From hope to hopeless on budget talks

We have to determine where the market can find firm support on a definite lack of real negotiation.

By Jim Cramer Dec 4, 2012 10:02AM

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Radius Images JupiterimagesIt's going to get old real soon. That's how I am starting to feel about this Washington situation. If neither side is choosing to negotiate in earnest on the fiscal cliff issues, then the market will have to reach a level where everyone has figured out there will be no earnest negotiation, and they aren't selling regardless.

 

Last week seemed incredibly confusing. On the one hand, there was plenty of talk about how a deal could be reached. I keep thinking about that comment from Goldman Sachs (GS) CEO Lloyd Blankfein in particular -- the one that said the sides were real close. How could he say that if it weren't at all true? Wasn't it based on something? How about all of those CEOs? Don't they make any difference? We thought they did last week.

 

On the other hand we have the perception that, if Washington was near a deal, something critical broke down -- because the positions got further apart over the weekend.


What happened in those intervening days, when the business leaders were hopeful and when President Obama went to the Pennsylvania toy factory? Did Treasury Secretary Timothy Geithner misjudge things and play too much hardball?

I am thinking like this because it is highly unusual to see a situation go from hope to no hope in three days without anything really changing.

 

I have to tell you that, behind the scenes, the presidents' people are very certain that there will be a deal -- so certain that it's a bit daunting. Maybe that's what the business leaders were imbibing.

 

To me, the important thing is how quickly the complete transformation was made. This went from last Wednesday's happy belief that a deal will be struck, to a harder line by both sides Friday, to a total collapse by Monday. That last stage was on the heels of a Republican offer that someone would put out only if they wanted to end talks. Sure, I am certain some people thought Monday's Republican gambit had some substance, but to me it was more of the same.

 

Get that "total collapse" offer into the market. Figure out where there is no hope -- and then the market will have some firmer footing, which is certainly lacking right now.

 

JimCramer'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 and has no positions in stocks mentioned.  

 

 


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311Comments
Dec 4, 2012 1:07PM
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 Treasury Secretary Timothy Geithner need to withhold payment of congressional salaries, health benefits, cafeteria eating credits, and all other perks congress receives to have congress get serious about the problems facing the nation.  Payments should be resumed only AFTER a resolution is found for the fiscal cliff!!???

Dec 4, 2012 2:19PM
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WE ARE HOPELESSLY UNREPRESENTED

The members of the Congress have totally failed to represent the wishes of the American people long ago. They are nothing but a special interest group out to get all they can for themselves.

 

Without a major change in attitude - "WE THE PEOPLE" - should take our country back by removing every incumbent that is trying to regain their seat in the congress.

 

SHAME ON YOU- YOU DO NOT REPRESENT ME IN ANY WAY AT ALL

Dec 4, 2012 1:02PM
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Obama used working peoples money to pay non working people to vote to tax working people more so they would get more for less.  He very adeptly convinced many people the enemy for each of us is ourselves. Now I am beginning to think the best that could happen to our country is the worst  that could happen.  Strange times.  At this point this market is out of touch.  And to top the first statement  these Internationals who destroyed this free country by bribing the politicians are wanted by every non free country to develop their economies. Even stranger. Capitalism works when there are rules that are fairly enforced on both sides.  The corruption that we are now seeing come to light and the causal effects of the lieing and disinformation somehow seem normal and a fair result.  We got what we voted for and what we have allowed to flourish. There is nothing to base any appreciation in this market on.  Yes inflation will cause many to hide in the market to not lose money.  Not a positive motivation for investors but one none the less.  But it is a given these Street folks will tell us something anything other than what we all know is true to get us to "play" the market. . All the pressure I see is to lower wages and massive inflation in commodities and yet we are told we are experiencing a housing recovery.  I don't think so.  I still think we are spiralling downward in housing, employment, and this market.  But we all know nothing goes straight up or straight down so common sense should somehow come into play.  Does it?
Dec 4, 2012 2:39PM
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As they say: "ELECTIONS HAVE CONSEQUENCES". The majority voted for this. THEY asked for it and WE GOT IT.
Dec 4, 2012 12:40PM
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I smell U.S. downgrade again!

 

 

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Obama wants the Fiscal Cliff.   If he didn't, he would be in town negotiating instead of campaigning and playing golf.
Dec 4, 2012 12:41PM
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I feel there will be a comprise of some sort to avoid the "financial cliff" as Obama would not want that to happen on his watch.  Unfortunately, I don't feel the solution they come up with will truly solve the problem but rather just push it out further.  If they don't reach an agreement of some type it will be interesting to see how the market reacts.  My guess it will "shrug it off" as Charley Blaine and others like to describe negative news with no negative impact.  The market needs a correction and a good dose of reality.  For the most part, these companies are not growing their business by selling more products or services but rather by continuing to cut cost thru job elimination, plant closings, reduction in employee benefits, accounting loopholes etc. and they then hoard the cash knowing what could be down the road.    
Dec 4, 2012 2:46PM
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Does anyone recognize that the "fiscal cliff" represents $500B "savings" per year over 10 years.

This means we bring our deficit from (depending on which figure you believe) $1.35T to $850B per year?  So in 10 years, even with this "unimaginable" cliff, we will still rack up $8T MORE debt.

 

I am sure they will compromise at some point.  Obama's "plan" is to raise taxes $1.6T over 10 years.  The GOP "plan" is to cut spending and raise revenue $2.2T over 10 years.  Both plans lead to downgrades and default in 10 years.

 

Where is a "real" plan to balance the budget, ever?

Dec 4, 2012 3:26PM
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I hope the Republicans stick to their guns - Detroit, as are other cities are broke, and have declared bankruptcy...what amazes me is the pushing forward of these entitlment programs that bring our ruin closer by the day. Stay the course conservatives - lets take the pain now. Oh and send out additional "flamers" for Greece and the European contintent to get their acts' together....what a joke!!

Romney was CORRECT!! Almost half of this great Nation are gold-bricks that want the checks to keep arriving in the mail. Good Lord - four more years; wonder if we will survive it.

 

 

Cramer is a liberal hack.....

Dec 4, 2012 3:06PM
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Quick question - If people couldn't afford houses when the prices were way down,how is the rise in home prices a good thing?Doesn't really matter how much an EMPTY house is worth,does it ??
Dec 4, 2012 3:02PM
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Screw the members of Congress the way they Screw us !   American politics has become a criminal organization unto itself ! The CODE PROTECT THEMSELVES THEIR FAMILIES AND INNER CIRCLE !  THEN SCREW THE AMERICAN PUBLIC ANY WHICH WAY THEY CAN!  RAPE PILLAGE AND PLUNDER IS THE AMERICAN POLITICIANS MOTTO !
Dec 4, 2012 2:37PM
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I stated last night to friends that the ****s in DC will implement an 'emergence extension' on into next year until they can come to terms. More can kick-age.

 

 

pathetic!

Dec 4, 2012 3:03PM
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Either way, its going to be tuffer.  Inflation or deflation, higher deficit, more taxes, I wonder what our fore fathers would say if they could see what has become of their country.  I am sick and tired of Republicans AND Democrats, neither is doing a d*mn thing to really help this country.  I did not vote for O, I don't trust him, he has done nothing but lie, transparency, obamacare (the majority did not want), Benghazi.  I really think we will be a third world country by the time Bo's done.
Dec 4, 2012 12:39PM
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Do you know what's incredibly confusing, Jim? WHY you would believe that a Goldman Sachs person would tell the truth. When this is done, there are two words that won't exist... Goldman and Sachs. We all know they invented the "complex" in complex financial vehicles which have driven us in the ditch.
Dec 4, 2012 3:03PM
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From Hope to Hopeless............that's OBAMA's AGENDA

He is up to destroy America..........as Rev. Wright preached him to do!

 

A Revolution is coming.................

Dec 4, 2012 2:12PM
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More like    "From Hopeless to Hapless"

This has turned into a strutting contest.
Dec 4, 2012 4:17PM
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Miracles start at home. First of all, Congress should not pass any laws that are not also applicable to them. Congress entitlements should be on the table too to reduce the deficit. To begin with, let's cut spending by removing some of their outrageous entitlements like full pension after only serving five years and their tax payer subsidized health insurance. They should all  contribute to and get their pension from Social Security after the age of 65, like everybody else. As for Health care, they should all be placed under Obamacare.

Dec 4, 2012 3:11PM
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Jim Cramer you are dead to me. Nothing is worse then a dishonest partisan. Enjoy hell.
Dec 4, 2012 12:55PM
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So V.L. a business is not to even think about making money it should lose money as long as it doesn't hurt employees? If that is the mindset we are about to take on,Lord help us.Most of the small business owners I talk to are more worried about regulations,and the costs that go with them.Mortgages probably aren't going out like we would like because of stiffer rules-Remember Dodd-Frank we don't want to revisit the late 90's and early 2000's do we? Or would you relax them in an attempt to spur Housing.

Dec 4, 2012 4:37PM
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Obama doesn't want to strike a deal, he is following the Cloward-Piven strategy to make all the people dependent on the govt. until it collapses the economy. Just watch
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