As I watched the market opening this morning, the futures looked bleak, the DOW being down some 200 points. The breathless media had been suggesting since the night before the market would tank today from the political failure last night. This morning, the market reacted to the clown show going on in Washington, but it looks more like investors taking of profits from the recent run up than it does a collapse. Consider this a buying opportunity, as what happened last night in the Republican House of Representatives is most likely a precursor to some type of deal on the US fiscal cliff issue.
Yesterday, the US Commerce Department revised GDP growth in the third quarter up to 3.1% and this morning news on consumer spending and business spending popped out. It seems the market liked the news, as it has come off its lows considerably.
- Consumer spending rose in November by the most in three years and a gauge of planned business spending jumped, signs that households and companies are shrugging off some of the fears tighter fiscal policy could cause a recession.
Fear is a powerful motivator, and as a market player, I have experienced how difficult it is to overcome it when trading. I must admit the political breakdown last night and the breathless media spin on that took me to a place of fear. Last night, I reviewed what I have going on with an eye to get out first thing this morning, but then something happened on the way to the forum -I figured out that the market would react strongly at the opening, but then it would realize the economic fundamentals and the politics in Washington don’t warrant a panic sell off.
So, I backed away from my fear and that rational act saved me a loss of over 3%, as the market has rebounded pulling my losses back to even. The lesson here is that market players need to be in touch with a whole lot more than what the breathless media tell us. Knowing the bigger picture helps one overcome fear, as do years of experience and the intuition that brings to one’s game. Panic serves no one well, so don’t participate.
I don’t know what will happen with the politics in Washington, but I suspect the politicians will piece meal a deal, ultimately, but before the end of the year, they will at least get a pact that will deliver a repeal of the impending tax increase for 98% of American taxpayers. I suspect the market sees it the same way I do. I could be wrong, so I will watch carefully, but my sense is that there is too much at stake for the really big money players, and that brings pressure to the politicians in Washington, pressure they most always respond to. As always, we will see …
Trade in the day; Invest in your life …
