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Goodbye Election Cliff, Hello Fiscal Cliff

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There is no good political reason not to start solving the fiscal cliff problem, an issue the markets need addressed right now.

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MINYANVILLE ORIGINAL As Father Time says, out with the old and in with the new. In this case, the new is the old fiscal cliff and Father Time is about to leave the building, if not the country. There really are no "politically legitimate reasons" (I'm too afraid to find out what that really means) for not starting to solve the fiscal cliff situation in the US. We're not asking for calligraphy and a gold-leafed historic document here -- just something scribbled on a Post-it and signed by one member of both political parties would do for now. "To dream…the impossible dream…"

Back here on planet Earth the markets had a confusing, low-volume few days last week leaving most indices -- including the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) -- mostly unchanged while continuing to take a bite out of gold. Hopefully we're hitting maximum confusion and delay regarding investing right now. But just in case you're hungering for a worst case election confusion scenario, you've once again come to the right place. How about a US presidential election with an electoral college tie, a popular vote win for the President, and the decision regarding who will be the next president going to a Republican-controlled House of Representatives? Why so bad, you say? Because the acrimony in Washington, DC would tick up to an all-time high of "11" and the fiscal cliff would likely get put on permanent waivers.

Maybe closing the markets for a couple of days again this week would be a good idea. "Ladies and gentlemen, please brace for impact."




Lloyd's Wall of Worry - Text only

QE: You want monetary stimulus to end? Just find a way to get fiscal policy started.

US ECONOMY: Hurricane Sandy delivers a misery multiplier effect. Let's hope it delivers the same multiplier effect to recovery spending when it kicks in.

UNEMPLOYMENT:
Read a report that says it's under 4% in North Dakota. Now if every state could discover a few hundred years' worth of shale gas, problem solved!

INVESTOR SENTIMENT: Buoyed by the market's handling of the hurricane week, or greedy after three years of watching from the sidelines, I'm sensing more retail interest. Could this worm finally be turning?

HOUSING CRISIS: The White House was just appraised at a cool $284.9 million. A golden sale-leaseback opportunity if there ever was one.

EUROPEAN ECONOMY: Lots of discussion about the EU budget. Keep talking, folks, and there won't be anything left to spend.

THE EUROPEAN UNION: The Troika -- the EU, the ECB, and the IMF -- are maintaining a vigilant eye on the financial picture in Europe. Begging the question, who's watching the Troika?

SOVEREIGN DEBT: Starting to really signal the "all clear" sign. Thereby making me that much more nervous.

SPAIN: EU reports back to Spain on its proposed budget plan this week. Hopefully it comes with a check paper-clipped to it.

VOLATILITY: Not enough for the HFTs, too much for the rest of us. "Is everybody happy?!"

HIGH FREQUENCY TRADING:
Lloyd: How'd you fare in Hurricane Sandy?
HAL: There was a hurricane?
Lloyd: Yeah, a big one. Got a big US election coming up, too.
HAL: Election? I keep things on a moment-to-moment, need-to-know basis.
Lloyd: Have I ever asked you where your on/off switch is?

CHINA: Closing in on the date for their once-in-a-decade government transition. No pressure. But if they mess it up, I'm first in line at the canned soup aisle in the supermarket.

STOCK MARKET TECHNICALS: Ready to break or ready to sling-shot higher. Sleep tight.

GLOBAL ECONOMY: When the potential benefits from a hurricane rebuild is all we have to look forward to, we've got problems.

US PRESIDENTIAL ELECTION: "Ladies and Gentlemen, please brace for impact."

JAPAN: Employment index drops to July 2009 level. Time to pull the parachute rip cord if there is one.

THE CLIFF:
We all lose if this is not dealt with post haste. Shining up my bugle and practicing "Taps" just in case.

GREECE: More austerity, more protests, more broken plates.

DRAGHI: Been quiet lately. Napping or shuddering? We should find out on Wednesday.

ITALY: Yield on their 10-year sovereign debt drops below 5%. Good news, but not quite investment grade yet.

EARNINGS SEASON: It's mostly over. Unfortunately, the memory of it may last for a while.

GOLD: The rumor of the week is that some European countries may use their gold holdings as collateral against their debt to lower their borrowing costs, thereby taking a page out of the first known fiscal handbook, written around 5,000 BC on a block of granite with a chisel.

OIL PRICES: Economic barometer predicting more global economic slowing ahead? "Slip slidin' away…"

VOLUME: Forget the "flowers." "Where has all the volume gone…"


What Is Lloyd's Wall of Worry?
by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry" refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.
SPY, QQQ, DIA, XLF, GLD
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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