Election Wildcards

Investors need to be on guard against one or more surprises that can come without warning. I call these the “wildcards” in the election season. It’s hard to know which one might emerge, but it’s not hard to forecast that at least one of them will. Investors should prepare accordingly. Here they are:

The Replacement of Joe Biden

The first wildcard is the potential that Joe Biden will be removed from the ticket soon and replaced by a more acceptable candidate, possibly New York Governor Andrew Cuomo. This is not as far-fetched as it sounds.

Biden is suffering acute cognitive decline. Whether this is dementia, early-onset Alzheimer’s Disease or the result of Biden’s two aneurysm-related neurosurgeries in the 1970s is hard to say without direct medical examination. Still, the cognitive impairment is obvious based on Biden’s vacant stare, confused demeanor and his inability to form sentences, complete thoughts or stay on topic.

The Biden campaign strategy so far has been to keep Biden under wraps and stuck in his basement. He does not do press conferences and his few interviews involve soft-ball questions and pre-scripted answers. Policies aside, the thought of Biden having to react in the midst of a crisis or a war will embolden America’s enemies and should chill Americans to the bone.

The crunch will come on September 29. That’s the date of the first presidential debate. Trump is an underrated debater with more command of the facts than critics give him credit for. He did well against Clinton in 2016 and will do the same if he faces Biden.

The real problem is not whether Biden can win a debate; it’s whether he can stand on the stage and speak and act coherently. Even with rehearsal and medication, this will prove exceedingly difficult.

The Democrats’ options are to replace Biden before the debate (which can be done at the DNC level without new primaries or a new convention), cancel the debates or go ahead and hope for the best.

The candidate replacement option doesn’t just solve the debate problem, it also gives the Democrats a better chance of a win in November. Canceling the debates (no doubt by playing the COVID-card) is a solution but it carries its own costs and highlights the problem (cognitive decline) it was meant to solve. Letting Biden go onstage live with Trump may be the riskiest choice of all.

There are no good solutions to having a mentally impaired candidate. In a normal election against a conventional Republican incumbent, Biden wouldn’t stand a chance. Of course, Trump’s not a conventional Republican incumbent, so a Biden vote is really an anti-Trump vote.

Any of the above choices set the race up for an unexpected shock, especially since Biden’s condition has been largely covered-up by a compliant media. Investors should brace for a shock on this front in the coming weeks.

Mail-in Ballots

Another shock-in-the-making is election day chaos resulting from the surge in mail-in ballots. These are not traditional absentee ballots that have long been used and have proved useful. This involves tens of millions of mail-in ballots intended to replace polling places and voting booths.

We can leave aside the issue of fraud in mail-in ballots (that’s a big issue but will likely not arise on election day itself; it can take weeks or months to identify and investigate such cases). The immediate problem is counting the ballots. Many mail-in ballots arrive at the last minute or even after election day. There will be issues concerning postmarks, matching signatures, timely delivery and the sheer time it takes to open the mail and visually inspect each ballot.

This mail-in ballot chaos won’t matter in states such as California or New York where Trump has almost no chance to win. The mail-in ballots will affect the final vote count, but they won’t affect the election winner because those states are solidly in the Biden column.

But, it could be crucial in swing states such as Michigan where Trump won in 2016 by 10,700 votes, and where millions of mail-in ballots are expected to be cast. What this means is that the election will not be decided on election day; it may take days or weeks to count the ballots and announce the winner in key states that will determine the electoral outcome.

Both sides are gearing up for this. The Trump and Biden campaigns have hired over 600 lawyers each to fan out across fifty states on election day demanding court orders on extended voting hours, impoundment of mail-in ballots and mandatory injunctions against certifying results.

Neither side will concede the election until these legal contests are resolved. A similar stalemate ensued in the 2000 election between George W. Bush and Al Gore. But, that was confined to a few counties in a single state, Florida. This stalemate will involve perhaps seven to ten states, all crucial to the outcome.

Two-time presidential loser Hillary Clinton added fuel to this fire by telling Showtime: “Joe Biden should not concede under any circumstances because I think this is going to drag out.”

This reveals the Democrats are already preparing for election day chaos.

The recent hoax about supposed efforts by the U.S. Postal Service to remove mailboxes to frustrate mail-in ballots is laying the predicate for election day charges of malfeasance. The reality is that mailboxes are routinely relocated for normal logistical reasons and the vast majority of mailbox relocations were done during the Obama administration.

The Chaos After Election Day Is Coming

Is there anything on the horizon worse than chaos on election day? Yes. It’s the prospect of chaos on the day after.

The one certain forecast is that the next two months will be a wild ride.

The Black Lives Matter and Antifa factions are preparing for a possible Trump victory. For them, it will be a vindication of their view that American democracy is inherently flawed, and the only solution is to destroy the system and start over.

The destruction will begin within 24 hours of a Trump victory in cities all over America. The riots and looting in Portland, Seattle, New York, Chicago and other major cities are just a warm-up for what will happen in the aftermath of a Trump victory.

The bottom line for investors is that the next 70 days will be among the most volatile in U.S. political history. An uncertain election outcome with extreme differences between the candidates would be enough to cause market volatility.

When one factors in a possible candidate switch, Biden’s cognitive decline, a delayed result due to mail-in ballots, refusal to concede the outcome, coast-to-coast election litigation and widespread riots, investors are facing a minefield of hidden dangers and catastrophic outcomes.

Reductions in equity allocations will reduce investor exposure to this litany of unexpected and shocking outcomes.

Cash will preserve wealth and reduce portfolio volatility. Gold will also provide a built-in hedge to adverse outcomes.

Regards,

Jim Rickards
for The Daily Reckoning

The Daily Reckoning