So here we are 12/21/12â€¦the end of the Mayan calendar, the End of Days, pack your bags we leave tonight (yes Eddie Money). While we still have a few more hours for this prophecy to take place, I am going to bet that the only thing that thankfully came to an end is the Jersey Shore. Unfortunately we cannot include the Fiscal Cliff in this conversation as this cartoon-like drama has taken a turn for the worse and it appears we are now back on track for a dive off the cliff. The folly that is Washington politics is at an all-time high and I do believe that if more Americans really understood what is going to happen to their paychecks on Jan.1st then there would be a riot in Washington. Sometimes I wish I was one of those uninformed folks because following this stupidity starts to fray your nerves after a while. At this point I think more would be accomplished in Washington if we replaced Republicans and Democrats with The Bloods and The Crips.
We mentioned the other day that we were within spitting distance of a deal. We also mentioned that we were at a volatile stage in the negotiations because you got the sense that if either party did not take the next step in the negotiations then it could possibly all fall apart. Well it currently looks like it is falling apart. The political speak coming out of Washington is a embarrassment to our country as both sides continue to blame the other for inactivity. People just do not know what or who to believe anymore as these politicians have as much credibility as Rex Ryan right now. Traders change their course on market direction on a daily or even hourly basis. This is all just such a mess as the rest of the world must be laughing at us right now as they can only wish that they had our problems.
From what I can gather the core of the problem right now is Obamaâ€™s reluctance to cut spending enough to satisfy the Republicans and in particular the Tea Party members of Congress. It is all a disgusting mess. The excessive debt of this country(currently @ 16 trillion) is a problem. If the US was a public company and that company went to the debt markets looking to borrow money then investors would not lend to them with a 10ft pole. Or if they would then it would probably look like interest rates that are equivalent to hard money borrowers. However, we have a printing press in Washington that allows us to print money that we in reality do not have. So yes this is a problem and will not be resolved in the short-term but sending this country back into a recession because of political games is pretty irresponsible. I often wonder how much better this country would be governed if all we had were independents in Washington but it is very curious how that party never has been able to get established in the country.
So with all this nonsense going on money is coming back into the bond markets with the 10yr down to 1.75%. So it seems clear that the high end of the trading range is in the low 1.80â€™s as we get closer to a deal but we will hover in the 1.70â€™s while there is no deal. That is something to keep an eye on and I do believe we will break thru the low 1.80â€™s if a deal is cut. However, at this point, that is a big if.