Echoing what most people tell me privately, I am personally over-joyed that tonight will be the last debate before US voters head to the polls. Tonight’s debate centers on foreign policy and will be divided into six fifteen minute sessions with the total time of ninety (groan) minutes. CBS’s Bob Scheiffer will moderate the debate and the fifteen minute segments will be broken down this way:
1. America’s role in the world
2. China
3. Israel
4. Iran
5. Pakistan
6. Afghanistan
Granted, you can expect many of these to overflow with a likely spirited discussion on Libya and the death of U.S. ambassador. As I’ve discussed at speeches over the last week (San Diego, Newport Beach, Calgary), Americans normally do not base their vote on foreign policy and therefore a foreign policy debate is usually ignored. However, times have changed. First, the Bureau of Consular Affairs at the US State Department indicates that US citizens have more passports than ever before with over one-third (110mln out of 313mln) of the population holding the blue books. Therefore, citizens are more aware of what is happening globally and have interest in affairs outside the country.
Second, this presidential race is extremely close. Nationwide, the latest polls from WSJ/NBC tied at 47%, Gallup has Romney up 52%-45% and Rasmussen has Romney up 49%-47%. Sadly for Romney, nationwide polls don’t matter as the individual swing states will decide this election. To me, the easiest path for a Romney presidency resides in winning three states: Florida, Virginia and Ohio. Of these, Ohio is the most troubling for Romney as President Obama has consistently held a lead in the buckeye state with the latest poll showing a 50%-45% lead. Romney leads in Florida by 48%-47% and in Virginia 50%-47%. To make up for Ohio’s Electoral College votes, Romney will have to take a combination of Wisconsin, Iowa, Nevada and others. Clearly, this makes the path to the White House more difficult.
My call is that Romney wins, but it’s truly too close to call. Election night will be either be over quickly (If either FL or VA go Obama) or it will be a very late night.
For the markets, there appears to be a rather sanguine consensus view that it won’t matter who the president is for the next four years as both will be dealing with the fiscal cliff and how to get the country’s finances in order. Yet, this is the wrong as it will matter given what’s at stake. There is serious heavy lifting to be done on tax reform for both individual and corporate. This has implications for not only the stock market (big tech, big pharma and defense), but also on the currency markets (Repat tax).
This is why we watch and this is why foreign policy will matter. On to the DVRs!
