Why the Market's Ignoring the No. 1 Threat to Stocks

CNBC ^ | 2:15 | Jeff Cox.

[ExxonPatrolUs]

Investors who fled in fear over potentially massive tax increases associated with the "fiscal cliff" have barely broken a sweat over corresponding spending cuts that are only two weeks away.

The so-called sequestration of $110 billion a year in discretionary spending will happen March 1 if Congress does not come to an agreement.

[GeronL]

barely broken a sweat over corresponding spending cuts

I guess even CNBC is economically retarded these days. Why would the private sector be worried about government spending cuts? They should be celebrating it. Relatively few private sector concerns depend on government largesse to survive. The ones that do, usually do not survive (see Solyndra etc)

[Buckeye McFrog]

Limbaugh predicted today that there would be no sequestration. Just another GOP cave and a deal with some phony window dressing “cuts” that would be more than offset by the baseline. I’m sure most investors agree with him.

[OneWingedShark]

If I were betting, that’s where I’d put my money.
The GOP seems far too spineless to actually force consequences of [in]action WRT spending.

[freedomfiter2]

Investors who fled in fear over potentially massive tax increases associated with the “fiscal cliff” have barely broken a sweat over corresponding spending cuts that are only two weeks away.

That’s because tax hikes are a bad thing for the economy and spending cuts are a good thing. You should have to pass at least a minimum test of critical thinking to write professionally.

[what's up]

Yes, they are lying because media doesn't want it to get out that spending cuts bring prosperity. This is why investors are taking heart.

The MSM ploy of trying to equate it with tax hikes is very disingenuous.

[GeronL]

My niece has some economics homework and most of the questions seem too basic for 12th grade.

Supply & Demand
Why are melon prices higher in January than July?

[Attention Surplus Disorder]

Without getting into the propriety or desirability of spending cuts; Every dollar of government domestic spending does in point of fact contribute to GDP. Thus, its loss would indeed reduce GDP. This is directly from the math formula used to calculate GDP. I make no argument that we should not reduce gov spending, we should. This is the medicine that an overindebted economy must make if it cannot grow out of its debt. Depending upon how one calculates it, government spending (of which over 40% is borrowed) is and has been responsible for between 7 and 10% of our current GDP for quite a few years.

Now whatever the effect of this might be, it’s bound to influence the level of the stock market. I’ll be the first to admit that the market believes Congress will somehow work around the sequester and yes, will probably sky on news that “the sequester has been avoided”. You and I both know this is nothing more than kicking the can down the road episode XXXVI.

[BfloGuy]

Every dollar of government domestic spending does in point of fact contribute to GDP.

Yes. And that's what has the pundits wailing.

But the GDP equation is not derived from the observation of nature [many think that, however], it was contrived to support the assertions of the Keynesians who believe that consumer and government spending create economic growth.

GDP is an interesting statistic. But not a particularly meaningful one.