Wednesday, November 4, 2020

News Note: Post Election Update

The US election is now officially completed with no official winner. Since we are clearly potentially headed into uncharted waters, I wanted to provide an update here for readers in an effort to provide a public service. I have no doubt there is going to be massive public confusion now, so it is important to get as much accurate information as possible to try and understand how this situation will eventually get resolved.

First, we have several states viewed as too close to call and no one very near getting the necessary 270 electoral votes to win. In particular, Michigan, Wisconsin, Arizona and Nevada are all so close that we can easily predict they will be contested, probably in the courts. There is no way to predict how long it would take to resolve such legal battles or the eventual outcome. I will try to offer a couple of possible outcomes. I would add that other outcomes than these are possible as we could be entering a situation with no historical precedent to use as a guide.

The Contingent Election Outcome

I laid out this scenario in a previous blog post you can find here. Scenario #5 is the one to look at. In Scenario#5 I explained how a Contingent election is resolved under the US Constitution. I also described how the US House and Senate might look since they decide the new President and VP. Everything I said earlier is still valid and right now the Republicans would control a majority of state delegations in the new House based on the races that have been called at this time. They are also likely to still control the Senate based on the numbers out there right now. It possible all that could also be challenged in the courts as well. If we go there, we are truly in a world of uncertainty with no historical precedent.

The "Some Electoral Votes are Thrown Out" Scenario

I asked a well known expert that understands this situation very well what other possible scenario could happen. I got this reply by email when I asked: Are we headed into the Contingent Election Outcome Scenario?

"Not necessarily. If a state cannot certify electors, then those electors simply do not count, so the 270 threshold is lowered. This is why there will be expedited court hearings."

So we have at least two possible resolutions. I am sure there could be more possibilities as events unfold.  I am already seeing claims of potential vote fraud coming out. If actual voter fraud is alleged in any of these states, that could complicate any kind of expedited resolution in the courts and lead to some other unknown outcome other than the two listed above. It's impossible to predict how that would turn out.

Summary: We did advise readers here that all this was possible and to prepare for this kind of uncertainty. Obviously, that is still our advice. Watch markets carefully to see how they react, especially if the outcome looks to be extended out into the future -- beyond just a few days. This election did clearly show us once again the US is a completely divided nation with whoever ends up being elected having to deal with that as a reality. Right now another divided government where no party controls both The White House and Congress is the most likely outcome based on the current election results. Today the stock market is cheering that potential outcome. That outcome also suggests we don't see radical changes to our current system unless something external forces it.

Added note 11-6-2020: With more results now posted in the election, the odds favor that VP Biden will become President and that control of the US Senate may not be determined until January 2021 as it appears two runoff Senate races in Georgia may take place with control of the Senate determined by those races. The only change I can see to possible impact on major change to the system would be if the Democrats do control the Senate and can then move forward with an agenda. Since we won't know that for some time most likely, it is time to move on from the election. Not much more to analyze now.

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