CBO on the Fiscal Cliff situation and implications on the Economy.
Substantial changes to tax and spending policies are scheduled to take effect in January 2013, significantly reducing the federal budget deficit. According to CBO’s projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013 (as measured by the change from the fourth quarter of 2012 to the fourth quarter of 2013)—reflecting a decline in the first half of the year and renewed growth at a modest pace later in the year. That contraction of the economy will cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013. After next year, by the agency’s estimates, economic growth will pick up, and the labor market will strengthen, returning output to its potential level (reflecting a high rate of use of labor and capital) and shrinking the unemployment rate to 5.5 percent by 2018.
Guest post by Vix and more.
The S&P 500 index fell as low as 1388 today, down 86 points or 5.9% from its September 14th high of 1474.
The table below summarizes all the peak-to-trough pullbacks in the SPX since the March 2009 bottom. Note that while a 5.9% drawdown is right in the middle of the pack in terms of the magnitude of the drop, the 36 days that it has taken for stocks to fall that far makes the current pullback the fourth longest in terms of peak-to-trough duration. Of course, these statistics all assume that today’s low will mark a bottom – and while recent market action supports that thesis, there are no guarantees that SPX 1388 will hold.
Also worth noting is the fact that 2012 is the first year that has seen more than one pullback with a duration of at least a month. There are several ways to interpret this. One, of course, is that when there has been weakness as of late, that weakness has persisted for a long time. Another way to interpret the lengthy pullbacks might be that the tendency of the bulls to buy on the dips has diminished the likelihood of sharp downward moves in stocks.
Guest post by Gold Silver Worlds.
Michael MacDonald and Christopher Whitestone did a superb Q&A with GoldSilverWorlds. In their book “The Silver Bomb” (available on Amazon.com), they wrote about their views on the world and the markets. They have summarized it and enriched with recent facts and figures.
The markets are completely bought and paid for, corrupt, and manipulated … “a farce”. We are in a corruption bubble, the largest corruption bubble the world has ever seen in modern history and perhaps in all history. This is the first time that the world has been united within instant communication, instant information, instant deposit or receipt of funds into any bank account or financial institution. Michael says: “I believe that we are already a one world order. I actually think we are already there, electronically certainly. I also think that a lot of the debates, wars and conflicts are manufactured, very similar to the presidential debates which are also manufactured. I believe we live in a one-world system, which financially is already completely manipulated.”
We don’t live in a free market. We haven’t lived in a free market for decades, if not since 1913. We have the most powerful agency in the world, the Federal Reserve, setting the interest rates and the value of the world’s reserve currency. Everything that stems from that is built upon deceit and fraud. This doesn’t bode well for the entire financial system as a whole and right now, we are seeing the ramifications of that deceit.
We are in the lengthening of this financial market topping. A lot of things are happening that point to any one of several large enough dominos falling over which is going to have a splash and pullover effect. Within three years we are going to see this farce imploding. Michael thinks that we will have something completely different and unrecognizable to what we currently have.
Biderman on Obama.
Unless Barack Obama dramatically changes, I predict by the end of his second four year term he will have earned the legacy of being the worst fiscal president ever. Why? The US will be bankrupt after another four years of the same Obama we had for the past four.
Here’s my evidence, before Obama was elected in 2008 after tax take home for everyone who pays taxes was just under $7 trillion annualized. That $7 trillion number included capital gains, an income source the US Bureau of Economic Analysis does not include in national income. Why is capital gains not included? Is there a prejudice against income on capital? Who knows. It’s the government.
Some statistics on the before/after elections performance of markets. Via Doug Short.
Today the S&P followed the time-honored pattern of post-election selloff. Of the 16 presidential elections since the middle of the last century, the close before the election has been a gain 13 times. The day after the election has posted a gain only six times. Today’s 2.37% post-election selloff was the second worst in 60 years, the worst being the -5.27% gut-wrencher the day after Obama’s first victory.
Earlier today: As I type this, about 90 minutes after the US equity markets opened, the major indexes are selling off. The S&P 500 is down over two percent. In my S&P 500 daily update for yesterday, I pointed out that Election Day or the day before prior to 1984 (when it was a market holiday) have usually recorded gains, at least as far back as the middle of the last century.
But what about the day after elections? The pattern of “second thoughts” appears to be the norm. Here is a table showing the 16 Election days starting with Dwight Eisenhower’s 1952 win over Adlai Stevenson. It’s the same table I posted yesterday, but this version adds the S&P performance for the day following the election.