The T-Report: Washington, A Christmas Carol

Posted by on Dec 31, 2012 in The T-Report | No Comments

I must have seen about 20 versions of the Christmas Carol this year. I liked the Patrick Stewart version, and still laugh at the Donald Duck one. I can’t tell if I actually saw a Suite Life on Deck version or that is just some horrible nightmare I had, but in any case, this is the season for variations of that play. Virtually every sitcom that ran more than a year seems to have a version of it, in addition to all the more serious ones.

The only version I haven’t seen, is the one that is most needed – the Washington version.

I think of the Christmas Carol as a story of a once promising and exciting future, turned into a dull and dreary and mean present, with the inevitable shabby and sad ending. Well not inevitable, that is the point of the story. The ending is not inevitable and can be changed, but to change the future you must change the present.

Here we are witnessing Washington in dire need of a Christmas Carol Intervention.

Fiscal Cliff – Bah Humbug

The damage to the economy won’t be from the fiscal cliff, it will be for the politicians proving beyond a shadow of a doubt they have moved past the point of governing.

Whatever doesn’t get done today can be done later this week. A couple more lobbyist dinners, some great wine, a few handshakes, and presto we will finally have a deal. Will the markets react poorly to no deal today? Possibly, but I will be looking to increase some risk into that sell-off. It can and will be reversed. To be honest, I don’t think we will see much of a sustained sell-off as fewer market participants seem to care today than I would have thought.

What won’t change is the fact that the world’s largest economy is about to start a year and no one knows what the tax rates will be. There are lots of other uncertainties, but for me, that is the most basic one to look at. How can a country be so inept or corrupt in its governance that we can start a year with so much uncertainty?

It doesn’t appear as though they are even trying. Both sides have drawn lines in the sand and are refusing to cross. That is bad enough, but the one party drew their line somewhere on a Hawaiian beach and the other somewhere down on the Jersey Shore, so they can’t even see each other’s lines.

Keep Nibbling at Risk

In spite of the hype and the countdown clocks, adding risk here makes sense. I continue to like the sectors/areas mentioned in Saturday’s report. We turned from bearish to long at just north of 1,400 on SPX and are adding here. It is scary, but the reality remains, whatever damage the politicians do today, they will likely do enough to get a pop and let everyone focus on QE and good news out of China for some strength. Remember, just like QE back in September, it takes time for these policy changes to have an effect, and a couple days over the other side of the cliff don’t put the serious drag on the real economy. And I do think I was one of the first to suggest this whole gambit is just a ploy so the Republicans can vote on tax cuts not tax increases and Obama can label them as his cuts and not Bush’s.

Happy New Year!

Thanks for all of the help and support this year. It has been exciting turning this into a bigger business than we had imagined and look forward to working with you next year, and hoping we can be as successful in searching out turning points and looking for the off the beaten path contrarian signals.




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