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International Business Machines Corporation Message Board

  • mr_dinky_dot_bomb mr_dinky_dot_bomb Nov 18, 2012 6:23 PM Flag

    My Bet -- We GO Over the Cliff & Senate Democrats Pass a Bill Changing Provisions of Sequester Cuts

    They can amend it if they can't get enough Republicans to cross over and vote for it. The proposed legislation will cut taxes below $250k -- probably not back to the old Qualified Dividend & Cap gains rates -- maybe progressively lower as you go down the taxable income ladder. The Republicans will hate it but if they are voting on a tax cut it will probably get passed -- it may well restore some of the cuts to Defense and probably raise the debt ceiling by a big amount. Obama is holding the cards.

    I think we are looking at slowing international demand based on numerous Q3 reports from the likes of 3M, DOW & DuPont. The tax hikes won't help here. The US has been in recovery for a long time with the Fed as accommodative as possible. I think we could see a slowdown here in Q1, some layoffs and anemic employment reports.

    There could be a lot of selling before YE.

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    • think you have losing bet, the cliff talk is sounding hysterical. on the one hand you have the administration and bernanke with trillions of cash gone to spending. on the other you have the opposition refusing to pony up another penny to keep spending alive.

      with a date in mind it is foolish to suggest that some compromise would take place BEFORE that time. it is logical however to assume that something will save usa from freefall simply because that is the way politics works., but a compromise will not usher in economic prosperity. earnings reports have not created optimism, europe is in long term recession, and unemployment here might rise as companies attempt to keep valuations from declining by firing employees..this does not bode well for housing recovery and the additional billions needed to stabilize losses from govt mortage lenders

      there seems to be agreement that when the "compromise" is reached, the markets will rise dramatically, but is that a rational reason to buy stocks, or maybe to sell into the frenzy.

      • 1 Reply to dornweg
      • "think you have losing bet, the cliff talk is sounding hysterical. on the one hand you have the administration and bernanke with trillions of cash gone to spending"

        You may be right about a deal being struck. If the House Republicans voted for a tax increase they will lose credibility -- many of them won election by saying they would fight higher taxation because more taxes would not be good for the economy. Obama & Democrats would like nothing better than to drive a wedge thru House Republicans and isolate the Tea Party Republicans thru votes in the house on a retroactive bill to undo part of the Sequester cuts.

        As to the Fed -- it has not "bernake with trillions of cash gone to spending" whatever that means. The Fed has injected reserves in the banking system and used financial repression techniques -- the Fed does not "spend" money like the Federal Gov't does.

        I'm standing by ready to buy Big Blue back. But I sold it in mid-October because of a clear shift downward of world manufacturing demand as seen from reports from DuPont, DOW, 3M, etc including IBM.

        As to the US, the av increase in consumer demand in the last 19 Q's from Q1 2008 to Q3 2012 has been .7% -- that's with the Fed injecting cheap money into banks and a lot of spending by the Obama admin. The average quarterly increase in consumer spending for the 10 year period 1998 - 2007 was an average 3.6% growth per Q. In the US there is a new normal. It's consumer spending which is about 70% of the US economy and Obama-care that will probably slow down hiring next year in the US.

    • Semiconductor companies are trading at prices very close to early 2009.
      Other sectors are not that far while the economy is not as weak as 2009.
      Can we say that fiscal cliff is already priced in?
      Fiscal cliff is something that media has created since one way or another, there will some agreements between two parties. Now, hedge funds that have been behind the curve are purring gasoline on the fire to bring the stocks down so they can get the chip shares. Even if taxes go up by a few percent then investors don't want to pass profits. They may sell but they also buyback.
      The small cap may not cover soon but big cap and the company with good record like IBM will be in demand. The big guys are after companies like IBM and CAT and they see this as the best opportunity to grab the shares cheap. IBM is also buying back its shares at these cheap prices. No wonder the smart ones like Buffets have loaded and probably are loading now while there is opportunity to buy those 10% or more below fair value.

      Sentiment: Buy

 
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