Markets obsessed with 'fiscal cliff'

Election 2012 status quo finale not reassuring to Wall Street. Photo: Warner Bros.

WASHINGTON, November 8, 2012 – We’re a little late out the gate today, but there’s really not much to report. Tuesday we got irrational exuberance, particularly in the coal stocks, as Mitt Romney’s big win was in the bag. By Wednesday, Mitt’s big win was out of the bag and we were bequeathed with not only four more years of Obamanation, but also with Harry Reid Senate plus and John Boehner House slightly minus, meaning that all the media hype in 2012 got us precisely—the status quo.

Think of all the money we could have saved by not doing this election at all. The market apparently thought of precisely that and thar she goes, with the Dow down a whopping 300+ points and the NASDAQ and S&P 500 doing just as bad or worse. Apparently, going “Forward” with four more years of Hope and Change engendered neither on Wall Street. And of course, the coal stocks, among many others, re-commenced their ongoing normal direction—down. So much for the political clout of those coal miners in Pennsylvania and Ohio.

Today, apparently, we’re experiencing a hangover from yesterday’s debacle. The day began somewhat brightly, but then the market’s swoon-song began anew. As of this writing, the Dow is down 89 and rapidly heading south.

Alleged reasons this time: again, 2012 election reflections, with the usual Euro-can-kicking crap, given a loving pat on the rear by European Central Bank (ECB) Prez Mario Draghi who carefully explained to us how weak and wobbly the European socialist economy really was. Who knew? Certainly not the American electorate which voted to follow the Eurozone in its merry game of chutes and ladders. Except in the Euro-version, there are no ladders.

Looking ahead, market action is likely to remain at least slightly weird due to the Monday, November 12 Veterans’ Day holiday. It’s no longer universally observed, alas. But the banks and the Feds get to take the day off, so the market is at least indirectly affected. Since banks are closed while markets will remain mostly open (check your broker if you trade bonds), settlement day will be Tuesday for some trades this week. Canada’s markets will have similar restrictions due to their equivalent holiday, Remembrance Day.

What we should remember today and tomorrow is that an awful lot of professional investors are going cash and heading for the sidelines. The fiscal cliff looms larger every day. And in spite of a little nice-nice emanating from Reid and Boehner yesterday, we shouldn’t necessarily conclude that we’re now firmly ensconced in a new era of lovey-dovey bipartisanship.

We find it hard to believe that the Democrats are eager for compromise 24/7, unless, of course, it’s entirely on their terms as is their custom. So we, and a lot of other traders and investors, will sit in mostly cash and await the paradigm shift which will probably occur on the same schedule as Godot’s arrival.

In the meantime, many investors and non-investors alike are poring over their GPS units and Google maps looking to see if there really is a Galt’s Gulch somewhere deep in the mountain passes of otherwise true blue Colorado. Hey, one should always be open to alternative investment ideas, right?

In any event, keep most of your powder dry. We admit to nibbling on utilities a bit as they slowly sink (with dividends and interest getting set to be majorly taxable after the turn of the year). But in this economy, what other industry—besides Obamacare—absolutely requires monthly checks from everyone who’s not living out of a Safeway cart? Real estate REITs also look good, although they, too, may have more to drop before all is over.

Banks are also getting smacked again, but there’s good value in there somewhere, particularly in the regionals (not generally subject to Euro-adventures). As some of these otherwise healthy institutions reach new bottoms here, now may be the time to scoop them up. Well, maybe not quite now, but soon. Assuming we can draw our fiscal cliffhanger toward a happy ending. Otherwise, 2008-9 might end up looking like that proverbial Sunday School Picnic compared to how January 2013 will make its presence felt.





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.

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.

Follow Terry on Twitter @terryp17



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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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