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Last Night’s Speech


Bond Vigilantes are arguably the most powerful people on Earth. They can topple governments without firing a shot. Apparently, they liked the President’s speech last night, as the Asia and European stock markets are up and interest rates are down. Whew! I suspect their focus was on the promised cut in corporate income tax rates, which I support.

It looks like another good day in the market, partly because the foreign markets are getting us off to a good start. Plus, the Fed meeting today is unlikely to interrupt the fairly steady stream of good quarterly reports from corporations.

My thought on the speech last night is primarily disappointment, as he did not mention the word “entitlement” one time. The $400 billion spending cuts over five years proposed by the President is peanuts compared to the increasing fiscal damage from our high level of entitlements. Hopefully, there are negotiations behind the scene with Republicans to jointly announce (1) means-testing for Social Security and Medicare, (2) raising the age for Social Security, and (3) an increase in personl income taxes. If this happens, we can enjoy watching the retreat of the bond vigilantes! Interest rates will drop, and the stock market will soar!

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