US stock markets fall again as prospect of fiscal cliff deal recedes
Source: the guardian
US stock markets slid again on Monday, as lawmakers on Capitol Hill grew increasingly skeptical that a deal can be reached on the fiscal cliff budget crisis ahead of a year-end deadline. All the major US stock markets closed down slightly after a half-day of trading.
Investors were reacting to comments from senior politicians over the weekend that time had run out and the best available option was an interim patch to mitigate the 1 January imposition of mass tax hikes and spending cuts.
All eyes are on the Senate after President Barack Obama urged senators to pass a stop-gap measure that would extend Bush-era tax cuts for those earning less than $250,000, extend unemployment benefits and delay spending cuts until a full agreement can be reached.
Talks between Obama and the Republican speaker of the House of Representatives, John Boehner, broke down last week. Boehner's attempt to launch his own "plan B" also failed, when right-wing Republicans balked at a compromise on tax hikes. Obama is now on vacation in Hawaii and will not return to Washington DC until after Christmas.
Read more: http://www.guardian.co.uk/world/2012/dec/24/us-stock-markets-fall-fiscal-cliff
bluestateguy
(44,173 posts)Don't give the so-called "fiscal cliff" an attention it does not deserve. It is Washington DC's imaginary friend.
BlueStreak
(8,377 posts)BlueStreak
(8,377 posts)in a mostly flat range. The markets have already anticipated this "cliff" nonsense and have already factored that into the pricing.
"Going over the cliff" is mostly a neutral proposition fo the market. If we let all the laws expire and did absolutely nothing, there is definitely an upside to the market in that we would essentially eliminate the deficit with EVERYBODY paying the Clinton rates. That would be a strong upside for the market. The downside pressure would come if the wisdom of the market was that we would plunge into recession, soon followed by another hostage-taking event over the debt ceiling. (However, is EVERYBODY is paying the Clinton rates, then we probably don't need to increase the debt limit anyway.)
But we aren't going to do "nothing". There will be some deals made in January and the market will carry on just fine.
xtraxritical
(3,576 posts)and 98% of the public will still be taxed at the lower rates. If taxes go up on everyone the markets will tumble. I don't know how you conclude that raising taxes on everyone "is definitely an upside to the market". The stockholders know that reducing the purchasing power of 98% of the public is not good for business.
BlueStreak
(8,377 posts)It hasn't dropped at all.
Since the election, it has gone UP!!!!!! The premise of that article is bullshit. It is just a case of a person with an agenda trying to force fit the data to meet the story line he wanted to put out. Investors knew that "going over the cliff" was a likely scenario. That won't bother the markets too much What will bother them is if this drags out for weeks without a resolution, giving the market a good reason to believe that a recessions might be inevitable. Nobody believes that today. The market understands this is just some routine gamesmanship.
Trust me. If/when the market gets irritated with "the cliff" you will know it. It won't be some meaningless 50-point move.
xtraxritical
(3,576 posts)I'm thinking bullish now too.
BlueStreak
(8,377 posts)A straddle play might make sense in the next several weeks.
xtraxritical
(3,576 posts)Anyhow picking individual companies is hard, placing the DIA is easier.
BlueStreak
(8,377 posts)xtraxritical
(3,576 posts)BlueStreak
(8,377 posts)because the market knows all.
A straddle is a much lower risk than betting on a move in one direction. And it costs more (ergo yields less).
xtraxritical
(3,576 posts)a happy new year and let it go. HAPPY NEW YEAR!