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Don't Vote, It Only Encourages Them. Why Gridlock Is Good

Don't Vote, It Only Encourages Them. Why Gridlock Is Good

parliment of whoresThere are two really great Libertarian bumper stickers. One says: " Pro choice. On Everything." And the other is, " Don't vote, it only encourages them." Anyway, in today's New York Post there is a story plucked from Bloomberg News that says when the "levers of federal government" are divided, the economy does better as do stock returns as measured by the S&P 500.

Which is why I know a guy who has launched the Congressional Effect Fund. Since Jan. 1, 1965 through 2009, the market (S&P) has been gained about 16% when Congress is in recess and appreciated by 0.94% when Congress is in session. Basically, (and this is a simplification) using futures and going to cash, its manager, Eric Singer, essentially goes short when Congress is in session and long when Congress is not. He is up nearly 15% YTD (versus about 8% for the S&P) this year. We have written about this fund before and the money manager has written a short piece for us.

"Under the 'politicians are idiots' view, divided governments tend to be gridlocked, and gridlock (with apologies to Gordon Gekko) is good. A paralyzed government is an economic boon because the changes that politicians congrive tend to be harmful," writes Kevin Hassett of the American Enterprise Institute.

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