AMARILLO, Tex., August 6, 2012 – We’ve begun our long and trouble-plagued roadtrip back to DC from Santa Fe, arriving last night in sunny Amarillo, Texas, where we left our vintage Saturn VUE last week in a hotel parking lot, disabled by a broken left strut which we’d only replaced about ten days ago. We’re thrashing out a warranty repair with a local shop and hope to be headed back to DC in a day or two depending on damages.
Via rental car, we’d continued on to our Santa Fe destination last week, and took in the Santa Fe Opera. Delayed filings of our reviews will appear shortly over in the WTC’s swell entertainment section, so stay tuned.
On the business side of the ledger, folks have seemed more mesmerized lately by the swell performance of our female Olympics athletes while space buffs have avidly followed the thus-far successful landing of Curiosity, NASA’s latest Mars Rover. Market-wise, it occurs to us that we the people might consider sending something like a Mars rover named Curiosity to New York and Washington and maybe Brussels, too, to investigate whether intelligent life of any kind exists at all in any of these three cities.
DC continues to dither with trivia, with politicians on both sides seemingly more interested in adolescent-level character assassination and semantic games rather than doing anything at all to keep the U.S. Government budget and the economy itself from sliding further into the tank. If Americans haven’t already realized it, the Federal government—at least its legislative branch—has entirely ceased to function, throwing checks and balances entirely out of whack.
Into the breach has stepped Barack Obama, issuing unchallenged executive orders that thwart the general will of the people but against which Congress has not bothered to rebel. It’s an ugly situation and promises to get worse in the coming months as the threatened “tax cliff” approaches unhindered by a Congress more interested in food fights than in adult responsibilities.
Which leaves the Eurocrats to do their usual expert can kicking while Wall Street does its best to eliminate the capital markets as we know them. Latest evidence last week was the Knight Capital-led flash crash, proving once again that Wall Street is more interested in commission generating video gaming rather than in investment banking. It’s pathetic—disgusting, really—to see an entire industry destroy itself and along with it the great, mighty engine of American capitalism. And it sure makes it difficult for the Maven to issue any kind of useful advice in this column, given the mind-boggling randomness that hedge funds, algos, and HFTs are causing at the exchanges, with the government entirely asleep at the regulatory switch in the one industry that really does require heavy regulation.
More to the point, today’s market action as we write in Amarillo at noon EDT (11 a.m. CDT), is fairly predictable today. For whatever reason, investors are happy with the Euro today as they were Friday, driving it up against the dollar. And when the dollar gets cheaper, Wall Street has a nice day. Right now, the Dow is up about 72 points—pretty nice after Friday’s fun—and the NAZZ and the S&P 500 are up rather smartly as well.
We’re keeping our powder dry, having liquidated a lot of positions before our trip simply because we were afraid we couldn’t keep up. But if the bulls can cross a few key thresholds here, we might start putting on some new positions again.
Our preferred investments at the moment continue to be high-dividend utilities, telcos, and REITs, and we can see indulging in this, for the most part, for the foreseeable future.
But at this point, we must start issuing a caveat to our high-dividend fans as well as to ourselves. If a feckless Congress and White House allow us to go off the fiscal cliff on January 1, 2012, and if Wall Street sees this as inevitable as the election draws near, we will start to see a gradual selloff in these high-yielding assets.
Why? Because taxes on dividends could launch toward the 40% zone for some taxpayers, and will increase substantially for all others as well. If and when this last-remaining reliable investment-revenue source gets hit, that will pretty much kill off the last of the reasonably safe alternatives that small investors have left to them. No one is even contemplating the disastrous consequences of this potentiality. But we are. So consider yourself forewarned by a friendly forward observer.
Have a good one.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
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