Tuesday, January 01, 2013

The problem with predictions

Well, it sounds like most of my expectations for the "fiscal cliff" drama have played out according to plans, but like Bill Parcells always says, the losses hurt way more than the wins.  The market rallied on every hint of a deal on Monday with no let up.  Every headline pushed the market forward and that led the computers to jump in on the fun. 

I think the market's reaction will influence the House's willingness to compromise.  Every hint from a Congressman that could derail the deal will likely swipe 15 points off the Dow and that will really weaken the resolve of the Republicans (don't you love the fact that we govern based on ticks of Apple's stock price?).

**** As I was typing this it sounds like the House has agreed in principle to vote for the Senate Fiscal Cliff plan.

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To address our run up to the "Cliff" we needed to build a bridge across the ravine.  Instead, it sounds like we will get an agreement to put up a sign that says "Bridge out ahead".  This is the ultimate band-aid solution.  The proposed agreement appears to avoid the most strict aspects of the fiscal cliff but in the end it does very little to address the medium and long-term structural issues facing our economy.

Remember for all of the bluster about the cliff it was established to help reduce our long-term budget deficits.  The mini-deal will actually boost our total debt over the next 10 years by up to $4 trillion. 

Is it any wonder we couldn't accomplish a grand bargain with a Congress that is more partisan than at any point in the past 130 years?


Here's to a great 2013!

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