I can't believe fund managers aren't selling stocks like buckwheat, but hope a dope springs eternal and the same guys who gave us no doc loans and "don't worry, we'll just flip it" advice to both business and leadership must now be running the fund giants. Once we're on the other side of the calendar on Wednesday 2 Jan 1913, Congress can get even more recalcitrant, because they're in the gotcha camp and tax rates revert to the Clinton levels. Anything on the far side of 2013 starts off with gridlock and ends with less, not more money going into business and individual coffers. I was thinking that the Offal Office and the dishonorable minority might make nice this Saturday, but I got preempted by this "we'll meet on Sunday and solve the crisis in four hours after church." Thatbullshit actually turned the markets on Thursday from the mother of all selloffs into a so what ending. Forget the fiscal cliff, there isn' t much time to get profits under wraps today and half day Monday to avert the financial debacle of being caught selling 2013.
Perversely, you just might get next year the "I aint gonna sell till I see the bill" rally if the whole market decides to be constipated. Can't see that either, but it is a long shot.
Anybody who thinks both houses of Congress are going to be caught up in "we were kidding, we're moving the goalpost back to 2014" is relying on the swift "don't read it, just do it" process that started repairs to the economy at the end of 2007. I don't think the Congress is that smart or prepared to back another Paulson like assault on the problem via stop gap legislation--Boehner can't even write his own bill and get his own folks to vote for it--there are genuine diehards he can't deliver his own party.
That puts us directly in the scenario Bernookie was trying to avoid, namely repeating the bad old days he spent so much time studying, and coming to the conclusion he'd rain money out of a helicopter to spruce up the economy based on his study of the great Depression, which this fiasco is mimicking more and more. Add the corn drought and Sandy's 250 Billion to the mix, and you've got a recession relapse on its way.
Higher taxes will have the same effect as increasing interest rates, it's just a different vampire sucking the lifeblood out of a fragile economy. We really need to cut the spending binge of govt in half. I usually start with DoD because I have intimate knowledge that that juggernaut is fraught with the vestiges of Cold War defense spending and stuffed with nonessential personnel and military paid mercenary wages that improve neither the country's defense posture or the country's penchant towards winning wars. Unless of course you're bombing stone age bedouins out of existence of course or fighting fist fights house to house in Bagoogiestan. Our reluctance to use nukes is the same reluctance, taken one step beyond, Athens displayed to Sparta. Look how well the Athenians did.
Will Congress yell gotcha on 2 January? That's the scenario, unless they do something drastic on Sunday. If they don't, or they're incapable of telegraphing effectively that there's a compromise at the end of the tunnel, and Boehner has no chops remember, you'll see a horrendous down day today and Monday half day.
See how that might not work?
Guess what kiddies, per plan and per prediction the House, the same guys who wouldn't accept the Plan B written by Bonehead, are on a tear to tear up the Senate passed proposal as if it were confetti.
Ovder the cliff we are, now it's got to be called a tax cut, but, wouldn't you know, the House isn't buying any of it.
How that plays out tonight is the mystery to end all--but if I know the dishonorble minority, compromise and small bites aren't their style and its over the cliff we go! Are the cuts necesary or correct? Not the issue, just the issue of timing and the market betting on a swift resolution in days, to what should have been the priority of the past four years, putting together a realistic budget, built on revenues not printed or borrowed money, curtailed Muddle East wars, scaled back military expenditures for WWII era systems and mercenary military instead of patriot based, or at worst conscription based troops, scaled back entitlements not more "health care" without a means to pay for it-- nobody asked for, or voted for, and on and on.
Is the House "right"? What I care about is is the House helping or hurting the market. I gave up on right and wrong about the time of Nixon and the flight from silver in to bullshitshapingthe value of our money.
Might I suggest to each of you that you go to Natural News and read the forecast of Mike Adams for the upcoming year? Some of what he discusses is already underway and the rest could very, very easily follow.
My fear is when we go over the cliff, the market will ferociously tank for a period of time.
This will likely scare the "close to" and current retirees out of the market near the bottom of the down spike. Most won't be back on board when the crisis is finally - temporarily "averted" and will miss the move back upwhen everything is hunky-dory,
A lot of middle income wealth will be separated from these folks and transferred to "the winners"
of this game of chicken.
It would be a perversity, if on the higher taxation side of the house, folks dumped stocks. In theory they should be selling winners now and Monday, and keeping losers for next year for write off purposes. As long as the limitation of losses against other income remains $3000, that windfall is very limited. $3000 against other income has been the rule for eons, when $3000 bought more than a flatscreen TV
The only folks left in the market will be those still trying to write off 2001/2007 losses with some "winners" next year. They will be few and far between.
If I were a fund manager, I would be lightening by half to take advantage of the lower tax rates on cap gain. High yield would be problematic, I certainly would be selling covered calls against those babies if I owned them.