Rigged Elections, Boobytrapped Stock Markets? (Yes, I'm Lying. Again!)

Rigged Elections, Boobytrapped Stock Markets? (Yes, I'm Lying. Again!)

Ganga Prasad G. Rao
http://myprofile.cos.com/gangar

Elections are in the news, even as we speak. Elections meant to ascertain from the citizens of a nation its choices as regards alternative futures embodied by the candidates and in their agenda. Elections that chart a nation's course as it competes and cooperates with other nations of the world. One would presume elections are 'free and fair' as the US insists they be when they concern other nations. But, sad to say, even the US itself is not the bastion of freedom and democracy, especially when it comes to elections. I am not talking about the influence of money in campaigning. I am talking about wholesale election rigging that's out on the front pages of your newspapers. Yes, the stock market crash, the liquidity crunch, the financial meltdown, or whatever you name it. What? NOOO!!! Pray how could that relate to US Presidential elections?

No, I have not the credentials of Bob Woodward of Watergate fame with the inside scoop. But, if I had big, I mean very big money at stake, and not just in the US market, I'd protect it from Presidential election politics and especially from the whims and fancies of the masses who vote after a hangover from the TGIF beer guzzling or the 'Munde' night bash on the TV. Now, big strategies involve multiple players. Let's imagine who they could be, shall we? The CIA? Warren Buffet? Bill Gates? Of course. Saudi Sheiks overflowing with petro dollars? Perhaps. 'Republican' money in the stock markets booked on the first flight out at the faintest hint of a democratic victory that could last, God forbid, two terms and more? Likely. So, who is the unlikely darkhorse? I'd say EPA with its 'Superfund' funds and penalties collected over the decades for permitting the poisoning of American lands. That may be so, but where is the conspiracy? Well, if I had the moolah to move stock markets, then it would be to my disadvantage to play the game straight. A no-brainer! Instead I influence policies and events that investors anticipate. Got it? Create coincidences/circumstances, influence 'public opinion' and 'expert opinion' to move the Fed and the Congress in to reacting as one desires. Have the President proclaim populist policies while stepping on funding bills and environmental regulations in the House or Senate. In short, anything that brings about outcomes that one can exploit systematically in the stock market where anticipating events is more the rule than reacting to them.

Consider this scenario. The oil markets of '86 were so weak, crude sold at $9 a barrel, perhaps lower. Oil companies lost money. The industry contracted and shed jobs. Who'd buy in to stocks of US oil companies that had plunged so low crude would ooze out if it got any lower? Lo and behold, the most unlikely white knights – Saudis, the EPA and the rest of the 'rich' pack. But the real nightmare is when these white knights gain political access to the highest corridors of power. It's one thing to enter the market at the bottom, it's another to choose where the bottom should be. Let the market drop until the President himself calls on the phone to invite in 'the big league' investors with their fat pockets. With the ruling party in their pocket, they set out to systematically influence policies that impact the stock markets. The grand strategy? Why anticipate events when we can induce or create them! Ride the boom as the crisis is resolved and populist policies are announced. Then, short the market just as the feeling of euphoria infiltrates the investing community and move in to another distressed sector of the market. First, exploit the technology market boom, then invest in crude with prices in the single digits, rake it in the commodity market as crude explodes to $140. Short commodities and enter the real estate sector just in time for boom-time. And finally, teach global investors a lesson by pricking the housing bubble, knowing it'd have a domino impact on national and the international financial markets with cascading effects on government finances and economic health of the international economy.

But where is the conspiracy? With markets lower than where they were at the start of the Republican regime, voters would think twice, indeed thrice, about voting for Democratic candidates campaigning on the platform of new taxes to massive finance social spending. Now, if voters behaved rationally, they'd avoid democrats with a long stick and return the very party whose President called in on the 'Black Monday'. But if the elections are on the morning after Munde night football in November, odds are stacked against rationality! In either case, the fat pockets have a neat pile of 'ride-the-boom, short-the-bust' money for the next cycle (but only after the call from King Oba' from the White House) even as the financial community braces for a global recession and offers premium stocks at low single digit PEs. Do I hear jingle bells?! Rigging elections and the stock market. Two birds with one stone! How about that? Or, more appropriately, Howzzat??!!

If such conspiracies abound in the US, can India remain insulated? No, I don't mean to suggest that EPA's Superfund and Pension fund monies are chasing an Indian stock market crash to 3000 levels. After all, we have our own 'desi' version of election rigging. The UPA was elected on a common minimum program with the Left. Dr. Singh adroitly managed to sideline them, but surely they are not down and out? Indeed, they did have their say (and their share of the pie?) in the Indo-US nuclear deal. Isn't it time for the Congress to play its cards? And play its cards it will. After all, wasn't it booby-trapped by its detractors half-way through its term to turn back upon its reform commitments? It is now too late to push the mid-term elections 'surprise' button, but surprises come in different varieties. Right?

Here's an entirely imaginary scenario: With the economy rearing its head up after the global melt-down and the spell of double-digit inflation, the Congress booby-traps the economy as it goes to the polls to ensure the BJP does not capitalize on its reforms or gain from the flight of capital from the US to India with Obama's ascendancy to the White House. What 'card' does it hold in its hand to boobytrap the elections? Hindu muslim riots? Perhaps. An economy booby-trapped to nose-dive if steered to the right under the BJP? Yessss!, but how? Consider the GSPC IPO over which the incumbent government has a certain 'right' both as regards its size and timing? If the electoral mood is pro-Congress, the government offers the mega-IPO at a discounted price. The stock market booms with Superfund, Pension fund monies and FII money chasing the soon-to-be-opened insurance sector and not because we signed the Indo-US nuclear deal and intend to participate, if eventually, in the global warming treaty. But if the public is prone to punish the Congress Government at the ballot box, it'd rather crash the stock market, permit the fat cat foreigners to get in at the bottom, and either 'shrink' the GSPC IPO or time it before elections so retail investors predictably shun it. Foreign investors in the stock market and our foreign masters at Sansad Bhawan would then teach India a lesson in economic humility by steering the market toward a 'low-returns' path for the Obama decade even as the newly-elected BJP government scrambles to unravel the subsidy conundrum and undo the innumerable other policy wrongs of the past decades. Any guesses how long that would take?

Ain't this election rigging? What say you?