator Maria Bartiromo, which was directed toward businessman Herman Cain, was nearly word for word the question I wrote for my Traders Reserve colleague John Hutchinson, who was right there among the phalanx of journalists asking tough questions of the candidates in the pre-debate press sessions. Bartiromo asked, “Once again, we were all impacted by the news that the Dow Jones Industrial Average dropped 400 points today. The reason, Italy is on the brink of financial disaster. It is the world’s seventh largest economy. As president, what will you do to make sure that their problems do not take down the U.S. Financial system?”

Cain responded with what became the overriding themes of the night for nearly all of the candidates, and that was by saying that the keys to nearly all of our economic ills was to grow the U.S. economy and to reform our monetary policy. Cain said that we aren’t going to grow the economy until we, “put some fuel in the engine that drives economic growth, which is the business sector.”  He then said that we “must assure that our currency is sound. Just like a dollar must be dollar when we wake up in the morning, just like 60 minutes is in an hour, a dollar must be a dollar.” Cain added that if we shore up our own fiscal house, we will be in much better position to survive the economic downpour caused by Europe’s woes.

The follow-up question from CNBC firebrand Jim Cramer focused on Italy’s status as too big to fail, and he wanted to know if the candidates were prepared to put the global banking system at risk by essentially staying out of any European bailout. Not surprisingly, the most philosophically consistent candidate on the stage, Rep. Ron Paul, said he favored the liquidation of European debt, and a laissez-faire approach that would stop the bailout-to-bubble economic cycles perpetuated by governmental meddling in the economy and markets.

That theme was picked up by Gov. Mitt Romney, who said, “My view is no, no, no. We do not need to step in to bail out banks either in Europe or banks here in the U.S. that may have Italian debt.” The anti-bailout theme continued to ring out from the rest of the candidates throughout the night. Even the most populist candidate, Gov. John Huntsman, came in against the bailouts, saying. “So long as we have banks too big to fail we are setting ourselves up for long-term disaster and failure.”

On the monetary front, former House Speaker Newt Gingrich waxed on his disaffection toward the Federal Reserve, saying, “Ben Bernanke is a large part of the problem and ought to be fired as rapidly as possible.” Here Gingrich took the lead from Rep. Paul, who repeatedly called for an audit, and then an end, to the Federal Reserve’s control of the money supply and interest rates.

The candidates all hammered on federal government regulation, with Rep. Michelle Bachman saying she would like to repeal the Dodd-Frank financial reform bill, while Sen. Rick Santorum said he would repeal every regulatory measure the Obama administration has imposed over the past three years. All of the candidates were in agreement that regulations posed a huge obstacle to U.S. economic growth, and all said they would take steps to ratchet down the level of regulation currently pulling vigorously on the reins of American enterprise.

Finally, the night was replete with a discussion of tax policy, with each candidate touting his or her plan to alter the tax code to make it less of a burden on citizens, and to make it fairer and more effective. And while each candidate has their own vision of what’s likely to work best—Cain’s famous 9-9-9 refrain, Perry’s 20% postcard option, and Romney’s 59-point tinkering of the existing tax system—they all basically stuck with the 10,000-foot view of what needs to be done, and how our system will be best served by their respective proposals.

The Investor Takeaway

So, what should investors takeaway from the CNBC debate? Well, although specifics were in relatively short supply, I think the bigger picture is actually what’s more important to investors. You see, the direction of the market has as much to do with perception and confidence as it is does the details of who, what, when, where and how a specific tax or regulatory policy is going to affect the economy and/or a specific market sector.

Still_the_Economy_StupidWhat I think was made abundantly clear from this debate is that all of the Republican candidates have views that are in stark contrast to those of President Obama. The president thinks bailouts, stimulus, top-down government jobs’ schemes that rob Peter to pay Paul, and increased taxes on millionaires and billionaires is the way to right our economic ship. Forget about the fact that the scrapheap of history is littered with such low-grade, failed socialist programs. The president and most in his party think that they will be the ones to finally outsmart the laws of economics.

Did we hear incredible, tradable specifics from the eight Republicans on stage at Oakland University Wednesday night? The answer is no. But did we get a good sense that all of the candidates would approach the economy and markets differently—and in my view much more effectively—than President Obama? I say the answer is a definitive yes.

As investors, I suspect that if any one of the GOP candidates is victorious next November, we could see a huge change-inspired market rally that’s liable to usher in another broad-based bull market. Conversely, if we fail to see a credible challenge mounted to the president, it could be mean more of the same market volatility, economic uncertainty and slow-growth malaise that have plagued the country since President Obama took office.

What Do You Think?

In the 48 hours leading up to the CNBC debate, we conducted a poll of Traders Reserve readers to see which Republican presidential candidate they currently supported for the nomination. Our results showed that the clear frontrunner was “None of the Above,” which captured 25.7% of the vote. Interestingly, Newt Gingrich was second on the list, and first on the list of actual persons, with 18.4% of those surveyed lending him support.

Survey_2011-11-10_1604-300x248Ron Paul and Herman Cain were tied for second place with 16.8%, respectively, while Mitt Romney received just 12.3% support among our investor-centric readership. Rounding out the list was John Huntsman (5.3%), Rick Perry (3.4%), Michelle Bachmann (1.1%) and Rick Santorum (0.3%).

What we want to know is did the CNBC debate change your mind? Did what any of the candidates say impress you enough to change your preference, or did you come away still suspecting that “None of the Above” still deserves your support?

We’re anxious to hear from you.  You can participate in our GOP Presidential Debate follow-up survey here or post your thoughts in the comments section below.

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