Daily Commentary by Larry Baer: No specific bill dealing with the twin
"fiscal cliff" issues of across-the-board tax hikes and massive
government spending cuts is on the agenda in either the Senate or the House of
Representatives when Congress returns tomorrow after the holiday break.
It is becoming
increasingly likely Congress will allow income taxes to go up for everybody as
now scheduled on December 31st. Once the clock strikes
midnight on the last calendar day of 2012 no member of Congress would have
voted for a tax increase on anyone - since current "fiscal cliff
legislation approved in 2011 mandates the coming increase - and the only votes
any member of Congress will cast in early 2013 will be to decrease tax rates
for most Americans back to their 2012 levels. No fuss - no muss - and
every politico comes out looking like a hero to the majority of their voting
constituents. The currently mandated government spending cuts may take a
little longer to modify - but most of those curtailments will probably not last
through the first-quarter of 2013.
The income tax part
of this scenario is already "baked-in-the-cake" and will likely have
no impact on the current trend trajectory of mortgage interest rates. The
spending cuts are more problematic - for stocks. If the scenario I've
laid out above actually plays out -- selling pressure in the stock market will
almost certainly increase - to the direct benefit of steady to perhaps
fractionally lower mortgage rates. The weakness in this assumption is
that a near-term sell-off in the stock market is inconsistent with my current
technical analysis of the Dow. For the time beginning I think it far
wiser to assume my technical analysis is correct as opposed to my supposition
regarding potential Congressional strategy and tactics.
There is still
chance the President and Congress can reach an accord before midnight next
Monday - but that chance is becoming smaller with each passing day.
As has been the case
for the past several weeks - economic news may cause a temporary little flutter
in the mortgage market - but any substantial shift in the current trend
trajectory of mortgage interest rates will almost certainly be tied to events
surrounding political action - or lack thereof - with regard to the looming
"fiscal cliff".
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
