Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
During this weekend’s thoughts on the tragedy, it had crossed my mind how small the fiscal cliff impasse will make these politicians look (more so than normal) in light of what had just happened. So in a perverse sort of way, it is possible such a horror would help get these (insert adjective here) politicians to actually work together and get this can kicked. Now it may be coincidence or it may just be that the timing was now or never to get a deal done by end of year, but there seems to have been more progress in the past 72 hours than at any other time. Overnight it was announced Obama came up from his $250K wage level for higher taxes to $400K, after Boehner had changed his stance on no higher tax rates to higher tax rates for $1M and above. So there is progress and some happy medium to be found it appears. Of course there are other issues such as spending but there are so many phantom levers (i.e. ‘war savings’) to be pulled on that side of the ledger I think it will be easier than the tax issue.
As an aside I read in a Politico story today that as part of last year’s debt ceiling agreement the politicos had agreed to now have automatic debt ceiling increases UNLESS it is voted against. That was completely new to me. This changes the geometry significantly from how it has always been done in which the vote was for increasing the debt ceiling. Now any vote would be for not increasing it which lowers the bar tremendously especially in a polarized environment where they can agree to almost nothing to vote on. I am surprised this has not been reported on more broadly as I had never heard of it until today. Granted the debt ceiling has ALWAYS been increased and not doing so would be the equivalent of spending on your credit card and then not paying – so it is mostly a cosmetic thing for the U.S. – but still a big change.
As for our markets, we have the 4th gap up in the past 6 sessions. Today’s will be right into that area of significant resistance we’ve been pointing out – 1435 to 1438 area. To make it simple for the S&P 500 a close and hold over 1440 would be constructive.
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