About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, October 19, 2012

US Politics / Pragmatism

The current dreary national election campaign is scheduled to end on Nov. 6. The next
congressional election is in 2014 to be followed in 2016 by another national election. The
The "Fiscal Cliff" is set to arrive on 1/1/13. There are thus two and four year windows for
the president and the congress to quickly tackle the "Cliff" in early 2013 which would allow
about two years healing time after any "curative" action before the boyz face the electorate
again. If there is actually serious intent to take action to begin reducing the large US budget
deficit, early 2013 would appear to be the politically wise time to initiate plans to trim
the red ink.

Seasoned markets players know this and it would be natural for anxiety to rise further as
we reach the deadline. Given the still somewhat fragile nature of the recovery, political
masterminds would take small initial steps to rebalance revenues and expenditures for
2013 - 14, followed by somewhat larger measures to run over 2015 - 2020. This type
of blueprint would allow for adjustments in the economy to proceed in a more orderly
manner. It would raise economic / financial risk, but better allow the political class to
manage the political environment instead of simply kicking the can down the road. The
latter course would assure debt rating cuts and the acceleration of a festering issue --
growing income inequality. I would wager that the continued growth of income inequality
will produce further economic disequilibrium and destabilization and that when power
shifts to those who represent the less well endowed financially, the rich will be soaked at
least in proportion to the narrow breadth of economic progress if not more so.

Should Mr. Romney secure the presidency, we would have ourselves a "wild card"
situation. Romney is not just a serial flip - flopper, he is the very incarnation of the classic
American political huckster and one of the great political bullshitters of all time. Only
the good Lord knows what a character like this will do when he faces substantive
alternatives pressed upon him by angry and frightened political factions (An old pal of
mine recently said to me that Mitt will accomplish nothing as he will be too busy trying
to make up his mind). Rest assured, market players have had a good whiff of the man's
fabulous ambition and lack of conviction and principle.

The markets will have other interests in the weeks ahead, but it is likely that concerns
about management of the "Cliff" and the identities of the top political players who will
be in charge will be lurking.

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