I have commented a couple of times that I have seen comments (mainly on the web) that the Republicans were simply waiting for the New Year so they could vote for a tax decrease instead of an increase.
Here’s a comment by a Wall Street pro, Charles
Lahr, Managing Director and global equity portfolio manager for Pacific
Investment Management Company (from WSJ, print
edition, 22 Dec 2012): “If we go over the fiscal cliff, tax rates will
go up on everyone, and someone will quickly come up with a bill to cut taxes on
98% of the American public. Who’s going to argue with that? At the end of the day, an agreement will be
reached, though not necessarily in the timeframe we want.”
So basically, no problem. As reported by CNBC
this morning, the only Fiscal Cliff offer on the table is the last one by President
Obama – higher taxes on the highest 2%.
That will raise around 100-billion in revenue. The deficit this year is $1-trillion+.
My comment: The President’s proposal, if it comes to pass, will be a sad day for America. We need to do more to cut the deficit, however; since the stock market tends to look ahead only about 3-6 months, any fiscal deal will be welcomed by Wall Street. Don’t expect stocks to rise much because of it, though, because a “deal” is already baked-in-the-cake.
SENTIMENT
Sentiment is high enough and has been
sustained long enough to call this indicator a sell. As of Friday’s close, sentiment is 64%-bulls,
so almost 2 out of every 3 investors are betting the markets will rise. (My
sentiment indicator tracks the assets invested in selected bull and bear mutual
funds in the Guggenheim Investment Family, formerly Rydex Funds.) Clearly, the current bullish sentiment does
not indicate that anyone believes we will actually go over the Fiscal Cliff in
a meaningful way.
MARKET RECAP
Monday
the S&P 500 was down 0.24% to 1427 (rounded). VIX was unchanged at 17.84.
NTSM
Overall, the NTSM analysis remains neutral, or
HOLD. Sentiment is the only negative
indicator.
MY INVESTED POSITION
Based on the SELL signal, 7 November 2012, I
moved out of the stock market at 1377 on the S&P 500. Because of the negativity I have noted from
Hussman and others, I am currently invested in a range of near 15% invested in
stocks.
HAVE A MERRY CHRISTMAS AND HAPPY HOLIDAY.
