nofearinvesting's  Instablog

2 years have gone by and Congress has done nothing about the impending tax increase, except to create a last minute emergency push with the hopes ( as I see it) of blaming the opposing party if things fail.  This is political gamesmanship at its finest with Reid also pushing a budget that should've have passed in September, as a last minute rush in order to score political points and hide, or at least attempt to hide, wasteful deficit spending in the tune of 1 trillion plus dollars.

Reid and company are playing with America's frail economy, shamelessly shameful.  I'm hoping that the conservatives in Congress hold their ground, but I won't be surprised if the acquiesce on the Budget.  No wonder this Congress as the lowest approval rating on record.

On an equities note, LVS continues to lose ground and with today's heavy volume downside pressure remains in spite of a technical oversold indication.  The same is true for BIDU as it fell to $100 on a downgrade in expectation from company executives.  It seems as if the Call activity for December options were initiated mostly by sellers and not buyers, which turns the sentiment bearish.  Going protective makes sense as a prudent hedge with uncertainty abounding in Europe, China and the US.

Economists, CEO's, analysts, and "talking heads" are projecting 2011 as bullish for the economy.  It seems that nary a one sees a bearish economy (maybe).  Good times on the horizon...maybe, but as for me I'm reserving my opinion and siding with the "show me" State. 

The markets are indeed on a bullish trend and recent economic reports favor the bullish sentiment as retail numbers beat expectation.  There are, however, major economic concerns that have not been in a recovery mode and continue in weakness.  That is to say that the Labor market and Housing continue to hinder a recovery and still suggest a lingering recession.  In addition to the above, out of control spending and significant debt the Governments have acquired, better indicate the outlook is at best cloudy.

The current Congress is hell bent on passing another pork filled, trillion dollar plus budget and presented a 1900 page bill that certainly contains intended and unintended negative economic consequences of which we won't know until after the bill is passed.  We need the fiscal conservatives in both parties to stand up and be counted...toe the line and hold, cause the US cannot continue the current trend and find a recovery in any mode. 

Good Times?  In the minds of some yes, but in the minds of many the answer remains uncertain.  Millions remained unemployed with little hope of finding work in the short-term.  Congress continues to ignore Small Business America and the tax issue on the table is still a major component in an economic recovery. 

After this week  my leaning is to move to the sideline and go protective with long stock and other 2011 open positions. 

Is there a correlation with taxes and deficits?  Apparently some in Washington think so, but they are not alone as Moody's considers the impending extension of the Bush tax cuts as increasing the deficit - as per recent statements, Moody's suggest that if the extension occurs they may very well cut the US credit rating within a 12-18 month period.  The thought process is that increase taxes bring in more revenue, which is not necessarily the case as increased income taxes will more likely have the "unintended consequence" of continued "belt tightening" from Small Business America and consumers resulting less revenues and weaker labor markets.

It's funny how often Washington counts on "expected revenue", in other words "counts their chickens before they hatch" assuming a revenue that never materializes yet they spend the assumed revenue as if it were real.  Let's be clear as well, Government does not create revenue outside of taking revenue from producing citizens. 

The current tax issue that sits before Congress is not in itself deficit producing.  Deficits come from spending and interest payments and unless Congress reduces spending the deficit and debt will continue to rise, period.  The Orator in Chief continues to talk the talk of deficit and debt reduction, but his actions belie his words and the continued spending along with the FEDS monetary policy is keeping the dollar and the economy at risk (my opinion).

Trading the markets, however, is not the same as being bearish on the economy.  The markets are stagnant to bullish, but mostly leaning bullish and if Congress passes the Bush tax cut extension, the Bulls will continue in the markets.  With the FEDS Long on the markets, it makes sense to trade with them.

Watch commodity values (precious metals) continue to rise as the world looks to hedge currencies and supply continues to decrease.