Tomorrow, Iowans will decide who their choice for the Republican Presidential Nominee will be.
The odds-on favorite is Dr. Ron Paul.
Paul is the choice among Libertarians, but not of the Republican establishment. Yet his likely nomination could throw the race into total chaos. It could also roil the markets, as well.
You see, Paul is running on a platform that would turn the “system” as we know it on its head.
Everything from the defense industry… to the healthcare industry… to the financial industry is on his “list” for revamping.
While Republican and Democrat candidates alike are talking about shrinking government, the only one with the guts to actually do it is Paul. And that scares the heck out of both parties.
The Market’s Reaction to Paul
Now, Ron Paul isn’t necessarily the best choice, either, given how radical his ideas are often viewed.
Paul’s problem is this…While he knows how to use a scalpel, he prefers to approach things with a machete instead.
Many will argue that the time for precise surgery is behind us. Rather, this patient requires an amputation to stop the cancer borne out of systemic, out-of-control government spending.
That might be true. But the market seldom reacts favorably to radical changes ahead.
If Ron Paul wins the Iowa Caucus, he’ll be the favorite heading into New Hampshire. If he loses Iowa, then his campaign for the nomination will likely fade to black.
I suspect Paul will win and send the market whipsawing into the days leading up to New Hampshire. In such a scenario, I can virtually guarantee the volatility will ultimately result in more selling than buying.
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Both Fantasy and Nightmare…
This Republican race is in danger of becoming the most contentious and closely fought in history.
There will be no clear frontrunner until early March when several states make their pitch on Super Tuesday (March 6, 2012).
Either way, January will play a big part in this election.
Iowa and New Hampshire are important, but the end of January is when the first major state will cast its votes – Florida.
If Paul can take first or second place on all the results in January, I anticipate the market heading south until March.
Such a reality is a trader’s fantasy… yet an investor’s nightmare.
While the New Year is usually the time that many investors start planning their strategy for the coming year, this go-round will be different.
There are a lot of irons in the fire – a fire that’s heating up.
Europe is on the rocks (still). Iran and North Korea continue to dominate the headlines.
With that in mind, in the next issue of The White Cap Report, I’ll reveal a potential sleeper – one that could dwarf all of the first-quarter headlines, including the Republican nominating process.
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Ahead of the tape,