With apologies to Alfred E. Newman, the title of the article is certainly what the market is telling us. How do I know this? Have you seen the new highs list recently? Some of the biggest winners so far are names like Costco, Ebay and Salesforce.com, to name a few. The indices are mostly up double digits for the year and with a month to go it seems solid gains will be seen. Equities might actually outperform bonds and gold, the latter is also up more than 10% in 2012.
Volatility is low, mostly due to the removal of major uncertainties from the Fed, Euro central bank and even China. The VIX is hovering near 15% (see chart below), and with a potential crisis looming (see: Fiscal Cliff) it’s startling the market is taking all in stride.
After all, the last major crisis here that was kicked down the road in August 2011 sported a supreme rise in volatility to nearly 50%, doubling from 25 just four days earlier! The expectation is something will get done, and when that uncertainty is removed then we can move on to more important things. This entire fiscal cliff debacle is great theater for the politicians and the media but little else.
Perhaps Newt Gingrich has it right – there is NO fiscal cliff:
‘At any point they wanted to, the President and the Congress could reduce the “cliff” to a series of foothills by breaking the problem into ten or twenty component parts. They could then focus on solving each problem on its own merits and out in the open with public hearings, public understanding and public involvement. Public understanding, however, would limit the level of waste, favoritism, and special interests which could be funded. That is exactly the opposite of what the Washington establishment wants.’
They say the holidays are the ‘most wonderful time of the year’, but now it seems to be the most tense moments are being felt from here to China. We all hope the politicians will do the right thing and make a deal that works somewhat well for both sides. This by no means is a small issue but let’s get it done and move ahead – nothing like a fresh start to the new year.
