The Norman Transcript

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December 13, 2012

There must be a way to avoid the cliff

(Continued)

NORMAN —

Unfortunately, political leaders have become so hostage to the extremes of their parties that they won’t risk compromise for fear of the consequences. It’s time for them to become statesmen and do what’s best for the country and not the party. I think that although it appears hopeless, behind the scenes, a compromise is developing.

So will we go over the cliff? I don’t think so. I’d like to believe that even Congress isn’t foolish enough to let that happen. In addition, the market is telling us it won’t happen. Recent conversations have produced the worst case scenario from the “fiscal cliff” front lines — an ultimatum from Treasury Secretary Tim Geithner, followed by finger pointing from both parties blaming the other for the impending economic disaster. News like that would normally send the market down 600 points or so. What did we get? A boring 60-point drop instead.

When a market fails to go down on bad news, something is going on. It leads me to think a deal is brewing. Have you noticed that each violence-threatening comment from politicians in Washington is generating market dips of diminishing magnitude? Nobody in the investment community believes that the problem will not get resolved. It is being greatly exaggerated by the media.

My guess is that in late December, they announce a compromise claiming that they saved the economy and they’ll be all smiles and handshakes. It will actually be fairly minor and do nothing to solve the long-term problems. But the market will love it and spike to the upside because it means the party is back on — for now. By April we’ll be back to talking about the debt ceiling and Europe again. Then we get to repeat the anxiety again.

Someday Congress will have to set politics aside and finally deal with the problem. But that day is not likely now. It will finally happen when there is no other choice. In the meantime, buckle up for a wild ride.

Nick Massey is a financial columnist for The Edmond Sun. Contact him at www.nickmassey.com.

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