A little sadness before the sunshine

I am writing this on the eve of New Years Eve, Dec 29. The last day to lock in old capital gain rates for profit taking on stocks is tomorrow Dec 30th. Now add that to the fact that the Republican side of our government has come out blocking any meaningful legislation, and the fact that the whole world was hoping we’d grow up with adults in congress by the end of today, and you have the making for a very bad day for the stock market tomorrow. I am not a betting man, and I stay away from prediction of a point estimate in favor of range estimates, but taking a blunt stab at this, I’d say a fall of 300 points wouldn’t shock me if no agreement is reached prior to the closing of the market (meaning that we “fall off the cliff”), and I hope it won’t discourage a rampage by readers as well, hence the importance of these blogs to the general public that has a tendency to only see short term movements or misinterpret market volatility.

First of all, by the end of the day tomorrow, a punt into the next year with a much smaller and less than desirable deal by our right wing extremest tied government is likely to have passed, or in the worst case scenario no package at all is passed then a similar small or even a medium or possibly a big deal will be eventually passed once the New Year rolls into place as the perceptions of raising and lowering taxes are played with by little boys with big check books. Governments don’t tax to pleasure themselves nor to spend wildly and without bounds as has been perpetrated by some, rather the revenue made and the investments wanted by a just society with a minimum level of dignity for all is the goal in this, the richest country in the world. Another goal is the maintenance of a middle class currently annihilated by those who claim that we suffer from what is passed off in a non existent “nanny state.” Such is the label of those who those who would concentrate wealth by allowing a larger pool of poor people to grow in number to support fewer wealthy ones at the top.

The opposing viewpoint, and one I actively support in everything I write, is the America that creates more wealthy people by shrinking the pool of poor people at the bottom by virtue of giving them access to health, and education and food so that those with the proper work ethic can rise to prominence in the promise of a free country inside a nation that is proud of a record of taxation with representation.

When the collapse of the market took place, we were down in the 7700 range, and today we are at 12900 or so. I fully expect that once we settle our “fiscal cliff” and debt ceiling arguments which are not arguments at all but simply work that must be done, we will be well on our road to prosperity again. 13000 and above in fact. The level and duration of our fall will equal the level and depth of the fear and ignorance currently being sold to the public by a minority extremist portion of the House of Representatives. That is well established.

All these wounds are self inflicted, and they are no pleasure to watch by members of any political persuasion. They cost each of our pocket books equally and proportionately. If people dont start to understand that the debt ceiling is not a credit card limit because it represents monies ALREADY spent, and does not make any money available to spend at all.

It’s as though our nation has bought a pair of socks, and suddenly doesn’t want to pay for them at the booth even though we have been wearing them for a couple of years. The whole world downgraded us when we almost defaulted on meeting our obligations last time, because when we buy our socks we promise to pay with the full faith and credit of the US in the future. By the time the debt limit needs to be moved, the socks have holes and no one else wants them.

As for the “fiscal cliff,” we will see a need for more revenue (taxes) and less spending (investing) regardless of whether or not one is Democrat or Republican, so to be held up just because Boehner has no control over his portion of the House of Representatives will simply have to be lived with until the next election.

I am a fiscal conservative, but creating expensive wars, and giving away tax cuts we can’t afford is not consistent with those principles at all. Someone who knows how to balance books better than run a propaganda machine of fear and ignorance will eventually straighten this out. Of that I am confident.

I will be on CBS radio covering the LA area during drive time (4pm-7pm) on New Year’s Eve Day (Dec 31) if you want to hear my picks for the three most important economic stories of 2012. Tune in for a little piece of our valley if you are driving to or from LA!

Send me your questions or comments at : www.johnpaulvaldez.com