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, November 09, 2012

Time For Obama To Kick Some Ass

Most traders and invesment people think official Washington will find a few ways to
circumvent the upcoming fiscal cliff. I do not share that view. Instead, I see a wider
political battle over who governs -- the House of Representitives or the White House --
that could end with a fiscal cliff dive. Today, House Speaker Boehner (R - OH) not
only drew a hard line in the sand on maintaining the full income tax rate structure but
linked a prospective bargain to an upcoming vote on the US debt ceiling which could
come in Feb. 2013. Obama's line in the sand is a bit more squiggly, but top Democrats in
the Senate are drawing a firmer line on tax rates as are WH spokesmen. But Boehner
threw down the gauntlet by threatening to use the debt ceiling issue as a blackmail

The easy thing to advise here is to figure there will be deals that settle the matter for
a goodly period but that the markets could be volatile until the deals are clear. However,
since I believe the House wishes to govern the country rather than the President, I
think Obama will have to confront them head on not only because the presidency is being
challenged but also because he will lose the support of his party and most of the country
if he fails to stand up to this unenlightened group of House conservatives and Tea Party
zealots. His academic specialty was constitutional law, and surely he must recognize when
the presidency is being challeneged. So, I see him vetoing any deal if he does not get what
he wants. In this regard, he has already made clear his willingness to agree to a range of
spending cuts.

When 2013 opens, there is a good possibility the US will go over the cliff unless the House
caves in on taxes and agrees to slim down the future defense budget. Moreover, not only
must Obama take his case to the country but he must also make clear to House members he
will use the levers of the executive branch to punish their districts if they will not budge on
raising high earner tax rates.

You know, in the US, race is never far below the surface socially and politically. The wealthy
white folks who run the GOP have their political views to which they are entitled, but to me,
there is the clear undercurrent of heavy aversion to taking leadership from a man of color and
especially from a guy who is clearly brighter and more articulate than they are. This racial
element and paranoia it engenders greatly increases the obstinacy of the House GOP. Not
only that, but the white guys know Obama does not want to appear "uppity" and "ornery" lest
he be seen as a bad ass dude who needs to be corraled. Obama has avoided this sort of
confrontation so far, but it may well be unavoidable now if Boehner and his guys decide the
public will ultimately support the white folks in a showdown. How Obama has maintained
his poise with these guys is quite something.

Unless the GOP caves on increasing tax revenues, it will be high time for Obama to kick some

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