Interesting account in the Wall Street Journal of why the US stock market was so hard hit yesterday: many traders had gone heavy into stocks in anticipation of a Romney victory --
Jerry Harris, chief investment officer at Sterne Agee in Birmingham, Ala., which manages $17 billion in assets, was among those who had placed bets on Mr. Romney winning the election. Mr. Harris had put money into some health-care stocks on Monday and Tuesday, predicting they would get a bump. While some health-care stocks rose, others sold off. Mr. Harris now regrets his move, though he said the damage to his portfolio was minimal. "It wasn't a big risk, but I did the two [trades] with the deliberate intention of thinking we'd get a boost out of stocks if Romney won," he said. On Wednesday, Mr. Harris said he told himself: "You've been caught leaning. You know better than to have strong opinions before an event like that." The selloff surprised Thomas Lee, stock-market strategist at J.P. Morgan, who before Tuesday had called for a postelection rally through year-end no matter which candidate won. "There were probably more people than we realized hoping for a Romney win," he said.
Especially noteworthy is that while you'd normally think of these big speculative bets as being based on hard analysis, the positions were driven -- as their chastened holders admit -- by a hope that Romney in, along with a revealingly cynical assessment as to which equities would benefit (health insurance companies, banks, and energy companies).
There's already the question of how Karl Rove was able to rustle up so much in campaign contributions for Romney on what turns out to have been a futile bet. Now we know it was not just the campaign chequebooks that were caught by the fever.
Jerry Harris, chief investment officer at Sterne Agee in Birmingham, Ala., which manages $17 billion in assets, was among those who had placed bets on Mr. Romney winning the election. Mr. Harris had put money into some health-care stocks on Monday and Tuesday, predicting they would get a bump. While some health-care stocks rose, others sold off. Mr. Harris now regrets his move, though he said the damage to his portfolio was minimal. "It wasn't a big risk, but I did the two [trades] with the deliberate intention of thinking we'd get a boost out of stocks if Romney won," he said. On Wednesday, Mr. Harris said he told himself: "You've been caught leaning. You know better than to have strong opinions before an event like that." The selloff surprised Thomas Lee, stock-market strategist at J.P. Morgan, who before Tuesday had called for a postelection rally through year-end no matter which candidate won. "There were probably more people than we realized hoping for a Romney win," he said.
Especially noteworthy is that while you'd normally think of these big speculative bets as being based on hard analysis, the positions were driven -- as their chastened holders admit -- by a hope that Romney in, along with a revealingly cynical assessment as to which equities would benefit (health insurance companies, banks, and energy companies).
There's already the question of how Karl Rove was able to rustle up so much in campaign contributions for Romney on what turns out to have been a futile bet. Now we know it was not just the campaign chequebooks that were caught by the fever.