Fiscal Cliff Notes: Interpreting The Deadline News
Jeff Miller | Dec 28, 2012 02:44AM ET
That was today's story. The market gyrations lacked a grounding in reality. Joe Weisenthal from Alan Grayson , a Democratic Congressman-elect from Florida. To appreciate the key point, don't think about his particular perspective, but instead focus on the process he is describing:
"Here are what I modestly and humbly refer to as "Grayson's Laws of Legislating":
1) Vote for what you're in favor of.
2) Vote for what you can live with, if you must do that to get what you need.
What we've been seeing in the House of Representatives lately has been a series of massive and pervasive violations of Grayson's Laws of Legislating. Instead of "I'll vote for X because it's right," or "You don't like X and I don't like Y, but I'll vote for X and Y if you vote for X and Y," it's "If I don't get Z, I ain't votin' on nothin'." And that's the problem."
He provides a colorful example of where nearly everyone in Congress agrees on most of the fiscal cliff issues. On the remaining 10% he provides a colorful example of trading help for the unemployed for more defense spending. It is a good description of how Congress has worked for decades.
The key question is whether we can see this sort of horse trading within the next few days.
Trading and Investing
The volatility is a natural opportunity for traders. You need only to fade the statements of whatever politician spoke most recently.
Investors should look a month or so ahead. If you are willing to conclude that there will eventually be a solution, you can go shopping for bargains whenever there is apparent bad news.
These were today's opportunities, and we might well see the same thing tomorrow.
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