Craig, your logic is impeccable, but as you note, it is difficult to predict what a court will do. The uncertainty affects the stock market, and particularly, stocks such as SNDK (a stock with only modest amounts of institutional ownership) in the following manner:
Bush is seen as anti-regulation and favorable to larger tax cuts. Investors draw a simplistic conclusion that (a) drug stocks will do better because Bush won't negotiate lower prices for prescription drugs for the elderly, and (b) a larger tax cut is inflationary, thereby forcing down high flying tech stocks on the basis of discounted forward earnings.
Gore is seen as more fiscally responsible, advocating somewhat smaller tax cuts that affect lower income people more than the Bush favored cuts. The Gore policy looks more favorable to bondholders because interest rates may remain steady or actually fall. Consequently, if an event favoring Gore occurs, the bond market reacts positively. If an event favoring Bush occurs, drug stocks go up, but tech stocks show less strength or even drop. The only tech stock that really jumps when the outcome looks more favorable for Bush is Microsoft, because investors think the government will simply abandon its antitrust case. (However, the individual state and private civil actions continue, buttressed by the damaging evidence collected during the antitrust trial.)
So how does all this affect SanDisk? I can find no reason for the stock to be as weak as it is, other than the overall uncertainty over who is to be the next president. As some people realize, the REAL next president is already in power, and his name is Greenspan. At least for the next two years, it is unlikely that the basic direction of SNDK earnings will change; only the magnitude, dependent somewhat on how robust the economy is. There is some data showing a slowdown, but this should not result in much change in demand for SanDisk products.
The only conclusion that a long term investor can draw is that SNDK is temporarily undervalued because of uncertainty over the election. While institutional investors fret about whether it is too risky to buy SNDK, smaller, individual investors have a rare opportunity.
Regarding election irregularities, I once worked in the Secretary of State's office in Michigan, and I have observed controversial election results in our local county in NY state. Absentee ballots that are not signed or are not post marked in time routinely get thrown out, military or not. People who show up at the polls have their signature matched with that on the registration records. If they are not on the voter rolls for a particular precinct or district, they are allowed to vote a paper affidavit ballot, and that ballot can be challenged later on if the signature doesn't match anything on record. These are routine measures taken to ensure the purity of the vote. I have never seen an instance where a hand count was deliberately thrown out because of an artificial deadline. I agree with you that, given the fact that the TOTAL NUMBER of challenged or uncounted or otherwise questionable ballots in Florida is MUCH GREATER than the certified margin of victory, the entire Florida result for the presidential election may be invalidated. I can't see how any court can condone the number of documented irregularities and still approve the current results. And I also agree that the Florida legislature probably cannot legislate retroactively, though here the legislature claims it only wants to clarify the intent of the existing law. How do they know the original intent?
On and on it goes, but the lesson for investors is to take a couple of Tums and gather a little courage to invest in some truly rare bargains.
Art Bechhoefer |
