February 24, 2013

The stock market says "sequestration will not happen."

According to Jim Cramer on "Meet the Press" this morning:
I do think that the stock market itself is saying this isn’t going to happen. The defense index on Wednesday, it is all-time high. That says sequestration will not happen. The fact that the stock market is doing well despite the fact the gasoline prices are much higher, that’s hurting the consumer, payroll tax holiday goes away, that’s hurting the consumer. Again says that maybe something is not-- not drastic. Nothing drastic will come of this. Even despite the scare-- scare tactics, government by freak out. How right is that? I still feel pretty good.

88 comments:

Will Cate said...

Well, Cramer is a big-time Democrat. He _would_ say that.

Bob_R said...

Jim Cramer is bad at throwing darts.

Revenant said...

Or the stock market is saying "this is a phony crisis, and sequestration isn't going to make a damned bit of difference to anything".

rhhardin said...

Low bond interest rates are holding the market high, because company earnings give a higher return than bonds even without any growth.

Basically it's a speculation on interest rates not going up (as is, even more, bond buying).

Holding cash is the other side of that interest rate bet.

St. George said...

In 1807 (!) the U.S. passed a law forbidding the importation of slaves.

A sequestration, sort of.

Lot of good that did.

File under: Graveyard, Whistling Past

whoresoftheinternet said...

lol. Jim Cramer? The lefty pussy who got reamed out by Jonny Stewart for daring to say Obama was destroying wealth? The man who retracted what he said in fear of being insulted by Jonny Stewart? That little pussy?

He's a chicken-shit moron who's now firmly carrying water for Obama. His words mean nothing.

bpm4532 said...

I disagree. I think it's pricing in long-term returns. If we have a chance to stabilize spending and the deficit, then it will create a more certain environment going forward.

EDH said...

Just skimming that transcript...

Where's CrackSkullBob when you need him?

GREGORY: Tax hike, yeah.

Mr. INSKEEP: …that brings-- or tax hike, thank you. They are willing to bring in…

MS. NOONAN: Who cares?

Mr. INSKEEP: Well that’s-- that’s…

MS. NOONAN: It doesn’t matter if they call it Uncle Harry.

Mr. INSKEEP: That is the point.

MS. NOONAN: Make it real reform and make it broad. Don’t be playing the game, don’t let the White House just…

GREGORY: But, see, nobody trusts each other.

MR. INSKEEP: Yeah exactly.

MS. NOONAN: …target loophole closing to…

(Cross talk)

SomeoneHasToSayIt said...

Misleading title. Sequestration WILL happen, but to little effect.

Boy who cried wolf if there ever was one.

tim maguire said...

It's such a tiny amount of money, relatively speaking, that it doesn't matter if it happens or not, but has the government ever, even once, successfully prevented the government from spending as much money as it wants?

Pogo said...

Quien es mas meaningless, the Oscars, or Sequestration?

David said...

The stock market's predictions are unreliable.

Maguro said...

I would say that the stock market's predictions, as divined by Jim Camer, are completely worthless. No one has a worse track record on the housing bubble than this clown.

The Godfather said...

If the stock market knew what was going to happen, there'd never be a crash, because stock prices wouldn't go up before they went down.

Dante said...

I do think that the stock market itself is saying this isn’t going to happen. The defense index on Wednesday, it is all-time high. That says sequestration will not happen.

Maybe the stock market is hoping sequestration will happen, and they think it's generally healthy for the whole economy. Or, perhaps they think sequestration will happen and that will require the military to rely more on the private sector than large military forces and contractors.

bagoh20 said...

So, have you heard the news reporting about the sequestration? Lots of talk about these small cuts resulting in loss of police, firefighters, school teachers, safety, services, jobs, etc, etc, but no mention of cutting pay or benefits to overpaid, underutilized, inefficient public employees, or ending programs that just don't return much. Nope go right for the jugular with that knife

It's as if cutting spending is like cutting your wrists. A small cut specifically placed to do maximum damage, and get everyone to cry about your unfortunate bad decisions. OMG, it's suicide. We can't possibly function on the same spending we did just a short time ago. It's impossible!

jrberg3 said...

What revenant said.

Levi Starks said...

It's my understanding that IF secquestration happens we will still spend more than last year. What it means is a reduction in additional spending.
So naturally Obama is acting like the spoiled toddler that he is. "I want more cookies, and I'm not used to being told no"
In fact if mommy says no then I'll ask the Supreme Court ....
They'll say yes.

The Godfather said...

The original purpose of the sequester was to force the Republicans to raise taxes to avoid defense cuts. Maybe I'm missing something, but I don't see the Republicans being all that panicked about defense cuts.

The new purpose of the sequester is to force Republicans to raise taxes to avoid being blamed for cuts in domestic spending. But if the Republican Party has any function left in our system, it is to cut domestic spending. The sequester isn't the way any reasonable person would choose to make such cuts, but cuts are cuts.

So if the Republicans agree to tax hikes to avoid the sequester cuts, doesn't that mean that the Republican Party no longer has any function to perform in our political system?

So I still don't see any signs that the Republicans will raise taxes to avoid the sequester.

Then the issue becomes: Can the Democrats parlay this issue into taking control of the House in 2014?

Levi Starks said...

I like the suicide/wrist cutting comparison,
But in reality sequestration would be more like a finger prick used to draw a single drop of blood for a blood sugar test.
We might in fact discover just how insulin dependent our nation has become.

bagoh20 said...

Has anyone here ever spent less than they did the year before - maybe lost a job, or got a pay cut, or wanted to save for a house purchase?

I know it's a silly question, because if you did, you certainly wouldn't be around to talk about it. The very idea is just right wing crazy talk.

Fred Drinkwater said...

Over the last few weeks I've sold more than 10 times what I sold all last year. Eventually we'll see who's right, me or Cramer, but I'm betting on me.

bagoh20 said...

I don't know what his record is recently, but way back when his show was first starting to get ratings Cramer's stock calls were running at 45% winners/ 55% losers. I stopped listening then, but he became more successful than ever at giving advice about stocks. What a country!

TmjUtah said...

"Over the last few weeks I've sold more than 10 times what I sold all last year. Eventually we'll see who's right, me or Cramer, but I'm betting on me."

So, Fred, do you sell reloading components, or just ammunition?

*wink*

My local shooting supply vendor has shortened their hours and only sells .22LR and some select pistol calibers with the purchase of a firearm.

They've sold ten times what they did last year, too. And just since November.

We are in a lot of trouble.

Fred Drinkwater said...

TmjUtah: I've occasionally thought about ammo as an investment commodity, but despite the fact that I live within walking distance of the gun shop patronized by the Mythbusters, I also live in California. So I have not made that investment.

Fred Drinkwater said...

bagoh20: I was at a brokerage last week that was playing Cramer's "program" on their lobby TV. Not their usual fare... What I thought was just my figurative dropped jaw must have been actually visible, because my agent glanced that way, rolled his eyes, and mumbled something sotto voce about marketing.
Maybe it's a sign, like they used to say about getting stock tips from your cabbie. A sign to get out.
Like I said, we'll see. I actually have a lousy track record predicting the markets, so I usually don't.

Gahrie said...

Look, even if the sequestration takes place, the government will still spend more money next year than it did this year.

The market is artifically high because of all the money the Fed is printing....there is no where else to put it but into the stock market.

Revenant said...

So, Fred, do you sell reloading components, or just ammunition?

Heh! I have a friend who has started making his own ammunition just because he can't find any to *buy*.

Barack Obama is truly the greatest gun salesman ever.

rcommal said...

Methinks Cramer is conflating and therefore confusing. Perhaps he is also making a stab at controlling. I, myself, don't give a shit about what Cramer is feeling. That doesn't matter at all, to me. It ought not matter to anyone else, either, I would say--except that I'm not in the business of insisting what ought and ought not matter to other people. So, if you like, I'll take back the part where I said it ought not to matter to anyone else and just, instead, focus on my own family and myself and what matters for that.

Bruce Hayden said...

If sequestration doesn't happen, I expect that we will see an attempt to dump the House leadership. House Republicans got rolled by Obama and the Democrats earlier in the year in regards to the tax hikes. The Speaker did a closed door deal with the President and the Senate Majority Leader, which isn't supposed to happen under Republican House rules (Dems, of course, always do that, which is how we got ObamaCare that no one had read before they voted for it). Republicans, facing big tax increases on everyone if they did nothing, sacrificed highest earners to do a deal for everyone else. Not really that honorable, but about all that they could expect to have gotten. And, the deal was no more tax hikes. And, sometime in the future, some spending cuts. Hopefully. But not realistically.

So, what does Obama do? His solution to sequester is to raise taxes on the "rich", the "millionaires" and "billionaires" (while still giving his millionaire buddies in Hollywood huge tax breaks). The same people who got hammered so hard last month. And, the same people who create and run the small businesses that hire so many people, and will hopefully hire a lot more.

The Republicans got rolled when Obama had the whip hand. Now, if they do nothing, there will be a small decrease in the rate of increase of federal spending.

So, the House leadership is caught between a rock and a hard place here. They hear, day in and day out, about the pending calamity from the MSM, and the President comes out saying that we are going to lay off first responders, without mentioning, of course, that those first responders are a state matter. Better he should have told Congress that they won't be able to use private Defense Department jets to get around the world. And, on the other hand, the Tea Party segment of the party is in open revolt. Selling out their caucus (again) to make the cocktail party circuit in DC happy is not going to do much for job security for the Republican leadership.

Unless Obama gives up on raising tax rates again on the job creators in this country, I don't expect legislation to avoid sequestration to survive the House.

SOJO said...

The stock market hasn't been tied to mainstream interests for a long time. If it were, they bailout would have been handled differently. People would have gone to jail. It isn't.

Of course you feel good. I do too when I look at my portfolio. That doesn't mean the economy that helps and hurts real people is doing well.

It's not. At all.

edutcher said...

SOJO's point is well-taken.

The stock market is highly speculative and bounces from one headline to the next.

You want serious predictors, you look at the bond market.

St. George said...

Sequestration in 2013 is like the U.S. government in 1860 trying to end slavery by the South cutting a deal with the North to reduce the number of slaves in the South from 2,312,352 to 2,298,786.

AllenS said...

Let me put my Economics Grand Poobah hat on and say that the defense index on Wednesday, it is at an all-time high. That says sequestration will happen. The fact that the stock market is doing well despite the fact the gasoline prices are much higher, that’s hurting the consumer, payroll tax holiday goes away, that’s hurting the consumer. Again says that it is going to happen.

There's two sides of every tea leaf.

bpm4532 said...

60% of the fed govt's $3.5T is entitlements. thus the $85B is taken away from the other 40% or $1.4B. I've known very few organizations that can't survive a 6% cost-cut. In fact, organizations as bloated and mismanaged as the fed govt are likely to benefit from such an across the board trimming.

kentuckyliz said...

The market is saying we uberwealthy capitalists will be fine, sequestration or not. Carry on.

Aridog said...

Sequestration = the political equivalent of masturbation and thinking you've actually had sex.

Footnote: Federal administrative employees won't be let go due to doing away with useless levels of senior management, no, oh fucking no, they will be furloughed one day a week for a few months and they'll call it a 20% cut. NOW, soldiers, Marines,et al...they WILL be cut back, in the combat arms, only administrative hacks will remain in the ghost units.

Don't think so? It is already under way. It is the new new normal, 1972 & 1992 redux. Oh, and we're going to leave a shitpot of equipment in Afghanistan because our allies will make it too hard to retrograde...the US Army and Marine Corps filling out multiple nation customs forms to move military hardware and personnel from a war zone, while the war is still extant.

IMO, bring on the "Arc Lights" one day after we depart, carpet all of AFghaniland...rinse and repeat every time the Afghans get uppity in the future.

Aridog said...

bpm4532 said...

60% of the fed govt's $3.5T is entitlements. thus the $85B is taken away from the other 40% or $1.4B.

True...ONLY if Obama and minions decide to do it that way.

There is no legal obligation preventing them from cutting entitlements first, regardless of specific funding, and IIRC he's threatened precisely that.

bpm4532 said...

Actually, there IS a legal requirement preventing the from cutting entitlements without Congressional authorization.

The point is there is no way one can look at this and conclude they are devastating. Cutting (future) spending is a positive development and keeping overall spending relatively constant for a few years (at about $3.5T) is a positive development.

Unfortunately, don't look at the stock market as an indicator of anything except the massive liquidity that has been pumped into the stock market via the Fed's QE actions.

Rick Caird said...

Cramer should know the stock market is not reflecting the economy. It is reflecting the huge amount of money Bernanke is pushing into the economy.

The stock market is no longer a predictor of the future of the economy. It is simply reacting to the Fed.

Clyde said...

I guess those underpants gnomes are going to be very busy in the next few days working on Phase 2.

Phase 1: Sequestration
Phase 2: ?
Phase 3: Profit!

AprilApple said...

The media won't mention that the sequestration is Obama's baby.

AprilApple said...

Loophole closing is code word for: Continue to hand tax payer dollars to Obama's cronies and donors while we tighten everything else. *wink*

AprilApple said...

"Lots of talk about these small cuts resulting in loss of police, firefighters, school teachers, safety, services, jobs, etc, etc, but no mention of cutting pay or benefits to overpaid, underutilized, inefficient public employees, or ending programs that just don't return much."

This.

And Loopholes. Loopeholes! Must stop the loopholes. The media/ White House buzzword handed down from his majesty the king.

Timotheus said...

Well, Jim Cramer is almost as good at predicting the future as a coin flip is ...

AprilApple said...

We can't cut the precious. Anything that wastes money and has proven to be a dead-end after decades of tax payer funding... (never mind the million dollar tax payer funded annual salaries + democrat donor comp wash) - The media won't touch this. No. Our pathetic "media" must demonize ordinary citizens promoting the left's gun grab, and then hide behind teachers and firefighters in their latest attemp to hide the real news and the actual facts.

Paco Wové said...

"...ending programs that just don't return much."

Bite your tongue! Every federal program is a unique, precious flower whose returns are immense and vital, even if immeasurable!

lincolntf said...

When I see a Government completely incapable of performing routine tasks like mail delivery, border control, basic book balancing, I immediately think "Hey, let's put them in charge of 300 million Americans' health care!". Because I'm wicked smart.

machine said...

hahahaha...good morning Fantasyland...

Colonel Angus said...

hahahaha...good morning Fantasyland...

Fantasyland is the idea that a 2.5% cut in spending is considered draconian and will have dire consequences.

Illuninati said...

I don't see what the connection so long as Republicans don't cave. I do care about the military, but Obama is going to gut it anyway.

I am selling off most of my US government bonds. It is time to take profits before the inflation kicks in and interest rates start to rise. I believe my money is safer and will make a much better return on bonds purchased overseas. Even Europe, when you take the entire Eurozone into consideration, with all its problems, has less debt than the USA.

Michael said...

Oh, sequestration is going to occur all right. And nobody is going to notice.

BaltoHvar said...

When interest rates are low, stocks will grow - when high, stocks will die.

And the P/E Ratios are in the tank.

Lipstick/Pig...

Rusty said...

machine said...
hahahaha...good morning Fantasyland..

Well. Good morning to you too, sunshine.
BTW Those aren't skittles.

dreams said...

Caveat emptor, the mad man is not always right, often wrong. Plus, he is your typical liberal Jewish Dem.

bpm4532 said...

I'm thinking we don't want to give the president and his department heads flexibility other than to tell them they have less money but are still required to achieve the same results.

Just like in the real world.

Bryan C said...

I think what the market is saying is that the infinitesimal cuts required by sequestration should have virtually no effect on anything.

Businessmen can rationally assess such things and make reasonable decisions that minimize their impact for the long-term good of the employees, their stockholders, and their customers. They assume their government counterparts, despite political scare tactics, are smart and principled enough to do the same. So what's to worry about?

Unfortunately for them and us, the Obama administration is not interested in minimizing the impact. They're interested in hurting people for political advantage. They're going to make the impact of sequestration as serious as possible because it helps them and hurts their enemies. And because they know they will never be held publicly responsible for their own actions.

AJ Lynch said...

Lincolntf:

I am ranking your excellent comment right up there with Fen's Law!

AprilApple said...

Video: Obama Angrily Denounces His Own Idea

St. George said...

"As we peer into society's future, we – you and I, and our government – must avoid the impulse to live only for today, plundering for, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without asking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow."

Dwight Eisenhower
Farewell Address
January 17, 1961

dreams said...

Hey, just heard Cramer say on CNBC that he has a Gatsby index.

lincolntf said...

It's all yours, AJ.

Options_Rock said...

One point of view is that the stock market is a predictor of things that will / will not happen. Another point of view is that the stock market is looking beyond sequestration. You may be interested in my view on this same topic: http://options-trading-notes.blogspot.com/2013/02/divided-we-rise.html

Colonel Angus said...

I don't see what the connection so long as Republicans don't cave. I do care about the military, but Obama is going to gut it anyway.

I don't have a problem gutting the military if it included removing our troops from Europe, Japan and Korea. I think those troops would he better served guarding our borders than theirs.

Colonel Angus said...

Another question to ask the President, if $85 billion in cuts is the equivalent of using a meat cleaver to the current $3 trillion in current spending, then where do you plan on finding sufficent tax revenue to close the $1 trillion spending deficit we currently have?

Just asking because I don't think you can get $1 trillion in taxes from the one percent.

EMD said...

OT: But, what a dipshit.

More plastic waste? More cost?

virgil xenophon said...

@St George/

You utter fool. Don't you know better than to quote the words of a long-dead hetero-normal white man? And a WASP member of the hegemonic patriarchy at that?

Foolish man..

Seeing Red said...

Uncle Sam only works in secrecy. If I were Majority Leader, I would have done something completely different.

I would have chosen a small group who can keep their mouths shut, a separate computer which could be locked up, then I would have gone to the American people with the following using Obama's words about sensible, balanced, no crises, chaos, yada, yada.

I don't know how big my stack of papers would be at the end, but each packet would have been no more than 5 pages so everyone including Obama could pick and choose.

I would have the name & cost of each program, modest suggestions for cuts, block grants & rule lessening or eradication -- think of the 3% Spanish-American War tax on our telephone bills, why are we still paying this, then post it online and let the citizens vote what they wanted cut. I would have listed how much travel and training each department spent, looking at you USDA diversity training, and suggest a moratorium on travel and those programs, which would be included in the modest cut to the overall budget of said program.

Let them pick and explain why we still need full funding of Title 9 or stupid EpA regulations.

I would even suggest that Obamacare be tweaked because of the chaos it's causing. There's no reason to model it on the failed French policy, we should up it to firms of 75 people or more and 32 hours of work.

LOLOLOLOL

Seeing Red said...

I would have also included a 3% cut for Congress which was non-negotiable, unless Barry wanted to cut more.

Lawyer Mom said...

Cramer is a goof. He has nothing to say and will not tell the truth.

But here it is. Put your coffee aside. Keyboard alert.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9891082/Trade-protectionism-looms-next-as-central-banks-exhaust-QE.html

Seeing Red said...

So much for the new NAFTA.

We should just take a page out of Japan's book on how they handled buying our apples.

Kirk Parker said...

Aridog,

"... because our frenemies will make it too hard to retrograde..."

FIFY. :-(

Kirk Parker said...

Hey, Cedarford has a sock puppet!

Aridog said...

bpm4532 said...

Actually, there IS a legal requirement preventing the from cutting entitlements without Congressional authorization.

I am not challenging your comment....but please give me a link or citation where I can assure myself of that fact.

So much of what Congress used to control is history, de facto if not officially, now that we've had no formal budget for 4 years. The features of Continuing Resolutions make it even worse vis a vis who controls what expenditures.

Finally, even if Congress technically has the authority, who will enforce it? The Supreme Court is already cowed by that threat, if an opinion might stray from administration desires ... even if lower courts are not.

Seeing Red said...

Confounded Interest posted this:

...Speaking of government spending, our State Department had no funds to secure the Benghazi consulate (where 4 men died), but they have $250,000 to spend on an Afghan YouTube channel.

Hopefully Afghans can now watch Robert Palmer videos!

EMD said...

Hopefully Afghans can now watch Robert Palmer videos!

You jest, but Robert Palmer can probably do more for re-shaping culture than drone strikes.

Aridog said...

Possible semantic clarification:

bpm4532 said...

... cutting entitlements without Congressional authorization.

As you used the term highlighted...Is that the same thing as just not paying them? Or does it mean they cannot adjust the payable amounts without Congressional action?

My point was that they'd just not pay the entitlements, in any amount...not "cut" them....for a sufficient period of time to scare the recipients in to outrage blamed on everyone but the administration.

Is there a specific act that prohibits just not paying?

Original Mike said...

Jim Cramer is the guy who smashes chairs, right?

Original Mike said...

I'm much more persuaded by the argument that the market likes the facts that actual cuts* will actual be ocurring.

*aka - decrease in the rate of increase.

Cramer has an agenda.

khesanh0802 said...

Revenant has it right:
"Or the stock market is saying 'this is a phony crisis, and sequestration isn't going to make a damned bit of difference to anything'."

The cuts are 2.5% for God's sake. Get real!

Aridog said...

khesanh0802 said...

Revenant has it right:

"Or the stock market is saying 'this is a phony crisis, and sequestration isn't going to make a damned bit of difference to anything'."

The cuts are 2.5% for God's sake. Get real!


I'd agree except that even at 2.5 to 5% the administration will not allow a crisis, real of created, to go under-utilized for their agenda's benefit.

It's not how small the cuts are, but WHERE they are made.

NONE of it, not a single itty bitty bit of it, stops annual deficits, it only decreases the rate of debt growth. It's like running on a tread mill with no off switch.

Gabriel said...

The sequester does not cut one dime from the budget, in fact it adds 2.4 trillion over the next ten years.

Like everything else coming out of Congress these days, it's fake.

TosaGuy said...

I think Wall Street already has sequestration baked into the cake. It is such a minor event compared to the past few "crisises" that it is no big deal.

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