Beware of Gifts and Grand Bargains
11/17/2012 12:01:00 AM
The stock market continues to send a message to Washington that it's not going to tolerate a protracted battle over the fiscal cliff. Memories of the debt ceiling battle, which ironically gave birth to this fiasco, are haunting investors.
The year began with gusto with the Dow coming into 2011 at 11,569, and moving mostly straight up to 12,724 by July 21. Then anxiety overcame the market. There was talk of America not paying its bills. There was talk of America not providing vital services. There was talk of disaster and calamity. The talk turned into screams.
July 31, an agreement is reached; August 2, agreement signed into law by President Obama;
August 5, S&P downgrades America's debt rating from AAA (the Dow closed earlier at 11,444); August 8, the market opens to a bloodbath finishing the session at 10,802
The rest of the summer was marked by violent volatility in stocks, anger and confusion on Main Street and Wall Street. The market didn't come out of it until a dip on November 23 left the Dow at 11,257 after the index dipped down to 10,655 in October.
According to Gallup, 71% of Americans are following the fiscal cliff somewhat to very closely. It's hard to believe we are actually beginning to relive that summer. The Dow is now not only serving as a harbinger of things to possibly come, but also acting much like the bond market used to act as a mechanism to force the hands of Washington and to push lawmakers over their own personal cliffs before they allow the nation to tumble over the fiscal cliff.
On that note, action must be taken on spending more than anything else.
I simply think increasing revenue, a euphemism from Democrats to raise taxes, isn't going to make things "right" nor get to the heart of the matter. This isn't about helping the masses, but a punitive action that will only help to build an all-powerful federal government that we could worship and succumb to at the same time.
I get that most Americans don't understand, or see beyond the simple rhetoric of fairness, but there has to be a stand against more "gifts" in these grand, and not-so-grand, bargains. So the stock market tries to force Washington to do something, yet there is nervousness about an outcome that severely harms investments, the profit-motivation and, of course, the overall economy. Speaking of Gifts
Two days ago Governor Romney pinned his presidential-election loss on Obama's "gifts" to blacks, Hispanics, and young people. "In each case, they were very generous in what they gave to those groups,"- Romney
I think his conference call underscores why he lost and why the GOP is in trouble. This constant chatter about certain people wanting free stuff is silly, everyone likes free stuff, and everyone likes "gifts." The thing is to evaluate those would-be "gifts" and understand if they're really good for you or not. In other words, Romney had to explain to the public how those wooden horses in the end aren't "gifts" but are really curses. "a forgiveness of college loan interest was a big gift"
Using taxpayer money to reward any particular group establishes precedence that repeats itself over and over. If you get to skip out on $20,000 in interest now, in ten years you'll pay someone else's loan, and that might be $40,000."anybody now 26 years of age and younger was now going to be part of their parents' plan, and that was a big gift to young people"
Staying in your parents' basement until age 27 means the youth will lack the development of skills and spunk, which will hurt their earning power for a lifetime-it is really a curse."getting free health care worth, what, $10,000 per family, in perpetuity - I mean, this is huge,"
Would you rather live a life of qualifying for free health care or live a life earning too much to get such aid, and do you want your children growing up wards of the state?
There is a difference between being generous and loving as a nation and creating traps that make us less competitive and mask the inability of government to provide the right kind of backdrop that allows all Americans a shot at economic independence. These gifts are the same that trapped Greece into becoming a fraction of what it was, a place living off the psychical ruins of its past because all those goodies doomed the future.
In the end, they say God bless the child that's got his own. America will always be there to help the unfortunate, but the biggest help is teaching them how to fish, giving them a big lake, and saying go live life. Go enjoy real independence, and beware of gifts that leave you at the mercy of government.