The Worst Politicians Money Can Buy
The disgusting soap opera over the misnamed "fiscal cliff" finally ended on New Year's Day with tax hikes (mostly aimed at the so-called "1%"), and next to no spending cuts. In others words, it was about what I had suggested might occur after we saw the election results. The economic impact is still going to be negative, as the restored payroll tax will affect consumer spending.
It Probably Won't Be a Cliff-Hanger
Congress and the administration are a total embarrassment, as this entire exercise has been about posturing rather than dealing with any of our issues. Even worse, we are going to see this same sorry movie again as we approach the debt ceiling, since it is extremely unlikely that anything of consequence will be done until that deadline is fast upon us. Given how lame our legislators are, I don't expect much to come from that, either. It is going to take a full-blown funding crisis to get us on the right track, assuming we haven't gone too far down the road towards European-style socialism before the bond market takes matters into its own hands.
Though it is just a guess and a theory at this point, I do think we will see the bonds roughed up in 2013, and perhaps the funding crisis could even hit this year, but as I say that is just a wild-eyed guess on my part. I do have a rationale for believing it, which I have shared in the past, that being the fact that the world's central banks are printing money so recklessly it is virtually impossible to see how folks can continue to believe in deflation (though I am sure those that feel they have been cheated out of deflation still expect it).
As for the market's reaction to the late stick save on the part of the clowns in Washington, D.C., after a decent-sized rally to end the year, the indices exploded about 2% higher yesterday and drifted sideways from there. World markets were also quite strong, as collective amnesia held sway once again. From there they just drifted sideways until the last hour, when they vaulted again to close at the day's high, with a gain of about 2.5%.
Away from stocks, the dollar was weaker. Though with a few notable exceptions, all of the world's currencies are just worthless confetti, so worrying about one versus the other is actually pretty silly.
Don't Call It a Comeback
The metals obviously have been under pressure and mining stocks have been even worse, as somehow folks have concluded that the world's central banks are magically going to thread the needle with their money printing, even though they haven't gotten anything right for decades. I find the whole concept completely laughable, but that is where we are.
Gold has basically been correcting since the highs of autumn 2011, when it began selling off because QE3 didn't commence. Now here we are with QE3 and QE4 being administrated in basically unlimited fashion, combined with money printing the world over, yet gold has not yet gotten back to those highs. That suggests, while gold might have gotten ahead of itself, given the developments that have taken place, when folks once again become convinced of the need to own it, the price is likely to head substantially higher.
About Bill Fleckenstein
Bill Fleckenstein Archive
|01/15/2015||Newsflash: Even the Central Banks Aren't Bigger Than the Market||story|
|12/01/2014||The World Should Have Learnt Enough Lessons||story|
|09/04/2014||“Full Monty” Mario||story|
|07/31/2014||Crosscurrents “R” Us||story|
|07/03/2014||Inflation Psychology Begins to Change||story|
|03/20/2014||Bill Fleckenstein Reopening Short Fund; Sees Opportunity Later this Year||story|
|02/11/2014||No Yellin’ at Yellen (Yet)||story|
|11/19/2013||Cisco's Tale of “Whoa”||story|
|09/24/2013||Maybe We Should Have Daily FOMC Meetings||story|
|08/27/2013||QE-Induced Anesthetic, OPM, and Computers = No Discounting||story|