Bailing Out Santa Claus.

December 3, 2012

Santa Clause, or the Santa Clause Rally, has been taken hostage by the current political impasse. You need only read of the lack of diplomacy unfolding in D.C. to realize that the budget impasse and its evil twin, the fiscal cliff, have lain to waste everything we traditionally cherish this time of year.
Goodwill? Done.
Good cheer? Right.
Peace among men? Gone.
Humanistic tendencies? Whatever.
As the nation remains abuzz over the impending spending cuts and tax increases named, absurdly, The Fiscal Cliff, Democrats and Republicans continue to pursue their own agendas.
When did we begin electing candidates to strictly serve the interests of their ideological monikers, their parties, instead of we the people? Perhaps I would have more respect for the Dumbos and Mules if they truly stood for ideology. Any ideology, more than the lip service they pay in order to continue to enslave the minds of the millions of systematically voting minions that keep them in office.
In truth, the fiscal cliff is more a street curb. It only becomes catastrophic if every spending cut occurs in unfettered fashion (which, long term, could be the blessing we owe our children and theirs) and if every tax increase becomes permanent. Both of which are so unlikely as to be next to impossible.
Remember Y2K? This time in 1999, if you'd taken the word of the media, you'd have been holed up in an Appalachian cave. Yet, everyone woke with nary a scratch on January 1, 2000. Computers came on. Bowl games aired. Planes remained aloft.
The real fly in the ointment is the expiration of the debt limit. Will the Republicans in Congress force a default on the nation's debt in pursuit of their agenda? Will the White House refuse to bow on any and all entitlement spending, so forcing the GOP to staunchly defend their remaining territory, so forcing all of us into a real pot boiler.
The GOP views the debt limit as the real fight. The fiscal cliff just sounds scarier. But it's not.
Should we not solve the debt limit riddle, the U.S. debt rating gets downgraded (the second such downgrade over which the 112th Congress will have presided), and our Treasuries (that is, the fuel by which we've powered this debt-driven behemoth the last decade) will become vastly less attractive to those that provide our weekly allowance. The Chinese. The Russians. The Japanese. The Sheiks. Do you really think they'll continue to buy bonds from a twice downgraded colossus offering 1.63% per year? If our own citizens and investors won't, why would they?
Suddenly, we will have to offer higher yields. Tempt them with additional income. Only, if we continue to sell bonds in order to heat and cool this house of cards, what happens when those debts actually require a higher rate of return? Right now, with interest rates at zero, the Associated Press reports that our total public debt is nearly $17 trillion. The total U.S. debt is nearly $59 trillion. The annual interest on that debt is nearly $25 billion.
Even at the current low interest rate, the Federal government paid a record $104 billion in interest (INTEREST!!!) on its publicly held debt during the first six month of 2012. You do not require a degree in economics to realize how those interest payments increase if we need to increase rates on new bonds issued.
Alas, I'm meandering from my point. Rightfully so, as this represents some serious S%@t. Still, I digress.
Once again, we find ourselves, citizens of this grand experiment in democracy and capitalism, being held hostage by our Federal government.
For the people. By the people. Screw the people.
Held hostage to arguments already made. Opportunities already squandered. The same problems rising, again and again, like some perverted, trillion dollar political whack-a-mole. Only, the public is the mole. And we've got a massive headache.
It's the most wonderful time of the year. Epsecially for investors. Over the last 14 years, 12 have ended with a stock market upswing. This occurs as institutional investors chase profits and lighter trading is manhandled by those buying back wash sale positions, options, positioning for Q1, and other drivers.
"Well boys," Santa might opine, "Given the reports I'm receiving, it seems that a lump of coal is all I can offer."
"Santa!" Shouts a voice from behind.
"There's an attorney on the line. It appears your workshop is being sued for its environmentally egregious coal policy. And apparently, a number of misbehaving children are claiming they've contracted black lung."
And just like that, the North Pole is federalized.

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