STOCKS

Dan Gramza talks about how the stock market will likely react to the fiscal cliff news and the reality of what may happen.

I’m here standing on the edge of the fiscal cliff with my friend, Dan Gramza.  So what does it mean?  Is this going to destroy the American equities market?  What is it going to do?

Well, is the market going to react to what happens in Washington?  You’re right, it will.  Are we going to go down that fiscal cliff that you’re standing on the edge?  I think there’s going to be some kind of resolution—whether it’s satisfactory for everybody, that remains to be seen.  From my point of view, I think that will be resolved.  Let’s talk about the stock market from a longer-term perspective.  I’m bullish on the market.  I really feel that we have a foundation.  I felt this since March of ‘09 when I started putting my portfolio together, and this aspect hasn’t changed.  What we still see is we still see companies being profitable.  We still see 80% of the S&P 500 beating analyst’s estimates.

Right.  A lot of cash on the books still, right.

Rob, that’s exactly right.  What’s fascinating about that is we have over $8 trillion sitting in Treasuries.

Waiting to be put to work, right?

Exactly, waiting to be put to work, but that’s a good one, Rob, that’s an important one.  How does that affect us though?  It affects us because if you’re that company that you’re profitable, do you want to expand?  Do you want to hire new people?  I’m not sure about my cost of healthcare.  I’m not sure about my taxes.  Can I get a profitable margin off of this expansion?  I don’t want to take the chance and that’s what we’re seeing.  We’re not seeing confidence.  Is that going to change in the future?  I don’t think it will actually.

Really?

Unfortunately I believe our unemployment has been about where it should be because of this.

It’s 7% to 8% to 8.5%, right in that area.

I think we’re going to stay in this range for a while because what we’re lacking in the market is we’re lacking confidence.

So that that money that you’re talking about can be implemented, and I just don’t see that changing any time soon.

Can that money get unlocked, all that stimulus money or whatever it’s been that’s locked up?  Can that get unlocked when the rules of the game are set now after the election?  We know what the healthcare picture is more like.  Does it ever get unlocked?  Or what’s the key to unlocking that wealth on the corporate books?

That’s a very good observation.  I think it’s going to be more than just a resolution in Washington.  It’s going to be a belief that it’s resolved.  Until they start to see things implemented.

Until they start seeing reality.  It’s one thing to have a bill passed on healthcare; it’s another thing to really know the economic criteria that it’s going to have an impact on for a company, and that’s going to take some time.  I wish it would be like a switch.  Unfortunately, I just don’t think we’re going to see that kind of reaction.

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