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Fiscal Cliff Nonsense Abates and Economy Continues to Improve

By: Larry Cyna | Saturday, January 5, 2013

A Sense of Drama

Stuck between a hard place and a rock, the Republicans finally relented and an agreement concerning the Fiscal Cliff was reached. The issue seems to have been a holdover from the sudden rise of the Tea Party, which during the last administration promoted a nonsensical pledge among Republicans to never agree to any legislation that included any tax increases. Well intentioned and an attempt to roadblock the continual increase in debt of the USA, but idiotically misguided and a knee jerk reaction to what seemed the political flavor of the day. Now that pledge is a matter of yesterday, and is wildly out of flavor this month.

Everyone knew that an agreement had to be reached, yet there was teeth gnashing and obstructionism to the very end. Should an agreement not have been reached, the politicians would have been directly blamed for a dip in the economy, for tax increases, and for the polar ice melting, as well as everything else the media could think up. The media needs a story of hysteria every month to whip up emotions and attract viewers. The Fiscal Cliff was ideal for this.

The ridiculousness of the matter, was that the politicians had all the way through this piece, the ability to retroactively put an agreement in place, and the effects of that agreement were not dramatically different regardless of the timing of the agreement. In other words, an agreement could have been reached yesterday, or next month, and by the stroke of a pen it could have been made retroactive to yesterday, or to any other day. So the hysteria of the media in insisting on an agreement by yesterday, was simply that - hysteria.

Theatrics became the flavor of the day. The politicians pretended to be working night and day, and miraculously, an agreement was reached at 11:59 PM of the 11th hour. This allowed every politician to shout out how important his/her contribution was. The only word for it is "disgusting".


The US Economy is Recovering

Regardless of the political foolishness, the private sector of the US is doing what it does best. Free enterprise people are starting to re-assert themselves and the economy is showing irrefutable signs of recovery and growth.

The latest economic info shows growth and positive movement. The American Bankers Association said today that delayed repayments of bank-card loans dropped to the lowest level since 1994 in Q3, falling to 2.75% of all accounts from 2.93% in Q2. Delinquencies in a composite ratio of eight installment-loan categories, which doesn't include bank cards or mortgages, fell to 2.16% from 2.24%.

US Car makers enjoyed their best year in 2012 since 2007 selling almost 14.5M vehicles in the U.S. in 2012, up 13% from 2011 and the highest since 2007. A strong December for Ford (F), GM (GM) and Chrysler (FIATY.PK) capped off the year, while Japanese car firms improved sales dramatically from the earthquake-ravaged levels of 2011.


The Eurozone is Also Recovering

The world is slowly pulling out of the bottom of this cycle. Europe also is now showing positive signs, in spite of the doom and gloom pontificaters. Eurozone composite output PMI rose to 47.2 in December from 46.5 in November, with the services index edging up to 47.8 from 46.7.


Some Other New Signs

Canadian banks are now moving into the void created by US banks by giving mortgages on real estate in the US. TD Canada Trust and The Royal Bank of Canada now have programs in place to offer mortgages to good credit borrowers. Real estate in Florida and in many other centers have stabilized and the great bargains of the last two years have disappeared. House prices in prime areas are climbing, and there are even multiple offers on some properties. There is no boom yet, but the market is strengthening.

The price of real estate in major markets is definitely moving up, sometimes quite dramatically. Great numbers of homes remain under water and unsellable, but certain markets are starting to show remarkable strength, such as vacation properties in Florida, in New York, in gated communities, and in prime areas. In some cases selling prices are 20% higher than last year. Good values are being snapped up by Canadian buyers, by Russian buyers, by Argentinian buyers, and other international buyers. What is remarkable, and at the same time expected, is that people from around the world are coming to the USA to buy real estate, for the same reason that the US will continue to lead the world. The US remains the shining light as to the rule of law, the rights of the individual, the reliance of property rights and patent rights, and the freedom and security of its citizens. The US will continue to lead the world as a result, and slowly but surely the next economic cycle will take shape.


Investing in the Stock Market

What all of this means to the average investor, is that now is the time to buy beaten down good value stocks.

 


The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.

 

Author: Larry Cyna

Lawrence J. Cyna, CA
www.cymorfund.com

Larry Cyna

Larry Cyna, CA, is CEO and Portfolio Advisor to Cymorfund, a boutique hedge fund. He expresses his insights several times a week on his blog www.cymorfund.com and offers a free newsletter which can be subscribed to here.

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and is a strategic consultant to selected clientele.

He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC's with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section.

He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder's Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants.

He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm.

Mr. Cyna is well known in the Canadian Investing community. He attends presentations given by public companies to the industry on a daily basis.. These presentations are intended by the various hosting companies to present their inside story for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being in constant communication in this manner keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.

Mr. Cyna is currently a Director of Argentum Silver Corporation and Telehop Communications Inc.

Copyright © 2012-2013 Lawrence J. Cyna