WASHINGTON, July 16, 2012 – We took an unexpected hiatus Friday as out-of-town relatives paid us a call out at our Berkeley Springs, WV HQ and ate up the clock all weekend. We wined and dined and took in a new play at the Contemporary American Theater Festival (CATF), now off and running through the end of July in Shepherdstown, WV. The annual festival attracts a good $2M in business to this small Eastern Panhandle town on the Potomac, illustrating how the arts can actually attract investment and consumer spending even in a rotten economy.
Of course, by playing all weekend, we missed the one really good market ride last week, a double-plus good 200 or so points in the DJI. Not to worry, though. As the market opened this morning, the averages turned to their losing ways with the Dow down nearly 50 points and the S&P 500 off a more modest 3.5 as of 9:38 a.m. EDT.
News continues to be crummy both from Europe and from the early days of earnings season (or lack of earnings season) here. People are getting used to this, so the market may retain a modest bias to the downside for the rest of the summer. Light trading will become even lighter as the vacation-heavy part of the summer looms.
No one expects much good news from anywhere. The Iranians are making quiet trouble again as watered down sanctions against them loom, leading to a sudden and sharp spike in oil prices. Yawn.
Newspapers and online media are starting to hype the “tax cliff” issue as another deterrent to a market rally. If Congress does nothing between now and, say, the election, it becomes more likely that a massive tax increase will take effect on January 1, 2013. Democrats and the media hype this as the “expiration of the Bush tax cuts,” and will blame the Republicans, even though it’s the Democrats, particularly in the Senate, who’ve refused to deal seriously with budget matters for four years running.
In actuality, though, the tax cliff is, in point of fact, a massive tax hike. The so-called “Bush tax cuts” have lasted for 11 years now and are currently the de facto Federal tax rates. So allowing them to rocket up on January 1 is essentially a massive, Democrat led tax hike.
Oh, and we should add to this the equally impressive brand new taxes that will kick in to fund Obamacare which, as the Supreme Court has decreed, is of, by, and for the tax-increasers. We’re actually hoping that all these tax hikes will go into effect and show up in everybody’s first January 2013 paychecks. Then maybe people will finally wake up as to what’s going on and throw out more incumbent socialists in 2014.
All this is contributing to the market’s weak tone. Businesses, in fact—petrified by the uncertain penalties imposed by Obamacare (since the Medicaid gambit has been ruled unconstitutional, among other things) are still keeping hiring on the sidelines while keeping inventories lean. Why go out on a limb if someone’s going to chop it out from under you.
The Obama Administration’s clear hatred of business and casual nonchalance toward business uncertainty and its employment consequences have been and still remain the greatest deterrent to recovery. But you can’t really tell Obama’s people anything. We are all too stupid to merit the attention of these born geniuses. So we all continue to twist in the wind.
In any event, we’re commencing another earnings week and stocks will probably gyrate with that aforementioned downward bias, we think. Again, our monotonous advice is to hold on to those REITs and high-yielding utilities (and maybe a few high-yielding pharmas) and keep the rest of your liquid cash in the moral or actual equivalent of your master bedroom mattress.
We’ll keep you posted if anything unusual happens. But right now, probably the very best investment, at least for your personal sanity, is your upcoming vacation. If you’re still employed.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
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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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