In late September I attended a fascinating dinner organized by a top money manager who is based in the US. There was a leading American political strategist present who is very well connected in Washington. So I was able to glean some insights into the current state of US politics.
Strategist said that both parties were thinking they would lose the presidential election and that the decision might be incredibly close: maybe as close as 11 counties. It might simply come down to who could persuade their supporters to vote on the day. Bad weather on November 6 would favour the Republicans: "They will drive across the state if they have to!"
Money Manager had a different point of view. He had been with some leading Republicans and reported that they were expecting a landslide victory. "Two weeks before the poll, Americans will sit down and ask: Am I better off or not than I was four years ago? And then they will vote with their wallet, and Obama will lose!" A Republican victory was viewed as good for markets. Strategist mused, though, that if the Republicans took the House, the Senate and the presidency, the budget deficit might balloon. The Republicans would not want to be seen as totally responsible for slashing the deficit and imposing hardship on US citizens.
I was intrigued to learn that Ben Bernankes time as chairman of the Federal Reserve is nearly up. Apparently, the bearded one is keen to shift the burden of the ever-burgeoning US deficit to someone elses manly shoulders. Bernankes term should end in January 2014 but it is thought a successor needs to be in place by early 2013. If the Republicans do win, Bernanke is toast because of his endless rounds of quantitative easing (which I always think of as quality heaving). But a mole in the group insisted that the Democrats were grooming Tim Geithner to take over as Fed chairman. Such an appointment is surprising given that Geithner has recently been as invisible as some of those senior banking chiefs I wrote about in my September column. Even more surprising is that my dinner companions whispered that Larry Fink, the Cheshire Cat-like chief executive of asset manager BlackRock, was lobbying heavily for the role of Treasury secretary should the Democrats win a second term. I am intrigued that the Obama camp believe they can appoint someone so closely associated with Wall Street to such a high-profile role.
Fink is a legend in his own lunchtime among the financial cognoscenti, not only because of his pioneering efforts in the mortgage markets when he worked for First Boston but also because of the way he built BlackRock from a pebble to a lump of marble in some 20 years. Another financial rock star is Bill Gross, the founder and CIO of Pimco. Gross is a remarkably youthful-looking 68-year-old. A source whispers opaquely that, as behoves someone who hangs out in California, Gross "has had work done". And while we are on the subject of succession, the question on peoples minds is how Pimco will change if and when Mohamed El-Erian, co-CIO, takes over. "Pimco is building a new complex in Newport Beach," mole murmured. "Im not sure Bill will still be running the show when they move in."