Photo: Casey Research via YouTube
Richard Russell, the author of the Dow Theory Letters, tends to have a bearish slant in his market and economic commentary.However, his most recent interview with King World News might give you reason to be bullish.
Fiscal cliff averted? If Congress can’t reach a compromise by midnight, December 31, we’ll drop off the fiscal cliff — in which tax rates will rise (hugely) to where they were under Bill Clinton’s presidency, and there will be deep cuts in the defence budget, and cuts in more than 1,000 other government programs including Medicare.
This would be enough, says David Kelly, Chief Strategist for JP Morgan Funds, to send the nation into a deep recession. But wait, Congress isn’t insane, says Kelly. He predicts that Congress might finally get a deal done — on the thesis that both sides have more to lose through inaction than they have to gain by refusing to work together.
Attention subscribers — This brings up the thesis that the stock market may have already priced in the thesis that the nation will fall off the fiscal cliff (this may explain the Transport collapse). But if Congress finally gets its act together and the fiscal cliff is averted, we could see an upside blow-off in the stock market and an unexpected surge in bonds that would murder the bond shorts.
If Russell really is saying that the worst-case scenario of falling off the ‘fiscal cliff’ is already priced in, then this would seem to mean that stocks should be attractive to prospective investors.
Read more at KingWorldNews.com.
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