There could be a short-term hiccup in markets when it becomes apparent there is no bi-partisan deal but its likely to be muted. The $1.2 trillion on compulsory cuts they agreed to last summer will kick in until they agree to abrogate that. That’s when the market will swoon. Right now a compulsory deal seems far superior to a negotiated deal. At least it starts whacking down the monstrous defense department budget without inflicting real suffering on people’s medicare and Medicaid programs just yet. Even Conservative blowhard CNBC columnist, Larry Kudlow, (who I know from my Bear Stearns happy days. He was chief economist and I lowly lackard conveying every utterance of his to my clients), even likes the idea of the sequestration. Just the word sequestration sound like they might even gather up some money to pay off the creditors. Let’s just keep our fingers crossed, though, that the special committee doesn’t come up with something. It will be sure be less than the $1.2 trillion and go over like a lead balloon.
Oh, and on the subject of Obama, he’s smarter this time around. He’s street smart saying to congress you can fool me once,shame on you but fool me twice shame on me. He’s not getting dragged into this dog fight. He’s acting Presidential. You forsake my advice and help the last time. I’m not falling for this obvious trap. Don’t you want your leaders to be smart? He’s also waving good-bye to Bush-era tax cuts that he grudgingly extend to 2012. Come 2013, no Bush tax cuts, $1.2$ trillion in cuts. That’s gotta help some, right?
None of this is good of course for public sentiment. Whether it helps Democrats or Republicans get elected is pretty obvious. The Republicans are just determined to snatch defeat from the jaws of victory IMHO. But then the bigger question, who’s better for the market, Donkeys or Elephants? Just based on past immediate performance the donkey seems to do better until the elephant drops a turd on them like they did last August. Of course we’re going to wake up one day and realize the emperor is wearing no clothes (country is broke) but apparently the entire world has become a nudist colony and you have to say to your self does it really matter anymore?