Jerry Bowyer

Jerry Bowyer appeared on the Larry Kudlow Radio Show on Saturday, July 12th, at 12:00 pm Eastern. The Larry Kudlow Radio Show can be heard live from 10:00am until 1:00pm (EST) on New York’s 770 AM radio dial.

Jerry Bowyer appeared on CNBC’s Kudlow & Company on Friday, July 11th. The show aired at 7:00 PM EST.

Everyone’s been so busy searching for the alleged Bush recession that they’ve missed what the markets are trying to tell us about next year. As the attached chart shows (courtesy of Professor Mark Perry’s Carpe Diem blog), the current bear market corresponds fairly well with the drop in the probability of a McCain victory.

Intrade’s presidential future’s market (where investors buy and sell futures based on their estimate of the probability of a particular candidate’s victory) has been tracking the falling prospects of McCain and the rising expectations of an Obama victory. As of this writing, Obama futures are trading at more than a 30 point premium over McCain futures. This doesn’t, of course, mean that the market thinks Obama will win by 30 points. It means that the markets think that he is about 34% more likely to win than McCain. In other words, it’s not a margin of victory; it’s a margin of the probability of a victory.

I don’t think that the current Dow bear market was caused by last August’s credit crunch. Nor do I believe it’s being caused by a recession that is allegedly starting right now (having failed to appear in the first or second quarter). Stocks are forward looking; when they drop now, it means investors are worried about things that are coming later – 6 to 9 months later. In other words, they’re worried about Obama.

And why shouldn’t they be. He’s promised to erase Bush’s investor tax cuts. That means a hike in the tax rates for dividends and capital gains. This means very large additional levies directly on investors. Of course this affects stock prices. It is ludicrous to suggest that adding a tax directly on an asset class would have no effect on the value assigned to that asset. Add to that harrowing scenario our already high levels of inflation, which the tax code treats as a gain, even though it isn’t one, and we’re getting to some very high tax rates on capital. This is happening just as most of the developed world has been cutting its cost of capital.

The political class is shifting left. We’re likely to get Obama and Nancy and Harry running the most advanced economy in the world next year. The investor class doesn’t like what it sees coming. That’s why it is scaling back. Capital is going on strike, and we won’t come back to the table until we see that we have a chance to a fair deal.

This article originally appeared on CNBC.com. To view the chart, click here.

As I write this, I sit here in Western Pennsylvania, atop the Marcellus Oil Shale Deposit, which may become one of the largest sources of natural gas in the world.

The CEO of its development company recently told Larry Kudlow that things were going pretty quickly for him because most of the land above the deposit is privately owned. Negotiating with private owners, he said, who have an incentive to negotiate mineral rights, works a lot better than negotiating with governments.

Some western states are almost all government owned, and the resources of those states remains buried in the ground. Not so with Pennsylvania, which is historically a farming state. That’s why the world’s first commercial oil well was sunk not far from here, in Titusville, on what previously been a farm.

Why did it start here, and not in the middle east or South America? Because they didn’t have Thomas Jefferson. Jefferson, who wrote the Declaration of Independence which we celebrate today, fought for the powerful idea that the right to private property included what’s under the surface of the ground as well as what is above it.

The old-world model was that the mineral rights belonged to the king. Frederick Barbarossa, the Holy Roman Emperor, held that coal and iron discovered on a freeman’s property could be taken by the state - without compensation. Not surprisingly, farmers went to great trouble not to find subterranean resources, and to hide any they’d uncovered. This model traveled west with the conquistadors and became the legal order of the Spanish colonies in Central and South America. It’s why Hugo Chavez and not some entrepreneur controls the vast oil reserves of Venezuela. It’s why Mexico’s oil company is state, not private-owned.

However, Jefferson announced a Novus Ordo Seclorum. This translates as “new order of the ages”, not as certain right wing conspiracy cranks claim “new world order”. It means that the old legal order of the divine right of kings would give way to a new order of "all men are created equal."

We have in recent decades drifted backwards, a little, to the old world. Central planning environmentalists cordon off great swaths of energy-rich property from the use of any consumers except a few disproportionately wealthy eco-tourists. They describe this act of putting resources under the control of the state as “progressive”. But they are wrong, it’s not progress, it’s a regression to the pre-American, pre-Jeffersonian privileges of the crown. The natural resources are being held for the good of the few, not for the good of the many.

This article originally appeared on CNBC.com.