Some sober second thoughts during the party
From Humble Student of the Markets
January 2, 2013 - 3:39am
As I write these words, most equity markets are melting up between 1% and 2% in Asia and Europe in the wake of the news of a "fiscal cliff" deal in the US Congress. While my Inflation-Deflation Trend Allocation Model remains in at an "inflation" reading indicating a risk-on environment, I am a very nervous bull.
Here are some thoughts to ponder:
Doesn't this deal set the United States up for more political drama at the end of February? Two months isn't a long time, even for a trader.
The payroll tax cut didn't get extended, which is an effective tax increase on the middle class. What will happen to consumer spending and consumer confidence? Isn't this contractionary for the economy?
Cullen Roche at Pragmatic Capitalism concluded that [emphasis added]:
If my rough math is right we’re looking at something in the range of $225B in cuts out of a potential $575B.
The total drag on ...
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