As 138 million Americans plan their Thanksgiving holiday assault on the nation’s willing retail emporiums today, others around the world are working on a more lethal stratagem that has investors more concerned than thankful.
North Koreans greeted our Black Friday with their own version of a 21 gun salute as they bombarded the disputed waters around Yeonpyeong Island even as our U.S. Commander in South Korea, General Walter Sharp, was on the island inspecting this week’s provocation by the North. The on-going dispute follows the sinking of a South Korean submarine eight months ago in the same territory of the Yellow Sea. Asian markets sold off as tensions escalated.
There was not much Thanksgiving cheer in Southern Europe either as European debt worries escalated. You would think that now that Ireland has accepted a bail out from the EU, things would calm down. Instead, investors worried about which nation would be next on the list to cry for financial help. Portugal, it seems, is now the center of attention with Spain and Italy still waiting in the wings. Most European markets were trading down as U.S. markets opened on this holiday-shortened Friday.
I wouldn’t make too much out of the sell-off. Readers may recall last year’s sell-off on the same day as a result of a perceived financial crisis in the Middle East. The following week all the losses suffered that day were quickly regained and then some. As I cautioned readers last week, this pullback may have a bit more to go before the markets are ready to resume their climb.
On the plus side, our own economy appears to be gathering strength with unemployment dropping, consumer spending rising and consumer confidence regaining its footing. As the economic data continues to improve I expect it will provide firm support for further upside in the world’s stock markets. I guess the only possible fly in the ointment I see right now is the failure of congress to act on the looming expiration of the Bush tax cuts. As readers know, I have written about the predicted logjam in Washington that I fear is now upon us.
It is unbelievable to me that politicians will allow these cuts to expire at the end of the year. The democrats argue that only the middle class should escape the tax increase while the republicans want everyone including the “rich” (defined by those families who make more than $250,000/year) to be spared the horrendous increase in taxes. In my opinion, if nothing is done and we all greet the New Year far poorer than we already are, the economy will most definitely suffer.
What rebound we are beginning to experience now will be short -circuited. Consumer confidence will falter and with it the stock market, housing and job growth. The actions of the lame duck congress since the elections have not given me a lot of confidence that the two sides will be willing to compromise on anything given the legislative stalemate that has occurred thus far. One can only hope that our elected officials will begin to act and do what is best for the country. As it stands, both sides seem to be preparing for re-election in two years as opposed to governing in the here and now.
At Thanksgiving dinner among friends and family in Pittsfield, both young and old were glum about the prospects for compromise within the government. We all agreed that this country needs term limits and needs them now as a possible start to electing leaders and not career politicians. However, that’s not going to get the tax cuts expended by the Christmas holidays. I suggest we all write to Santa this weekend with those extensions at the top of our wish list. In the meantime, I hope you all had a great Thanksgiving.