End of year window dressing after a 12.5% S and P runup and a desire to capture profits this side of the fiscal cliff invokes the "sell half" rule at the Fund level. Next week has the probability of two or three triple digit down days as the big boys will argue some is better than none. It won't take much to make that happen.
To be of record 31 Dec, many will want to sell 26 December, but an avalanche is possible that builds all week long. If stocks will have to be viable for purchase in 2013, assuming there is no tax "cut" from the cliff, everything is going to have to be about 20% cheaper. If you're income is like Mitt Romney's, 12M from 15% capital gains, he's about to take a $2.5M hit. That means he needs to sell more for cap gains now, so that when the prices decline beginning of 2013 he can buy more then. The problem is the same problem everyone else faced in the real estate market--everybody will be trying to leave the exit doors to capture the 2012 rates at the same time--the decline should be self fulfilling.
Could the market lose the 12.5% it gained all year long? Markets plod up, but fall like knives downward. It wouldn't take much, and if the Congress is convening next week, best believe the markets will be watching and nobody with a tablet in hand is taking the week off.
Boehner can't deliver his party, and the issue isn't only whether the government can deliver a respite from the fiscal cliff. His failure to bring his own constituency to the table leaves nobody for Obama to talk to. They know it, we know it, and Wall Street knows it.
So the issue is whether the government, after four years of gridlock, can function AT ALL.
What would you do if you owned scads of stocks with profits this year? Take them, or hope a four year malaise in the government rights itself?
Fairly quiet down day today, as folks marshal the strength to put up with relatives but for the grace of happenstance, we'd never associate with. Takes a lot out of you and yours, especially the long trip, so the market is left to a few stalwarts. I am watching selected junk bond funds, and they rise every so slightly in 100 lot shares, to be hammered by a large at the market sell off in the 10-11000 share arena. There IS profit taking this side of the fiscal cliff.
Unless you're abandoning interest bearing instruments, bonds, etfs and trying your hand at equities or just hoarding cash, it is still quiet XMAS eve. I expect a lunchtime selloff at the end of the trail--there isn't bargain hunting in earnest until Wednesday and Thursday, the, in my mumblin opinion, it's whoa nelly. I am awash in dry powder.
Awash/dry, now there's an image..........................
Boehner doesn't represent his party or is that a sufficient percentage only?
Perhaps those that recognize the ongoing financial recklessness for what it is are stonewalling what clearly is both a piecemeal and lame approach to the country's financial woes. If there is indeed a solution, it will have to be one comprised of deep, deep cuts in spending and taxation, one that eliminates entire federal departments—Education, Energy, HUD while curtailing our swashbuckling foreign policy to boot. Anything else is merely window dressing. As a side show, our reliance on the fraud money system would be reduced and that might be a boon to those that want to see it ended. I'm excited to see that just 'having a plan', regardless of it's legitimacy, is no longer as widely acceptable as it once was in the rubber stamping US CONgress, which has also been gleefully shredding all remaining vestiges of the Bill of Rights. Perhaps now we'll see a reversal of field there, too. Frankly speaking, I feel there are too many pretenders and traitors inside the beltway. The echoes of oaths offered to 'uphold and defend'...'all enemies foreign and domestic' have nearly faded away and it appears when that happens it is thought that they no longer exist.
A conspiracy involves intelligence, an end game, and I haven't seen anything but the vaguest kind of steering at the top. The longer Congress stays out of town and gridlocked, the higher the dollar seems to go.
Cutting off spending is like using leeches to clean the blood stream. It does nothing but kill the patient. It's something to consider.