Stocks are doing better this morning after a rough week. The
major indexes are up a little over one percentage point which can largely be
attributed to positive remarks made by the president regarding negotiations over
the fiscal cliff. Investors were largely overreacting last week, so a return in
the right direction is to be expected. I haven’t pulled out of any of my
holdings because I have faith that the extraordinary incentive for both
political parties to create a deal will in fact lead to a deal. I believe that
the Democrats will be able to use their power to increase taxes on the wealthy,
and the Republicans are likely to go along with it. While this will not have a
positive effect, it is better than taxes being raised on everyone which would
throw us into recession.
While I remain optimistic in the short run that stocks will
recover their recent losses when a deal is made, I am more pessimistic than
ever for the long term. I listened to the San Francisco Fed. president and CEO
who had some astonishing things to say. He claimed the sluggish US recovery is
not actually sluggish and that it was to be expected given the scope of the
meltdown. In addition, he cited car and home sales as evidence of a rapidly speeding
recovery, and he believes home sales will play a large role in our nation’s
recovery. Personally, I think he’s an idiot.
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