Posted on 11/28/2013 8:39:51 AM PST by Kaslin
And the band played on.
As the holiday season approaches, they are dancing on Wall Street with the Dow, S&P and NASDQ either at or approaching all-time highs. And while his popularity is rapidly joining his Health Care Reform Act near the bottom of the political trash heap, the tin-eared President Obama continues to glide on the dance floor of the White House celebrating the Democrats clampdown on filibusters and an ill-advised agreement on nukes in Iran.
But as this year races to an end, there looms a huge set of problems, all interconnected, that could not only end any vestige of political happiness in the White House, but also put an end to the exuberance on Wall Street.
The scenario goes something like this: It begins with a continued unraveling of the Affordable Care Act. With even the likes of CBS News now reporting that millions of Americans will continue to face cancellation of their health insurance, even those who receive those benefits through their employers, the likelihood that Obamacare will somehow turn the corner towards popularity is unlikely.
Looming in the not-so-distant future is another round of dealing with the budget and the debt ceiling. Most experts doubt that even the boldest of Republicans will attempt to shut the government down for a second time. They escaped what looked likely to be an endless avalanche of elite media criticism for their October shutdown only because of the complete flop of the rollout of Obamacare. Its failure was so massive that it actually diverted the media's attention away from their sport of choice -- beating up Republicans.
And the disaster that is the Affordable Care Act is likely to embolden conservative members of Congress to stage their next fight over the issue that, in reality, has been paramount in their minds for years, that of the debt ceiling. That leads us to the other dance partner in our holiday season scenario: Wall Street.
After learning that the Federal Reserve had no immediate plans to stop shoveling printed dollars to purchase our own Treasury bonds, and seeing both the shut down and debt ceiling crisis averted, equities shot up to all-time highs. And that made sense since the low-interest rates that result from the Fed's feeding the beast has left investors with nowhere else to gain a reasonable return for their money.
But the partying and dancing in the East Room of the White House and at posh establishments haunted by the elite of the financial world this holiday season could be followed by a 2014 political and economic hangover of massive proportion.
As the Affordable Care Act continues to draw more critics, it also, through its implementation, is leaving more and more Americans uncertain as to the availability and cost of their health care in years to come. Whether their fear will be reflected in decreased consumer confidence, either in the last few months of this year or perhaps early into 2014, remains to be seen.
But, as we all know from past bubbles that have burst, "leading economic indicators" often aren't so leading. That means that at some point early into the new year, the Fed may feel that the economy is stronger than it truly is and begin the reduction in bond buybacks that seems to have Wall Street gurus quaking in their boots.
About that same time, Congress will start considering the debt ceiling, which by most calculations must be addressed in real terms by March or April. Emboldened GOP conservative members of the House and Senate believe that Obamacare will be so unpopular by then that they will be capable of holding the raising of the debt ceiling hostage as a bargaining chip to kill off Obamacare. They might be right.
But by around March it is possible that the wizards of Wall Street will suddenly feel a squeeze from the Fed. That could come just as they suddenly realize that conservatives might just have the juice and the courage to call the bluff of President Obama and the endless parade of bankers and CEOs he always frightens into joining him, who will be demanding that, once again, the nation should take on more debt.
Of course the elite media and pundits will expect the Republicans to back down for fear of dire economic consequences. What many of those Republicans will know is that, but that time, the party for the White House and Wall Street may well already be coming to an end both politically and financially.
I wouldn't want to be President Obama or a Democrat after that ... and I probably wouldn't want to be heavily invested in Wall Street's house of cards, either.
Oh I don’t know... ideology seems to trump everything else in today’s America - no matter the consequence.
The Fed, sooner or later, will have to stop buying Treasuries. The problem with smoke and mirrors is that, eventually the smoke clears and the mirrors crack. With no one else willing to buy American debt, rates will, by necessity, have to shoot up. This will kill economic growth and further swell the deficit, as it will cost so much more to service the federal debt. If they choose not to stop, well, then there’s hyperinflation. Pick your poison.
It was soetoro who shut down the government. Guess this author needs a barrycade up....
Blah, blah, blah . . .
This article was already written . . .
In 2008
In 2009
In 2010
In 2011
In 2012 and now in 2013
What was that about a broken clock?
Meanwhile my clients are up 125% in the last four-plus years and some of them are up 36% just this year alone. What so many of these prognosticators fall short on is that in the REAL WORLD, advisors like I ACTUALLY have responsibility for our clients. Just like we conservatives like to talk about college professors in their ivory towers so must we also call out those bloggers who blithely live in theirs.
Bump
The conservatives would love to do this, but the GOPe will not try to kill obamacare until 2017 at the earliest. They think they will gain big majorities because of it in 2014 & 2016. I believe the flaw in their thinking is two fold; one, conservatives will not continue supporting a party that won't fight for them; two, by 2017 a large enough number of people will be dependent on the expanded Medicaid and subsidized insurance that the GOPe won't want to upset them.
Playing the market is for the younger investors. A major contributor to the growth in the markets is QE and when it does stop the markets will decline.
It's great you have clients that can jump in and out of the market to realize those gains and still see huge profits despite their tax brackets, higher capital gains taxes, and fees. As an older investor I began moving my investments into short term bonds a couple years ago because I'm at that point where I can't wait out another major downturn. At this point with the continued war on the productive in the USA, that doesn't seem to be coming to an end any time soon, I'm taking the funds from those bonds as they mature paying off my remaining debt in this country and expanding my purchases of real estate outside the USA.
In 2008
In 2009
In 2010
In 2011
In 2012 and now in 2013 >>>>
blah, blah, blah to you too.
Prove it with the exact dates or otherwise crawl back under your rock. No one forced you to read the the article
I had a professor who taught me “The Rational Man Theory Of Investing”. The problem is that people are greedy, chicken and irrational. Soros understands this and has made billions exploiting it.
Excellent points
What the heck has gotten into you today? I’ve mostly positively commented on your many posts before. My beef is with all the doomster articles that appear here, particularly those from Zero Hedge and Karl Denninger, which have been promoting a market crash pretty much since the March 2009 lows - just search Zero Hedge and Karl Denninger in the search if you want proof.
Although Denninger is correct on the politics and on the federal government his market predictions are CHILDISHLY inaccurate the past 4-plus years.
I can’t believe you haven’t seen ANY of those posts, which pretty much were a daily occurrence until recently, when their accuracy was correctly pointed out by me and others here.
I expect a LOT MORE of you than to stoop to this type of response to me based on your past contributions to this site.
The Democrats staged the shutdown as they refused bill after bill funding the government. They held the US hostage to their demand that PPACA/Obamacare be funded even though they knew it was not ready. Republicans offered a one year delay so that the Democrat plan, Obamacare, could be made ready - Democrats refused to accept this, rejected multiple bills, and shut down parts of the government.
Don’t cede the narrative to these liars. The shutdown is entirely the work of the Democrats.
Remember the Barrycades!
GOPe plays to “not lose”, the don’t play to win. They are passive.
Victory - and history - goes to the bold.
This is driving me nuts! The bottom line on my portfolio is ridiculously high versus what I have put in. Do I bail on something “too good to be true” or hang in. I’m making money and it is making me very nervous.
Tal, I can’t give you that type of advice. I don’t have any sort of background info on your finances, needs, etc. I also don’t believe in one-size-fits all thinking. Sorry, but I can’t answer that in a public forum. If you want you can email me a private message here and I can give you my business email and we can make contact through that if you’d like.
The bottom line is, you haven’t made ANYTHING in a portfolio until you sell it (and successfully extract the money for that matter).
Most people, particularly on an individual level, will ride that 125% increase parabolicaly right back down...
Most of the people that lost everything pulled their money out after the market was near the bottom. If they had left it alone they would be in a lot better shape. The ones that pulled some or most out during the downturn and then got right back in are sitting pretty.
Man do you have that right!
This is why the GOPe strategy will fail. They won't be bold and once the fight starts they stand on the sidelines second guessing those that will fight. My campaign money goes to the conservative groups and Tea Party candidates.
I got out of the market at the top last time. Time before that I rode it out but we are in our 60’s now. I dollar cost averaged back in with about one third of our savings and the rest was returning about 4% in a fixed income instrument. Since I still work I was also investing about 2k per month in new money so I’ve made some money on Ben’s runup. But I can still get 3-4% and if I miss the top by 10 - 20% I don’t much care. Come the end of the year the equities are gone.
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