Looking Past Headlines
Just a week ago the Dow Jones Industrial average kicked off the month of December right around 13,050 points. After starting the year just shy of 12,400, that means the index of large American blue chip stocks has added just 650 points (about 5%) in the 11 months of 2012 already behind us.
This is where we find ourselves after all the hoopla and all the volatility, with the market going negative in late May and early June, then running all the way up over 13,600 points in October - which at the time represented about a 10% gain on the year.
In other words, the Dow can show a modest gain of just 650 points after all the millions of dollars spent on political ads, not to mention all the dollars spent on lobbying efforts. All the rallies, parades, handshaking, headlines, TV time, and press conferences that comprise a campaign have left the markets just marginally higher than they were beforehand.
If, on January 1st, someone had told you that Obama would be reelected, violence would break out in Benghazi and Syria, and there would be so much worry over Europe without any actual default, and this is where the market would be after all the dust had settled - would you have believed them?
In the end all the talk, the hype, the enthusiasm and excitement amounted to just that: posturing. None of it matters; it's all designed to get people focused on the trees instead of the forest.
And, after all is said and done, the market has done pretty much as we predicted: recovered slowly and steadily as the economy has continued to gradually improve. This is all part of putting 2008 further and further behind us.
Now, with the election over, all attention has shifted and is now focused on the fiscal cliff. We've written before and we maintain our position that all the debate is utterly meaningless. All it represents is another chance for some congressmen to get a little more time in front of TV cameras to show people in their district they're actually working.
In the end, there is no fiscal cliff; just President Obama pursuing his policies. Republicans in Congress are allegedly waiting for some proposal from the President to avoid a "deadline," but this from a president who has never submitted a budget.
Has anyone bothered to ask just why Obama wouldn't take us over the fiscal cliff, especially since it's a win-win-win for him? In the event we go over this imaginary line in the sand, Obama accomplishes three distinct objectives:
- He gets to raise taxes, which he wants to do
- He gets to cut military spending, which he wants to do
- He gets to blame republicans in congress, which he LOVES to do
At the end of the day, all the talk is nothing but worthless worry. The economy is still going to recover; the problem is the speed. This recovery has been and will continue to be incredibly slow because every single policy coming out of Washington is precisely the wrong policy to encourage the recovery. Every single one in some way adds to the already burdensome regulatory environment or to the exorbitant cost of doing business.
The astounding thing is that in spite of so much anti-business and anti-investment policy, things continue to improve anyway. The economy continues to see gradual improvement while the markets march steadily higher. We could be doing so much better given the right policies, but even without them things will continue improving anyway.