Knowing the market was on pins and needles, Harry Reid gave stocks a nudge last week, sending the major averages spiraling into the close. It didn't take a lot of words, but they were the kind that sent investors scurrying for the exits.
"We're not making enough progress on the fiscal cliff."
While I'm happy President Obama finally met with small businesses, the White House is using grade school bullying techniques that the cool kids use to punish the not-so-cool kids. Non-stop campaigning is probably how the office operates from now on as it works for the incumbent who spent more time blaming Bush than fixing problems. Hey, it worked... but it didn't work. If the goal is to stay in office, it is a great strategy and one that calls on a lot of energy. But we are talking about a fiscal cliff and tax breaks on the middle class because the economy is a wreck.
"We have to get away from the happy talk and start talking about specific things..."
The happy talk has already faded Senator Reid, but it is still silly season when it's all about finger pointing and warning about the mean guys ruining Christmas. That public relations thing is won... piling on now is about as far from talking specifics as possible. At some point, all the players will have to congregate in a room - if the recently vanquished feel like they have nothing to lose they might hold firm. But we all have a lot to lose. I heard the word compromise a bunch right after the election just like I heard the word "pragmatic" a lot after the previous election. I wanted to believe it back then, and I don't see it right now.
In the meantime, Main Street is set up to do some self-recovery if allowed, and if it can pierce through the haze of woe and victimhood. Consumer confidence trends are higher with yesterday's tally, the highest in four years. Household debt continues to tumble and now sits $1.3 trillion lower than its 2Q08 high. Home prices have hit terra firma and delinquencies are down for everything except student loans, which continue to soar in general. I suspect many students and parents figure some unsuspecting taxpayer earning more than $250,000 a year will have to foot the tab (how their own children go to college remains a mystery unless they can claim to be Native Americans).
Despite the feel good nature of recent surveys, I still contend this is a "Dropout Nation" where living in the moment trumps beating the bricks for a job or saving for things like a house or retirement (yes, I know surveys say a bunch of people are ready to buy and that's great - better when it actually happens).
People are spending like there's no tomorrow. The good news is they are chilling on the credit cards, but tallying huge cumulative fees with the debit cards. But what the heck, either the world ends tomorrow or the government will pick up the tab as long as I'm not too successful.
Another sign people are living for today is the stock market. The market is poised to explode to the upside. I saw many true breakouts yesterday, where stocks closed at new 52-week highs on substantial increases in volume. The shorts are on the run as Monster Energy (MNST) and Green Mountain (GMCR) are up on real news, instead of down on negative hype and bogus short propaganda. Considering how much would-be investors have stayed away for years, and another spike in selling (see table) that could be fear ahead of the cliff, and it is easy to see why they think stocks are vulnerable, but under the right atmosphere they could take over.
Even if a third of the nation is living hand to mouth, another third has been weakened and the other third is just trying a place to hide from the jealous mobs led by politicians hell-bent on chaos or are too timid to speak up.
Letter from A Subscriber
Charles,
First, let me congratulate you on your success and thank you for being one of the voices of reason in turbulent economic times. I am primarily writing to thank you for articulating a serious issue that may arise should we "fall off the cliff "on 1/1/13. I live in Port Washington on Long Island with my wife and two sons, ages 26 and 24. I work two jobs and take all the overtime I can in my primary job to help with property tax and skyrocketing costs. My wife works very hard as well, and together we make over $250,000/yr (Congratulate me, I'm rich! ). My son was hired 15 months ago as a part time employee by a firm who is reluctant to hire due to potential rising costs. He makes $20 an hour with no benefits, and as a result I must now pay an additional $588/mo (COBRA) to continue his benefits under my existing plan. Since I'm technically rich, my tax rate will also go up. How ignorant can the President and Congress be? Home heating oil is averaging $4.27/gal on Long Island, gasoline is still near $4/gal, my costs keep going up and now I may incur even higher costs and taxes due to unrealistic plans by the ever expanding government. To borrow the vernacular of the day....WTF??? I understand the debt is overwhelming, but where are the cuts? I cut up my credit cards and am forced to curb my discretionary spending. Shouldn't government lead by example and do the same? Should we now expect more people on the government payroll, be it by expansion or entitlement? I will gladly support the needy, but I refuse to supplement the lazy.
Sorry I vented, but this grows more frustrating every day. I remember being told growing up that hard work is rewarded. My parents failed to tell me it rewarded someone else.
Best always,
WSS Subscriber
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