Small Children at Play

November 16, 2012
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Robert Reich writes about the likely kick-the-can do nothing outcome for the “fiscal cliff” scam.  He suggests it goes out to a new deadline of March 15. Makes sense to me. Logically this would or should not be bullish, but in a world of entitled dysfunctional children, it is probably good for a low volume market pop when it comes.  The reason for kick-the-can-do-little outcome can be discerned from the following Citi chart: austerity ain’t politically popular. I don’t see Obama being interested in this at all, even if his Republican opponents have it in mind for him.

 

The McClellan is running at minus 284, which suggests the should a can kick come soon,  a good bounce will ensue. On the other hand those waiting for the can kick may be setting up another hook, similar to the Lee Adler mention that a slew of Fed settlements hits on Nov.19- 20.  He also has comments on the big surge in new unemployment claims. My view is these jobs are not coming back, and any new jobs from reconstruction will take years to materialize. In processing this, I see the money printing as seeking trouble, going into places that are economically disruptive such as food prices and energy.

As for investors the challenge now is that firms involved in productive activities are punished, while parasites remain overvalued.  Everything is all about short termism and market distortions. For example there is a lot of Chinese rat line money floating around. There is a huge amount of kleptocratic criminality in play.

Thus even though one can identify great values in certain corners of the market,  the sistema and markets are broken. The bond bubble is bigger than ever. Therefore the best course is to play for this sistema to hit a crushing wall.

-rest of this post available in Actionables

 

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