The market doesn't fear the fiscal cliff

It likes the coming together that we will see after we go over it.

By Jim Cramer Dec 28, 2012 10:09AM

thestreet logoDollar bills floating over US Capitol CorbisYes, it does all seem crazy. And while there are still two more trading days after today, the logical question to ask is: "If this is austerity on the horizon, why do markets seem to like it so much?"

Think about it like this. We know that we wanted Europe to put through pretty much what going over the fiscal cliff does, and those of us who think that growth is important don't like their plans. There's no growth stimulus. Austerity has led to lower interest rates, but those rates are really a function of central bank intervention.

Can our stock market really like a plan that has no growth kickers in it? So, logically we should be going down, not up.

Maybe the market is totally oblivious, and while we can make judgments that the market likes the fiscal cliff from the action, we can also presume the market doesn't know what it is talking about except for retail, which has been rolling over. But that's a tough fiscal-cliff-to-blame call because retail's been weak the whole season, a combination of ultra-warm weather, worries about the cliff and Superstorm Sandy.

This leads me to the most likely scenario: the market likes the coming together that we will see after we go over the cliff with the Republicans fighting vigorously for tax cuts and winning. That's why the sellers aren't dominating.

Makes sense. Grover Norquist really wants that. Some say he wanted the Plan B, but that's just nonsense. He wants nothing but tax cutting and that's what he can bargain with the president on through his committed minions. Turns out he was the most powerful man in Washington after all. Always will be, as long as the GOP owns the house.

Also, let's not forget how much the market is in love with gridlock. We know the next battle will be the debt ceiling and that will create another push for still smaller government and more rancor, which, while distracting, should no longer scare us because that's about debt downgrades that don't seem to matter so much anymore.

So, here's the bottom line. The market doesn't fear the cliff because good things come off it -- middle class tax relief -- and the rest is the long-sought agenda of fiscal conservatives everywhere.

We all acknowledge that a recession will be caused by the cliff if we don't get middle class tax relief, but if we do the fact that we didn't sell off big says that we will get it.

Those who don't believe in this thesis should be selling or shorting retail. The numbers are too high.

That's the best hedge I know.

Cramer's face

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.

 

 

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98Comments
Dec 28, 2012 10:50AM
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We have had recessions before and will have them again.  This is just an expensive way to postpone the next one.   If the government can't find a way to limit itself, then we have to cut off their money.  I'd ask the CBO to figure out what the interest will be on the national debt for the next year, give the government enough to pay only that interest when the debt limit comes up, specify that the debt increase was to be used only to pay the interest on the debt for one year, and tell them to live with what they have now plus the increase in income and the decrease in spending that will hit when we go "over the cliff".  At some point the way things are going has to come to an end and now is as good a time as any.
Dec 28, 2012 11:04AM
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Going over the Cliff is a good idea.  There will be NO deal...  We need the 47% leech class to start to pay for Obamanomics, and the Cliff will do that.  We shall see how they like paying for Obamanomics.  The Republicans have figured out they will not get any of the 47% leech class vote while they are on the government teet.  The 47% will always vote for someone ELSE to pay their fair share of taxes, while they pay ZERO.

 

We need to slash spending.  That will come up soon as we are at 16.4 trillion in debt now and will hit the limit the first week in January.   The house will not increase Obama's credit limit one dime until he comes up with 1.2 TRILLION in spending cuts THIS year, not spread over 10 years and far in the future.

 

Prepare for the end of Obamanomics.  The 47% will begin to pay their way.  The insane spending will stop, and the USA will return to fiscal sanity, inspite of the democrats and the 47% leech class...

Dec 28, 2012 11:32AM
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Jump Baby Jump - It will remove some of the useless citizens from the Government Teat and force them into productivity - That is good in my opinion.
Dec 28, 2012 11:28AM
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So who has the MOST FEAR ?

The Republicans constituents fear of increasing taxes ?

The Democrats constituents fear of cost cutting ?

 

I'm going with the latter: the 47% will have to pay into the Obamanomics they voted for, have to look for work - finally- (extended EU benefits gone) .

 

The Dems are playing the most serious game of 'chicken' I've ever seen & if no deal is reached, we'll begin to see the outrage from those who voted for this mess.

Dec 28, 2012 10:33AM
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The market doesn't fear the cliff is because those manipulators who are in control of Wall St will not allow it to crash and lose their money.
Dec 28, 2012 11:26AM
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A "jobless recovery", one that exists only for Wall Street, and passes the country on by is no recovery at all, and not one that's worth having.  Quite frankly, yes it's obvious, many of their lobbyists would love any scenario where they get the leverage, and everyone else is ****ed.  What else is new....  But these representatives aren't supposed to represent one group of their constituents, against the interests of the rest of their constituents (aka the voting public at large, which is just as much a constituency, however some might chose to explain that away when they want to justify not representing them).  It's not their job to play favored sons among the constituents and buy into corruption; but this has not stopped these ***hats in Congress before...  Same goes for a "recovery" bought and paid for by Burnake's printing large swathes of money through QEC, near 0% interest rates (ironacally on every form of investment basically but never on credit cards), the Twist, and just about every other move that can tend to de-value the dollar and contribute to inflation even while wages don't increase to compensate.  Yeah, some "recovery"....  Not existent for all but those who can invent new fees, and find other means to game the system as a means to increase their own portfolio when growth is non-existent....
Dec 28, 2012 12:39PM
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The people seem to be as evenly dis-united on solving the "Fiscal Cliff" thing as our irresponsible and feckless government.

 

I for one hope we do go off the "cliff."The American People have been held hostage to the extortion of endless wars since 9/11 and the bogeyman of terrorism. These tarpheads wouldn't stand a chance on American soil, but we are supposed to be so afraid. Nuts to that. Let them come. there are parts of this country that no terrorist would let themselves be caught dead in.

 

The American People (that's all of us) have been held hostage since we allowed the "too big to fail" and the "too big to jail" to extort one bailout after another from the American People (in the guise of the FED). Let the thing fail.

 

Are you not as tired as I am of one extortion racket after another? Regardless of what happens, do you think the politicians will stop getting their pensions, and their health care, and pay checks? Not as long as they continue making you pay their taxes.

 

Time to call the bluff of our criminal shyster politicians and banksters. Let the thing go over the cliff.

At least we get some peace and quiet. That alone would be well worth the end of everything. Oh, the joy of peace and quiet. Think of it.

Dec 28, 2012 12:11PM
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No matter what the gov does,I don't see the market doing too much in either direction.Think about it - every time Ben&the fed talked about what they MIGHT,MAYBE,COULD do the market would go up,but only until the fed actually did something and it would go back down or stay fairly level.
The past few weeks the only "rallies" in the market have been because someone SAID something about a possible deal.
It's a W O R D  market,when they like what they hear,UP.Facts and actions seem to have very little effect.

Dec 28, 2012 12:25PM
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Do not TRUST this market it is a criminal enterprise that SCREWS the small honest investor !  TAKE YOUR MONEY AND RUN BEFORE IT IS TO LATE !
Dec 28, 2012 11:39AM
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We are in this situation because the entire country has been held hostage by the "too big to fail" and now "too big to jail" criminal, shyster, politicians and banksters. The banks have held hostage the demands by the American people that free markets reward the successful and punish the losers, all because the banks think they are special, and the people are slaves. The FED has said that without bailing out pure evil that the whole country will go down. Now the price for extortion has gone up again with this so-called "Fiscal Cliff." As an American citizen I say, let the thing collapse. My country is dead. Capitalism is dead. Free Market Economy is dead. As an American Citizen I say: "God Damn America." The people are sovereign. Enough is Enough. REVOLUTION. BURN THE PLACE TO THE GROUND. FREEDOM.
Dec 28, 2012 1:09PM
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The cliff is the deal........... then a week or 2 later they will pass a few bills more or less undoing half the cuts and tax increases in the cliff and then act like heros.  The cliff was made by congress and the pres, it will be partially undone by them.  All a bunch of grandstanding BS, the dems can say they didn't vote for these cuts and repubs can say we didn't vote for the tax increases.  Nonsense at it's finest.
Dec 28, 2012 12:47PM
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I'M A 60 YR. OLD MAN AND HAVE WATCHED THE STOCK MARKET GO UP AND DOWN FOR MANY YEARS.  I HAVE 2 401 K ACCTS. AND I JUST TURNED ONE IN AND THE OTHER ONE I PUT IN STABLE BECAUSE I'M STILL WORKING.  I THINK THIS YEAR IS GOING TO BE ONE OF THE WORST YEARS WE EVER HAD DUE TO THE PEOPLE RUNNING THIS COUNTRY.  GET READY FOR THAT ROLLER COASTER GOING STRAIGHT DOWN, AND NEVER GOING BACK UP.
Dec 28, 2012 12:07PM
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david carver (crazzy dave):

You must be related to Nicky Manaj by throwing around the race card freely like that !

 

BTW: my office manager of 25 years is BLACK .

 

Unfortunately, I will be absorbing her work load when she retires at the end of this year & I won't be able to rehire someone on account of the inaction by congress. But don't worry about her; she is a wealthy woman in her own right, and she attained that by HARD WORK EVERY DAY !!!

 

Now go back down to your basement, eat a twinkie & see if you still get your 'check' next month !!

Dec 28, 2012 3:39PM
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The republicans will get the blame as Obama takes us over the cliff and then puts forward tax cuts for the middle class. - Remember though the tax rates just go back to the Clinton rates, when all was well and everyone had a b - job and life was good.

Forget the fact that the congress has passed a budget and also passed plan B and the Senate does nothing ... ...

Laughable - you get what you vote for... ...
Dec 28, 2012 12:05PM
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Nice to see all the political hacks have now found their way back home.  Spewing their venom and hate.  Sooo hard to understand Liberals preaching for equality, fairness, and life while the blood vessels bulge out of their necks as they scream Kill Kill Kill.
Dec 28, 2012 3:23PM
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Simple -
No debt ceiling increase means Obama will have to reallocate what he has.  Just let attrition of federal employees keep cutting into the expenditures.   Choke the cancer out.

Dec 28, 2012 2:04PM
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This fiscal cliff issue is way overblown
Dec 28, 2012 12:59PM
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If we go over the cliff we get spending cuts and tax hikes. The crooks is DC are debating how to cut spending and raise taxes. Do you see a difference? Neither do I.
Dec 28, 2012 11:14AM
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There will be no middle class tax relief, because everyone's taxes will go up. So I don't know where Cramer got that idea. 
It is quite obvious that the market is selling off for the past few days, so again, WTH is Cramer talking about?
If taxes rise on everyone, it will be bad for consumer spending. Bad to the tune of $3000-6000 less in disposable income per family.
It has come down to a few far right house republicans and everyone else. No matter what your beliefs, and I am progressive but fiscally conservative, this is not good for the economy. It may be great for the deficit, but it will suck for the market.
Dec 28, 2012 12:02PM
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The market might not be afraid of the cliff, but I bet it's worried about being pushed over the edge.
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