The People’s Seat

“Well, with all due respect, it’s not Ted Kennedy’s seat, and it’s not the Democrats’ seat, it’s the people’s seat.”

-Scott Brown, Republican candidate for United States Senate

A few days ago we posted a note on President Obama and touched upon the special election for the late Senator Kennedy’s seat.  We noted that Republican candidate Scott Brown seemed to be making some decent headway in the liberal bastion of the Commonwealth of Massachusetts. 

Polls out in the last 48 hours seem to further support the potential for Brown to surprise the punditry.   In fact, a poll out this morning from Suffolk University suggested that Brown had the support of 50 percent of the voters, while Democrat Martha Coakley had the support of 46 percent. 

The implications of this race obviously goes far beyond just the fine Commonwealth of Massachusetts.  This race, in fact, is important for the balance of the power in the United States Senate.  With this loss, the Democrats would no longer have the filibuster proof majority of 60 votes.  This of course has implications for some of the President’s primary agenda items.

From an investment theme perspective, the idea of less control for the Democrats is positive for the U.S. Dollar and supports our call for a Buck Breakout in Q1 2010.  This isn’t a political point, but with less than 60 votes in the Senate it becomes more difficult for the Democrats to move forward with their agenda, which is naturally more left wing in nature, and realistically more expensive.  Perversely, a government that can do less, is probably positive for the U.S. dollar.

One of our Hedgeye contacts on the ground in Massachusetts sent us the following note as it relates to this race:

“I just read your piece from yesterday.  It is insane up here in socialism land.  I think many still have the fear in the back of their mind that it is a Democrat’s seat and always will be but polls have this guy winning now.  Most feel he caught her and the lead will grow.  The state has been engrossed in this race for a couple of weeks now and he’s not picking up steam, that horse left the barn last week, it is like a tidal wave of support up here for Brown.

This race is the topic of every conversation and the Scott Brown support is overwhelming.  It is strange, it feels like you are an interloper heard round the world type of deal.

I think he is going to win this thing and even if he does not win, the damage has been done.“

There are potentially some serious investment implications based on this race and the potential for a shift of power in the Senate.  Implications for the Buck Breakout, but also specific sectors.  As our Financials Sector Head noted when I forwarded him the above note:

“Wow, I had no idea this guy had that much momentum …. This would be HUGE for financials if this guy won.”

Indeed.

Daryl G. Jones
Managing Director