"Probably, but how will markets react?"
$4 trillion Grand Bargain (give or take 10% seems to be wiggle room discussed on tv) -> S & P 500 to 1600 or higher this year or next? e. g.
http://finance.yahoo.com/video/goldman-sees-p-2013-target-171500665.html &
http://www.cnbc.com/id/49208910/S_P_500_to_Hit_Record_High_in_2013_Strategist (Please note that both of these video clips are over 1 month old).
Kick the can down the road (
http://www.economonitor.com/dolanec...ns-underline-need-for-goldilocks-budget-deal/) not sure (continued slow muddle up / muddle around what Leon Cooperman a month ago said was fair value with Obama victory (1415) with limited bouts of dampened volatility?, because unlike 2008, there is adult supervision of markets in place both here and in Europe (last fall, initial impression was that European leaders were keystone cops hopelessly behind where markets wanted them to be, but now I think sentiment is that they will hold things together while they let some turmoil occur in markets to scare populaces into agreeing to more austerity, and also don't forget that QE Infinity might be a howitzer behind barn door Ben Bernanke has when market only wanted a bazooka). Maybe they let markets fall a bit to prod politicians into action, but the howitzer is there if need be.
Seems to me main question / uncertainty to be removed in the short term is hopefully Lame Duck Congress not throwing economy into temporary recession early next year because of idealogy. Something like comprehensive corporate tax reform, including repatriation of foreign profits as bargaining chip, 1 year extension of Bush tax cuts for everyone, and say real infrastructure stimulus spending once believable to markets locked in plan for $4 trillion of judiciously spread out over 10 years debt reduction, all could be nice boosts to upside, if they could actually occur.
China 10 year change of power starts in a few days (November 8?), and there is another round of Greek austerity measures that have to be approved in next few days or week or so? Lost the link (edit:
http://finance.yahoo.com/news/reform-votes-end-talk-greek-103644471.html), but article I glanced at a few days ago said if Greeks agree, it reasonably takes risk of them leaving Euro off the table, for good (?) I think Merkel also said it European sovereign debt crisis would take another 5 years to resolve, which might mean their original plan for getting debt to manageable levels with harsh austerity, but enough government intervention to keep interest rates from soaring in mean time. Seems like might deal with debt, but really no plans for competitive reforms or growth.
Last summer I think, underneath the debt ceiling theatrics, was whether economy was going to be pushed back into recession (e. g. inflation was approaching 4% IIRC, and Morningstar analyst Bob Johnson said that is what typically kills off recoveries). Plus everything about Greece was starting to show up on out tv sets all the time.
China sounds like it is coming in somewhere between soft landing (8%+ nominal GDP growth) and hard landing (5%), and not the worst case scenarios of actually crash landing into negative growth.
Uncertainties (read tail risks?) slowly being removed from market (e. g.
http://humblestudentofthemarkets.blogspot.com/2012/01/global-healing-2012-vs-2009.html) again please note that both articles are from a much gloomier time, specifically very early this year) hopefully Europe is Japanifying itself and will just fester away while it inflates and devalues it's way out of debt, and a true Grand Bargain, I think, could make market soar, to all time highs, and probably much higher than that.
War with Iran or Syria with huge spike in oil prices is of course wild card always out there.
Vadim Zlotnikov this morning (temporary risk off?:
http://video.cnbc.com/gallery/?video=3000127793&play=1 ) vs. a few weeks ago (de-risking rally:
http://video.cnbc.com/gallery/?video=3000124560&play=1)
Cam Hui's take today:
"Technicians often describe this pattern as a coiled spring. When it breaks out, it will typically break hard in the direction of the break."
http://seekingalpha.com/article/986141-what-now-for-the-markets (inflation vs. deflation; harsh austerity vs. stimulus in U. S. and globally???)
Quote from this article is slightly out of context, but I think it, ultimately, does capture proper sentiment:
"In addition to these three scenarios there are all the “Armageddon” prophecies that include the breakdown of the monetary system, hyperinflation, or a deflationary depression with all of the social unrest that comes with the breakdown of societies. But what does all this mean for us as investors and traders?
The answer is simpler than you might think: follow the money. The great classical economist Ludwig von Misses taught that it is human action which determines the value of things and the direction of markets. If people panic and sell things we will enter a deflation as cash becomes king just as it was in the Great Depression. Whatever cash you hold could be worth ten times as much in purchasing power at the end of a great deflation. If on the other hand people run from cash and trade it for stocks, or homes, or commodities like gold and silver; we will be in an inflationary world where cash is trash."
...
The coordinated move by governments to lower interest and supply liquidity to banks and governments, has tipped the hand of world leaders.
It will be seen as inflationary, but it is actually an anti-deflationary move. It is a concerted action to off-set deleveraging. In my opinion it is a test run leading to further action as necessary, and it will involve almost every major nation in the world. The immediate reaction this time was money flying into equity markets around the world."
http://www.paulnathan.biz/commentaries/111-at-the-point-of-panic.html
(having howitzer, but
not actually having to use it if U. S. economy can continue to slowly gain steam, might argue against gold soaring (?))
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