A Lack of Leadership

"One of the true tests of leadership is the ability to recognize a problem before it becomes an emergency." - Arnold H Glasgow

We all knew that the Fiscal Cliff was approaching(we have known this for four years) and we all knew that the leadership of the United States would wait until the last minute to try to come to a resolution.  It is clear that no resolution will be found between now and the end of the year and if one is found it will be another band aid placed on a fractured skull.  There is no way to complete a proper working solution to this monumental problem in three days.

Furthermore while this is being debated the news reels report that they are coming together, falling apart, working bilaterally, working unilaterally, not working at all and any other fodder to make their readers more confused than ever.  The noise from the press is creating a sense of urgency when in actual fact the Obama agenda is very clear - let the Fiscal Cliff happen as it was a Bush era tax cut that should be reversed.  Drag the economy into recession and point a finger at the other side for creating the mess.  Once again more finger pointing and no leadership.

As this all bubbles to the surface the debt ceiling is ounce again looming its head.  The Treasury Secretary, Timothy Geithner, has said that the United States will reach the debt ceiling of $16.4 trillion by the end of the year.  This level of debt is now over 100 percent of GDP and is accelerating at a rate of around 6 percent a year, more than triple the growth of GDP! 

Now he will still be able to pay bills through February by moving money around in a take from Peter to pay Paul scenario but this too needs to be addressed.  As the Obama administration will spend more than a trillion a year for the next four years the ceiling will need to be raised but this once again circles round to the Fiscal Cliff and how much in additional taxes will be received once the Bush tax cuts expire.  A mess to be sure and one that has been left far too late once again showing that our current leadership (and I am talking about both sides of the isle) has one thing on its mind - saving their jobs!

How much longer can this leadership vacuum last before the people have had enough?  Surprisingly the vote for more of the same was overwhelming but in in times of economic weakness it is not that difficult to buy votes by creating unfunded social programs.  The problem now is that paying for these programs is becoming harder and harder to do and all the while the debt rises faster and faster.  This debt will need to be repaid or at the very least a plan worked out on how to balance the budget, but the political bickering is creating a void between the politicians and reality and this is not an environment where a workable solution will be found.  More often than not this is an environment where the economy runs into a brick wall at high speed.

Therefore in this type of political environment it is extremely important to protect your assets.  The risks to investing in the stock market far outweigh any perceived upside as there is no way to hazard a vague guess as to the outcome.  We are clearly at the mercy of our political leadership and it is very clear that no leader exists so investing in the market is like taking a ride on a sailboat without attending to the rudder.

I would like to take this opportunity to wish all my readers a wonderful New Year and a very prosperous 2013.