Consequence Of Massachusetts Election

In a list of the investment consequences of the special election for Ted Kennedy's old Senate seat, Bruce Krastig has this one for the U.S. dollar and gold:

I read the election result as being dollar positive. Somewhere inside this vote last night is a call for fiscal conservatism. We are going to hear rhetoric to that effect in the coming months and we will see legislative steps that at least give lip service to the idea that we ought to tighten our belt a few notches. To the extent that I am right by calling this dollar positive, you have to also think that it is a gold negative development. For those that love the yellow metal and hate the dollar, take heart. Any positive impact to dollar will be short-lived. The inability to put a second stimulus together will show up in all of our numbers by midyear. At that point it will be more clearly understood that the US is broke and there really aren’t any viable options that don’t entail a lot of time and pain.

Although the greenback's rise last night and today was attributed to PRC tightening, the election might well have added to the rise. The greenback has pushed above 78.3 this morning, and gold dropped below $1,120 before bouncing back above.

The rest of his list deserves some thought, especially for equity investors. He also sees the Brown win as a shot over Tim Geithner's bow, as well as the Fed's. People who are hoping for a second stimulus are likely to be disappointed.

Given today's brand of populism, he's likely right about the consequences for gold and the greenback.