This note was originally published
at 8am on October 30, 2012 for Hedgeye subscribers.
“If you play with the power, the lights go out.”
-Yale Hockey adage
For many on the eastern seaboard this morning, the power being out is no joke. By some estimates that I’ve seen the total number without power exceeds some 8 million people. I can certainly attest that much of the Hedgeye team that lives in New York City or along the Connecticut shoreline is without power this morning. In fact, our CEO Keith McCullough just sent me a picture from his driveway and he and his family are completely blocked in due to fallen trees in their driveway.
I think the best thing you can say when a storm like this occurs is that it could have been worse. From what I can tell, the government, who we are sometimes apt to criticize, did an excellent job getting in front of Sandy and sending out appropriate warnings. That said, New Jersey Governor Christie unfortunately may have made a major political mistake in cancelling Halloween. He has clearly now completely lost the 12 and under demographic.
From a global macro perspective, the key question relating to Sandy is what, if any, impact it will have on the election. It seems in the short term, the storm has caused President Obama to pull back on his campaign schedule, while the Romney / Ryan team is staying at it in Ohio and Wisconsin today. At this juncture of the election, it’s not clear if another couple of campaign stops really matter.
In terms of real time impact from the storm, Intrade barely budged over night, which suggests neither candidate will really get a meaningful bounce from anything Sandy related. So we go back to a Presidential race that is increasingly becoming too close to call. On a national poll level, Romney remains with the ever so slight edge, but his major issue remains Ohio.
If we take the average of the last 10 polls in Ohio, Obama has an advantage of +1.9. Even as one-off polls can be wildly inaccurate, historically the averages of polls have been a pretty good indicator of outcomes. So, even if the undecided voters swing meaningfully to Romney at this point, Obama appears to have enough of an edge in polls to win Ohio. As a result, Romney’s chance of an Electoral College victory appears almost impossible. The question, of course, is can we believe the Ohio polls?
That last statement is certainly not me trying to be a conspiracy theorist, but rather just to highlight some clear discrepancies amongst the Ohio polls. As I wrote to one of our subscribers yesterday, if we dig deeper into the Ohio polls, we get some color on what could be the major wild card of this election, which is that there is some serious skew in the polls. I’ll give you a couple of examples related to Ohio:
- In a recent poll from Gravis marketing, it has Obama with a +1 point lead on Romney, but the sample has 40% Democrats, 32% Republicans and 28% Independents;
- In another recent poll from Public Policy Polling, the poll has Obama with a +4 lead, but the sample is 43% Democrats, 35% Republicans and 21% Independents; and
- Finally, a recent Ohio Newspaper Poll has the raced tied, but the sample was 47% Democrats, 44% Republican and 10% Independents.
Clearly, turnout is the major wild card in Ohio and a factor the polls are not modeling with any consistency.
The other wild card is the economy. We did a call with Professor Ken Bickers from Colorado who has accurately modeled Presidential election outcomes going back to 1980 based on state level economic data. His analysis shows that Romney should win in a veritable landslide of 330 Electoral College votes. We’ve posted a link to the presentation below if you did not get a chance to see it live:
Similar to dealing with Sandy, the best thing for most of us will be when this election is behind us. It is time for American politicians to start working together again, just as all Americans do in times of national need. To that end, I’d like to leave you with a quote from both President Obama and Governor Romney.
“The American culture promotes personal responsibility, the dignity of work, the value of education, the merit of service, devotion to a purpose greater than self, and at the foundation, the pre-eminence of family.”
-Governor Mitt Romney
“And I will do everything that I can as long as I am President of the United States to remind American people that we are one nation under God, and we may call that God different names but we remain one nation.”
-President Barack Obama
All the best to you and your families in the coming days.
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
In terms of logistics from our end, we still are planning to host or best ideas call this Thursday at 1:30pm. We will be re-circulating dial in information and materials ahead of the call, so stay tuned for that.