Fiscal Cliff Update "Business is Business"

The markets shifted lower right after the election.  It seems the only people convinced that Romney was going to beat the President was the professional investors on Wall Street.  Since then however stocks have advanced about 5%.  The initial push higher came from optimistic talk about averting the "Fiscal Cliff" {I really hate that term!}.  In the past ten days though that positive talk out of Washington has largely gone away, at least in public.  Over the past week or so, positions on both sides seem to have hardened and both sides have publicly staked out very extreme positions.  Both sides are basically saying they're unwilling to budge.  So why hasn't the market tanked?  

In the last week, despite all this political drama, stocks are basically flat when many assumed they be falling apart.  International markets are flying.   Here's why.  Markets are sniffing out a deal.  Whether a full deal gets done before the end of the month or a stopgap is put in place to await the new year, markets are optimistic that the outlines of an agreement are in place.  As they say in the movie Kelly's Heroes" -"Business is Business".

The web site Politico.com outlines this morning in an article entitled "The 37 Percent Solution"-the basis for a compromise on tax rates.  This has raised a lot of eyebrows on the Street this morning and I think is indicative of what is going on behind closed doors.  

Here's the other thing that I thinks happening.  The untold story I believe is that the economy is improving on its own and politicians are starting to grasp that.  I'm pretty sure they're seeing that at the White House when they look at the economic data.  I think everybody knows in DC that if they can slog through some pretty tough issues in the next six months, that right now the way forward on economic growth looks pretty positive.  I think that if I'm right on the economic data a "grand bargain" in Washington would remove one of the last barriers to solid economic growth in the next few years which by definition would likely mean higher stock prices as well.

Now I know there will be purists on both side who are going to balk at the eventual deal.  There always will be folks like that.  But most recognize that the election results were ambiguous enough that everybody is going to have to bargain and neither side will get 100% of what they want.  If I'm right about a grand deal then everybody wins because economic growth will solve many of our problems as it should put more people to work.  At the end of the day economic growth will trump political ideology for most politicians.  That will likely be good for stocks.  Investors who believe as I do are trying to get ahead of that curve.  "Business is Business."