A Post-Election Scorecard, The Underperforming Tea Party, Pelosi Runs Again

In investing, it has been proven over and over again statistically that the vast majority of "active" mutual fund managers, those who trade frequently to try to beat the market underperform simple index funds which just buy the stocks that comprise big indices such as the S&P 500.

How is this relevant to politics and predicting elections? I feel a bit like one of those active managers.

Not that this site did badly in the past election. In the close Senate races, I had an average error of only 3.8% and an average bias of only 2.7%, both the second best of the 4 major election sites I benchmark against. And these are the best of the best...well established sites with a strong history of projecting elections.

It's just that I didn't "trounce the market"...and if you followed this site in 2008, you know that through a combination of a lot of luck and some skill, I trounced the market back then. Here is a scorecard comparison of the close Senate races and the total House count among the major sites.



You can see my averages got hurt by big misses in Colorado and Nevada and to a lesser extent, incorrect margins in the fringe close races in Missouri and Kentucky. You can also see that no specific method of poll aggregation prevailed over other methods as the one that was most accurate.

My numbers would be so much better if it weren't for those darn.....

Underperforming Tea Party Candidates
The Tea Party clearly cost the GOP 3 Senate seats in this past election cycle. The trouncing that Christine O'Donnell took in Delaware was predicted. The losses that Ken Buck and Sharon Angle took in Colorado and Nevada respectively were unexpected, at least by myself and other major prediction sites and show a consistent pattern.

The Tea Party had either 5 or 6 loyalists that won GOP nominations for the Senate this cycle, by my count. It is tough to get an exact count, since there is no clear definition of who is a "Tea Party Candidate", but certainly Christine O'Donnell, Joe Miller, Sharon Angle, Ken Buck and Rand Paul fit that bill. Marco Rubio is somewhere in between...he enjoyed strong support from Tea Party organizers against Charlie Crist, but was careful not to get too close to the movement.

If you don't count Rubio, who obviously did extremely well, then the experiment in Tea Party candidates was more or less a complete disaster for the GOP.

Christine O'Donnell, Sharon Angle and Ken Buck all lost. Joe Miller appears likely to lose in Alaska. And it is abundantly clear...mainstream candidates in each of these 4 races would have easily won on the GOP line.

Rand Paul did win in Kentucky, but a Republican Senatorial candidate winning by less than 12% in dark red Kentucky in a heavily Republican year is hardly an impressive showing.

Rand Paul wants a Senate Tea Party caucus. It will either be loaded with Republicans who voted for all of the Bush spending increases and TARP plans or it will be a very lonely place.

Let me repeat what I said from the outset: The Tea Party is a joke.

Pelosi Runs Again
Outgoing Speaker Nancy Pelosi (D-CA) has announced that she will run for minority leader when the new House convenes. This is a break with tradition, whereby the leader of a party generally steps down when his or her party losses the majority. Pelosi appears poised to win, over the objections of conservative and moderate Democrats. There just aren't enough of them left to overcome the liberal base in the House...frankly the conservative Dems were the ones hit the hardest in this election cycle.

Pelosi has been an effective leader in getting things done...can you name one policy priority for the Democrats for which Pelosi didn't get a bill last congress? But she is also a polarizing figure in the country, one whose image raises a lot of money and energy for the GOP. I don't have a dog in the hunt, but if I were the Democrats, I might want a fresher face with a more moderate image.

Tea Party Victory in NV Primary, The Geopolitics of BP, EPA Carbon Regulation

Another Tea Party Nomination
The tea party gained its second significant candidate for statewide office this past Tuesday, when tea party loyalist Sharron Angle absolutely obliterated far better known and presumed front runners Danny Tarkanian and Sue Lowden, garnering 40% of the vote in the three-way primary. Angle had been picking up steam the past two weeks after being virtually off the map for most of the campaign season.

This sets up a fascinating showdown, with a weakened and battered Senate Majority Leader Harry Reid facing off in the general election against a little-known former state assemblywoman in what will surely be the most-watched race of the 2010 campaign.

With Rand Paul's earlier victory in Kentucky, this gives the Tea Party two of its own running for statewide office going into the general election. It also shows an interesting schism in the Republican Party, with some state parties, such as Illinois and Delaware opting for old-school moderates, some states, such as Indiana, going with establishment conservatives, some states, such as Florida, going with upstart conservatives not affiliated wit the Tea Party, and at least two states going with outright Tea Party members. Assembling all of these factions into a united, winning combination in November is no small task, even running against an unpopular incumbent and a Democratic Party that seems to be in a fair amount of disarray going into the mid-terms.

My personal view is that every Tea Party candidate that wins a Republican primary in a competitive race helps the Democrats retain control of the Senate. Kentucky shouldn't have been a competitive race, but certainly now will be with Rand Paul in the mix, although it is still probably more likely than not that he will win in November. Nevada is another case...the early polling is split to slightly favoring Angle, but my gut is that this race will probably settle down as a pure toss-up.

The sub-plots in November are getting more and more fascinating. What are the core principles of the GOP? What is the agenda of the Democratic Party? Is President Obama going to help or hurt the DEMs? Will the jobs picture look any better by November? Lots of questions to answer and a lot of campaigning to cover.

Remember, It Is BRITISH Petroleum
The chum has been almost as plentiful in the water and the oil gushing from the rig in the Gulf of Mexico for the past week, with every politician and talking head, including the President, taking shots at BP. Around their liability, around their response, their safety practices, their dividend. It has caused a huge plummet in the share price of BP, destroying almost $80 billion in value in the company, at least in the near term.

Yesterday, newly elected British Prime Minister David Cameroon appeared to jump to the defense of BP, communicating through aids his view of the importance of BP to the British economy and suggesting that the British government could, perhaps, be willing to shoulder some of the bill. Cameroon is slated to speak with President Obama this weekend and it would be safe to assume that talk of BP will consume the discussion.

BP appears slated to announce the suspension of its dividend next week, a move that may partially pacify the circling sharks, but which is very bad news for British pension funds, where BP dividend represent over 1/7th of all dividends earned in those funds.

Two thoughts from my perspective. First, I think a fair amount of the criticism against BP is quite unwarranted at this stage. It is not at all clear to me at this point how to apportion blame for the incident between BP, the construction company that built the well, the company that built the relief valve (our old friends Halliburton) and government regulators. The actual facts of the case seem to be secondary to finding someone to string up and that is a shame if we are going to learn from this incident and prevent another incident from happening in the future.

My second thought is that BP will survive and will not go bankrupt. A bankruptcy would be a disaster for the British economy, British retirees and investors and world relations. It won't happen. BP has a business that spits off tons of cash and billions will be available for clean-up. This will calm down in a few months, although the lawsuits will go on for years. But expect BP to live on, just as Phillip Morris and R.J. Reynolds survived the massive lawsuits of the 1990s. Full disclosure -- I purchased a stock position in BP this week.

EPA Carbon Regulation Lives On
An attempt by Sen. Lisa Murkowski (R-AK) to eliminate the capability of the EPA to regulate carbon emissions failed this week on a procedural vote with 53-47 voting against consideration of her proposal. All the 41 Senate Republicans voted for the proposal along with 6 moderate Democrats, including both Democrats from Arkansas (Pryor and Linclon), Nelson of Nebraska, Landrieu of Louisiana and Bayh of Indiana.

This vote essentially means that the EPA, under President Obama's guidance, will continue to have the authority to regulate carbon at its discretion. The President has said that he would prefer to have Congress act on a comprehensive bill including Cap and Trade but that the EPA would act under existing law, if needed.

Next up....latest updates on the 2010 ratings including Nevada.

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Everything You Need to Know About the British Elections, The Tea Party Losses Yet Again

The British Parliamentary Elections
Ah, Mother England. It could be the United States of America in 1992. The United Kingdom is in the middle of what has been possibly the wildest, most unpredictable elections in its history. I don't write a lot about foreign elections, but let me attempt to recap.

The Labour Party, which has been in power since Tony Blair's rise to power in 1997 is under fire, not only from the other so-called "major" party in the UK, the Conservative Party of Margaret Thatcher and John Major, but from the upstart Liberal Democratic Party, which had, up until very recently, been considered a joke in British politics.

The Labour Party was widely considered to be in trouble, facing the same headwinds that all incumbent governments across the world face of ugly economics, high unemployment and growing government debt. But it was assumed that Gordon Brown's Labour might lose to David Cameron's Tories (Conservatives), not to the much-mocked LDP.

That all changed in the first-ever U.S.-style televised debate between the three parties, when the charismatic LDP leader Nick Clegg, mopped the floor with the two so-called "major parties". The LDP briefly surged to a lead....at least until everyone realized that their policies were a little nutty.

Now, with the LDP peaking too soon and the Conservatives stuck in the mud, Labour has a chance for a big comeback. Enter Gordon Brown's "bigot-gate", where, while not realizing he was on mike, Prime Minister Brown accuses a grandmother of being a bigot, for reasons which aren't very clear to me. The lady had just had a wide-ranging conversation with Brown. She did at one point reference immigration, but the quote was simply "and you can't even talk about the immigrants". For all I know, she could be a bigot, but her words certainly weren't sufficient to make that determination. Brown shows his detachment from the common (wo)man. Labour continues to languish.

So where does that leave us?

Here is my aggregation of the British polls going into the election tomorrow. I'll caveat this with the fact that I am not nearly as familiar with British polling as with American polling, so I would anticipate that the margin of error on my projections could be larger than normal:

Conservatives = 35.5%
Labour = 27.7%
Liberal Democrats = 27.5%
Minor Parties/Undecided = 9.3%

So, it looks like a fairly good margin of victory in the popular vote for the Tories, and a very close second/third finish between the incumbent Labor party and the LDP. The LDP has been fading in late polling and the Conservatives coming up.

But, wait. The British have almost as screwed up a system as our electoral college. The winner of the popular vote does not necessarily win the election. Instead, each parliamentary district is awarded to a party, with the winner of the majority of seats becoming Prime Minister. If not party wins a majority of seats, you have a "hung parliament" and the parties would have to form coalitions in order to get the majority required to form a government.

Because of the concentration of the LDP support, while they may get about the same number of votes as Labour, they are almost assured to win less seats. Based on my projections and past election results, I attempted to model the number of parliament seats that would be won by each party. Here are the results:

Conservatives = 282 Seats
Labour = 258 Seats
Liberal Democrats = 81 Seats
Other Minor Parties = 29 Seats

Needed for Prime Minister's Seat: 326

So, the likely result will be that there will be a hung parliament, with the LDP playing king-maker, able to make either Labour or the Tories the party in power. Politically, they are closer to Labour, but Clegg has run on such an anti-Labour platform, that an alliance with the Conservatives is possible.

If the Conservatives can get to approximately 40%, they might take an outright majority of the seats.

Two points here
1. This will be a very interesting election
AND
2. The British election system is even more in need of reform than the American system

Stay tuned...

GOP Shuns the Tea Party in Indiana
In the Indiana Republican Senate primary to replace retiring Sen. Evan Bayh (D), former Senator and mainstream conservative Dan Coats has beaten back the tea-party movement to claim the GOP nomination.

Also, yesterday, incumbent Sen. Richard Burr (R-NC) easily beat back a tea-party challenge (actually 3 of them) to be renominated for the Senate by the GOP.

In Ohio, Rob Portman won the GOP nomination, as the tea party couldn't even field a favorite of theirs to run.

This builds on the earlier tea-party loss in the GOP primary in Illinois?

The meaning of all of this?

1. The GOP nationally sees a huge opportunity and is in it to win it. Wingnuts need not apply.
2. As I've said for months -- the media is wrong, the tea party movement is a joke with no traction. They have not won a single election yet and so far have only been able to torpedo the GOP chances in races that they got involved.

But wait, you say, what about Florida and Marco Rubio? Let's set the record straight on this one -- Marco Rubio has been very careful not to claim membership in the tea party. He has carefully and smartly kept his distance. And Charlie Crist was ousted for being perceived as too close to President Obama and being an insider in an anti-incumbent year. I said the tea party movement was a joke, not that Republicans didn't truly dislike President Obama.

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