I’m not talking about the Fiscal Cliff, which is coming at us quickly. That is only a symptom of gridlock, which is the underlying problem. It has been well over a year since we lost our AAA credit rating from S&P, and Washington has been unable to do anything about it. Don’t forget the reason we lost it was NOT because we didn’t have the resources to pay our debts. It was because we had become ungovernable, due to gridlock, at least according to S&P.
The Fiscal Cliff is a train coming at us, and getting off the track is far more important than whether we get off on the right side or the left side. We need to get off on one side or the other and do it now!
Portfolio managers cannot allow themselves to become too partisan. We must be agnostic. Political sloganeering is intellectual pollution and must be avoided. Of course, we still have our beliefs and political preferences, but those preferences merely inform our investment choices and don’t drive them.
Despite the best efforts of some sincere Senators to cobble together some compromise before year end, the most likely outcome is that the “can will be kicked down the road again.” That is not a solution, nor even a bromide. It just prolongs the uncertainty, which is another separate, distinct problem.
Remember: the longer we spend falling down the Cliff, the worse the recession will be. America would be so much better if we could deal with the issues now.
That’s why my hope is that one party will make a political sweep of the election, winning the White House, the Senate, and the House of Representatives . . . even if it is not my party. It would break this dangerous impasse at a vulnerable period, and we can always get back to petty bickering in two years.
In other words, my first choice is for my party to sweep everything, but my second choice is for the other party to sweep everything. The status quo of gridlock is my last choice.
It is counter-intuitive to support “the bad guys” in a sweep, but it would still be an improvement over gridlock!