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I heard a particularly telling comment from a market/political commentator this week in reference to the US Congress debt ceiling stalemate. She said: “You could randomly pick 435 residents from the phone book and put them in Congress and they could not do a worse job.”
What is going on in US politics is like a childish make-believe tea party. Further, there is actually a libertarian populist movement in the US called the Tea Party. Named after the Boston Tea Party - an iconic event in American history when colonists refused to pay taxes to the British, preferring to destroy their product by throwing it in the harbour – this movement is calling for smaller government and even lower taxes.
Living in Asia, I can’t help but contrast the economic focus of this region with the shenanigans in the USA. Asia is still powering ahead with growth rates around 10% whilst the USA and countries in Europe struggle to service their trillion dollar national debts. While the West indulges in childish ‘tea parties’, Asia steals its jobs and resources and increases its leverage over these countries by buying up Western debt.
In the short-term the US could fall into the same category as defaulters such as Greece recently and also Russia, Ukraine and Argentina - just a few that come to mind.
We have heard many clichés used to describe the current stand-off, including ‘political positioning’, ‘unthinkable’, ‘inevitable downgrade’ and ‘threatening the world economy’.
But the out-of-control US debt has been around for years. It did not just happen in the last few weeks so I am not surprised that markets have not reacted violently.
The daily Elliott says it is business as usual and even Bollinger is asleep, both suggesting this is a benign market:
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The weekly Elliott even suggests there is more upside ahead:
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And I can’t even get the Monthly Elliott to come alive.
Is there anyone out there who cares?
Enjoy the ride
Tom Scollon
Chief Analyst
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