Friday, August 01, 2014 01:47am
North Adams, MA now: 59 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: Fiscal Cliff or Shallow Ditch?
By Bill Schmick On: 03:44PM / Thursday November 15, 2012
Important
1
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0
And you tell me
Over and over and over again, my friend
Ah, you don't believe
We're on the eve
of destruction
.

— Barry Mcquire, "Eve of Destruction"

Panic has once again descended upon Wall Street. This time investors are gnashing their teeth over whether our political parties will be able to strike a tax and spending deal before Jan. 1. If not, so the story goes, we will plunge, like lemmings, over the so-called Fiscal Cliff never to return. Why am I not impressed?

We have had a number of these dramatic binary events over the last few years. They always make great theater, but none have turned out nearly as bad as the media predicted. If you had panicked and sold on their advice you would be much poorer today. This particular cliff-hanger reminds me of another end-of-the-year event that was predicted to cause horror and dismemberment among the world's institutions, Y2K.

The Year 2000 was a problem for both digital (computer-related) and non-digital documentation and data storage situations that resulted from the practice of abbreviating a four-digit year to two digits. Would the world's computers be able to recognize and accommodate a year that began with "2" instead of "1?"

At the time, we were assaulted for months with stories that spelled out what could, would or should happen if the world was not prepared for this digital disaster. But predicting the end of the world is a zero-sum gain. If someone gets it right, (and no one has thus far) there won't be anyone left around to brag about it. As for Y2K, it turned out to be, in the words of Shakespeare "Much Ado about Nothing."

In this case, investors, who have known about the Fiscal Cliff for months, are assuming what happens before it will happen again. Readers may recall that last year, both Republicans and Democrats could not agree on how to address our growing deficit. The Republicans used the nation's debt limit, which was fast approaching a ceiling, as a bargaining chip to force a series of spending cuts on the White House and Senate. Both sides refused to back down. At the 11th hour, it was agreed to kick the can down the road until after the elections by temporarily raising the debt ceiling in exchange for implementing a series of tax hikes and spending cuts that would be implemented automatically at the beginning of 2013.

If there is no compromise, pundits and even the president have predicted that the combination of tax rises and spending cuts will drive us back into a recession, the gains in employment will evaporate and the United States will quickly join Europe in vying for the worst economy of 2013. No one wins. Everyone loses.

What's wrong with that picture?

Well, for starters, everyone knows it and politicians hate to lose. Americans have also conveniently forgotten that the parties did compromise last year. They agreed to disagree, but still raised the debt ceiling at the height of partisan politics. Today, less than two weeks after the elections, President Obama was re-elected with a mandate to lead but also to compromise. That seems clear when you look at the results in Congress. Republicans were re-elected and maintain their majority in the House while the Democrats control the Senate. It seems to me that voters want compromise from all their elected officials and both parties know it. Last year there was no such message; in fact, if anything, both sides felt it was their way or the highway and still they compromised.

So far, both sides have said they are willing to do just that. In politics (as in real life) you go into negotiations with your strongest suit. Otherwise, you have nothing to give in exchange for another card. I believe there is a new willingness in Washington to compromise but, for Americans, it will have to be one of those "show me" moments. As such, patience and a cool head are required until then.

We only have 14 or 15 working days on Capitol Hill in order to get a deal done before this "Eve of Destruction." Just about everyone assumes both sides will not budge and negotiations have not even started.

In the meantime, there is an old saying on Wall Stree: "Don't fight the tape." It means that regardless of whether the direction of the market is right or wrong, don't fight the flow. Right now, panic prevails, the markets are in a waterfall decline and investors are all going down like lemmings together. Don't get caught up in this crowd psychology. In my opinion, sentiment and the markets will reverse as soon as it becomes apparent that this black chasm in front of us is simply one more shallow ditch.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.


0 Comments
     
News Headlines
Berkshire Force Runs to Second Win in World Series Play
Clark Opens Galleries With Abstract 'Make It New'
Magic Treehouse Author Invokes Invokes Joy of Learning
Bankruptcy Court OKs BMC Bid for Northern Berkshire Healthcare Assets
North Adams Implements Higher Parking Fines
North Adams Cemetery Commission Advises Rates, Rules
National Grid Meets With Local Officials Over Power Outages
Action Continues at YMCA Long Course Nationals
Murphy, Berkshire Force Win World Series Opener
Mount Greylock Invited to MSBA's Feasibility Stage
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (140)
Independent Investor (190)
Archives:
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
October 2013 (6)
September 2013 (6)
August 2013 (8)
Tags:
Rally Metals Japan Interest Rates Fed Bailout Federal Reserve Markets Debt Crisis Selloff Recession Oil Taxes Energy Europe Stocks Currency Housing Commodities Deficit Euro Europe Election Jobs Pullback Debt Ceiling Stock Market Banks Congress Retirement Stimulus Economy Fiscal Cliff Greece
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
The Independent Investor: How Much Is Too Much to Spend in Retirement?
The Independent Investor: The Fed Turns Off the Spigot
The Independent Investor: Should You Pay Off Mortgage Before Retiring?
The Independent Investor: Retirement should be a part-time job
The Independent Investor: Unhappily Ever After
@theMarket: June Swoon
@theMarket: Europe Is a Good Bet
The Independent Investor: A Road to the Future
The Independent Investor: Holy Cow
@theMarket: Flirting With Record Highs Again


View All
Reading of The Gettysburg...
The Adams Historical Society held a mass reading of the...
Adams Cruz Night 2014
Classic and custom cars lined Center St. Thursday night for...
Williamstown Chamber @MadMacs
Attendees at Wednesday's Williamstown Chamber Nite at Mad...
Pittsfield Ethnic Fair 2014
North Street in Pittsfield had a double-dose of block...
LaFesta Baseball 2014
The LaFesta Baseball Exchange, celebrating 24 years, pits...
Adams Polish Picnic 2014
Adams residents enjoyed traditional Polish food and music...
Mingo's Sports Bar & Grill...
Over 50 cars packed into the Mingo's Sports Bar & Grill...
BYP Networking at Naumkeag
The Berkshire Young Professionals met at the historic...
Pittsfield Shakespeare...
Pittsfield's Shakespeare in the Park free performances at...
Lanesborough Kids Fire Camp...
Lanesborough Fire Department held its annual Kids Fire Camp...
Lanesborough Fire Drill
The Lanesborough Fire Department trains on basement fires...
Pittsfield Polish Picnic
Crowds lined up for golabki and kapusta at the annual...
North Adams Kids Emergency...
The North Adams 21st Century Community Learning Center...
Gather-in Festival 2014
The 42nd annual Gather-In festival was held at Pitt Park in...
BFAIR Mini-Golf Fundraiser
Berkshire Family and Individual Resources held its annual...
Lanesborough Seeds of Harmony...
Bradly Farm in...
Reading of The Gettysburg...
The Adams Historical Society held a mass reading of the...
Adams Cruz Night 2014
Classic and custom cars lined Center St. Thursday night for...
Williamstown Chamber @MadMacs
Attendees at Wednesday's Williamstown Chamber Nite at Mad...
Pittsfield Ethnic Fair 2014
North Street in Pittsfield had a double-dose of block...
LaFesta Baseball 2014
The LaFesta Baseball Exchange, celebrating 24 years, pits...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved