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Shaffer Asset Management CEO Daniel Shaffer explains why he thinks we will tumble over the fiscal cliff.
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-- -- -- -- -- Speaker of the house John Boehner saying congress is so divided that he is not at all confident that the US can avoid that looming fiscal -- This after Moody's this morning came out with a threat to downgrade the country's triple -- rating if congress fails to stabilize the budget in 2013.
-- -- -- Asset management joins us down and -- the Dow's up 85 points almost to new highs we haven't seen since December of seven.
Maybe the markets don't care about a debt downgrade from Moody's -- Well the moment they don't care what they're up is because of Bernanke there waiting for a decision on how much money they're gonna stimulate the economy and if they're going to do it.
So this is a little bit of a -- -- it just doesn't make sense but the treasury market is very.
Unstable right now and that that's an area that I do lightening up on which -- from my clients for the last two weeks right now this fiscal cliff you think it is coming kid is gonna happen and how damaging elevate fully yes if you think about it in both ways that fiscal cliff is either the the tax was going to affect the taxes get raised for -- money the economy.
And they get the austerity of the government stops slowed down on spending.
-- or it goes the other way which is still not gonna help the country because that that the fiscal cliff.
Is that we cannot pay back the debt that we have the sixteen trillion dollars and we can't tax the people during a recession.
-- normally when you're in a normal economy you have low debt and your economy goes into recession starts to slow down the government to put on some debt to -- -- try to stimulate the economy.
Well we've already got the sixteen trillion dollars in debt what is the next trick what are they gonna do next there really is nothing else.
And people are not spending money and this is something that's part of the consumer confidence.
Survey they just can't spend money.
And it's going to cause people to look at the stock market -- they may be some of these prices.
Are over inflated but if things are so bad and bleak why did stocks rise 10% since -- I can't answer that question for you the market has its own way of thinking and no longer term.
Maybe the market will fall apart -- -- a lot of technical things that I look at right now like the consumer confidence survey and we -- that against the S&P.
And you can clearly see that in that we have before this is a sell -- in 2007.
And the sell off and -- 2002.
The consumer confidence index it really is the one that led the way for -- S&P to fall and by the way the spread between those two is almost at the -- it was back in 2007.
But I'm surprise it.
And you know if you actually -- -- in the middle of -- stock market and equity bubble yes even though we're about thirteen times forward earnings and for I think thirty years heard about nineteen and a half times -- earnings -- and equity bubble in stocks are pretty cheap.
Well I'll tell you because deep bond market is predicting a serious deflationary depression.
The bond market is always ahead.
Of the stock market now what will happen now is that -- is being downgraded as we talked about what's being looked that to be downgraded because of the financial situation of the United States.
If treasury interest rates start to go up it's gonna compete with the returns in the stock market treasury rates are lower now than they were we have the AAA rating from S&P -- right we with -- -- I don't discreet but we have not just those things we do have a major election ahead of us.
And depending on the outcome of that election will affect the markets people are nervous people are uncertain and we -- uncertainty.
Things are out of dislocation and specially with the federal reserve bank of the United States and the ECB.
Causing asset bubbles -- dislocation in some of their policies throwing money into the system to try to inflate it.
And we are in a deflationary environment the population's getting older people are saving yeah.
Before and I you know this is not okay that's new Dennis you know -- history repeating itself -- -- is Dow thirteen 1337.
Dan Schaefer thanks for being with us take a little -- out of the well -- -- my friend thank you very much credit that is --
