The market doesn't fear the fiscal cliff
It likes the coming together that we will see after we go over it.
Yes, 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.
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.
More from TheStreet.com
Fiscal Cliff is not entirely all bad. Some good may come of it.
This increase in marginal tax rate for the top 2% is not a solution, certainly not a fix to our vast and deepening problems. It’s only and always was “a campaign slogan”. This is just rhetoric and only achieves dividing this country more than ever. My goodness, we all have to understand and believe (agree) that this country is in pretty bad shape and on a terrible unsustainable trajectory. All this media frenzy only makes the 98% feel good temporarily and the 2% scorned and unmotivated. By how, feeling better by spreading their grief and anger directed at the top 2%. Although the top 2% makes all that money, they give so much away in charitable contributions, and they do spend and sometimes even on stupid things, and they do create jobs and employ Americans. This fiscal cliff is a wakeup call for everyone. I say it’s not entirely a bad thing, it might even be an opportunity.
I say let us go over the fiscal cliff. In the short term we will certainly all suffer. But why not all contribute to the solution, increasing everyone’s taxes since it’s really everyone’s problem. And most of all, cut spending. This country has a spending problem. You can’t tax everyone fast enough to keep up with all the spending. If we went over the fiscal cliff, we will hit the nail on the head and start (serious discussion) reducing our spending and our entitlement programs. Ultimately, we do need more revenue and we need far less spending.
In the long run, we will be much better for it. This country is so resilient that we will eventually bounce back probably sooner and greater than we are today. The small, short term sacrifice made by “all” will be offset by greater good, higher revenue and reduced spending creating more financial security.
Folks, we are dealing with cancer, with gangrene. We need chemotherapy; we need to cut off the hand to save the arm. We need to extinguish the out of control oil well fire with one hell of an explosion. We haven’t passed a budget balanced or not for years. Obama couldn’t get his own party to vote for his packages the first 2 years in office while both house and senate were controlled by Democrats. The Democrats, Republicans, and the Independents are not right. In fact, they are all equally wrong and share blame. But let’s stop blaming and hating. You should pay more. No, we need to give you less. We relish the fight, but let us instead suffer the solution. The hell with all of them, let’s put the Country and our citizens first. We are not at war with Iran, China, North Korea; an external or foreign threat. We are at war with ourselves. Let us all take the Fiscal Plunge; we’ll call it the “Cleansing of a Nation.”
Everyone continues to focus on the 47% entilted people who may be living off the government but I believe a majority of those would prefer to work instead of living below poverty levels provided by the government. So who else falls under that title, could it be physicians who order exsessive tests and consult with their friends so they can get reimbursed for doing nothing or is it the fact that physicians compete with the hospitals themselves or is it healthcare vendors who charge enourmous amounts of money for equipment or is wall street brokers, CEO's, sports figures that receive millions in salaries and bonuses. I wish everyone would just sit back and determne who really is entitled making millions instead of the poverty stricken folks who can't get of the hole! Just hope any of you don't have the experience of losing your job and life savings trying to keep your family alive!
JdJ...Today may have been an opportunity, but now you would have to buy in the after hours Market.
If they make a hap-hazard deal this weekend, Markets may be up Monday...
If they don't do the deal in the next 3-4 days, stocks may be down a little bit more next week..?
If they make a good deal that the Markets like, I would look for a 300-500 pt. upside next week.
I kinda think some of downside is priced in now...Plus they have been sneaking away frm stocks.
We have been re-investing dividends, this past couple weeks....And still have small side of cash.
With last div coming in on the 31st...I may be doing some re-adjusting over the next week or so.
Pays your monies, takes your chances...
Its sad to see how we respond to the pain, hurt and needs of others during these tough economic times.Millions have lost jobs due to many job closings and many states are on the verge of going bankrupt. Add to this the millions who have no health insurance because they lost their jobs.
And we have leaders who think its a good thing to do nothing ; that some how that will solve the problems. They don't realize doing nothing means things will get worse because nothing remains the same. As a nation we have the reputation of helping other nations but we complain and spew hate
when we look at the needs of our own people. We are a diverse nation thats a fact. The current election has shown us that. But we will all drown if we do not find a way to help one another. We are all in the same boat heading for the same cliff. What affect one will affect the other.
Read Proverbs 21:13 Give it some thought. A Concerned Mother
I'll be happy to say goodbye to that corrupt group led by Boehner and McConnell.
After that, we can start to dismantle the ethnic plantation called the Democratic party and get some people better opportunities instead of transfer payments.
The Democrats have allowed the wrong problem to be identified and the Republicians appear to be too dumb to present the real problem to the AMerican people. The cliff with all its drama is not the problem. The expiring tax cuts is not the problem. This is stupid talk and small thinking. THe problem is Obama's 1.3 trillion dollar deficits and his willingness to sail along wiht trillion dollar deficits as far as teh eye can see, or at least until the real cliff is reached.
If one looks at the real problem of trillion dollar deficits it is easy to see how stupid of ridiclous Obama's talk about raising 70 billion each year by letting the tax cuts expire for those making more than $200,000. It is just ridiculous. Then again low information voters are bought with foolish talk.
If your reaction to this post is anger, or thumbs down, I am content in knowing that there is no hope for people who think 70 billion is equal to 1300 billion. Think about it.
So should not the talk be about Obama's trillion dollar deficits and not some silly pointless band aid of 70 billion in taxes? Sure tax increase would likely be part of that talk, but that is not the question of the day.
MORE ON MSN MONEY
DATA PROVIDERS
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
STOCK SCOUTER
StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.
128 | 268 | 471 | 585 | 652 | 595 | 673 | 422 | 262 | 141 |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
LATEST POSTS
Current conditions are a perfect recipe for ringing the register. The hottest stocks, in particular, could see some real mayhem ahead.
FIDELITY VIEWPOINTS
- How to sell covered calls - Fidelity Investments
- Savvy year-end tax moves to consider now - Fidelity Investments
- Seven ways to prepare for tax changes
- Five reasons an annual review is crucial - Fidelity Investments
- Take a look at mid caps now - Fidelity Investments
- State of the sector: Health care - Fidelity Investments
VIDEO ON MSN MONEY
ABOUT
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.