Roberts Nash Advisory Group

January 2013 Market Comment

I am writing this on the weekend before New Years with “the fiscal cliff” clearly on the horizon. The talk is that a solution to the impasse between Republicans and Democrats will send the markets soaring as that will give certainty to the business decisions of American taxpayers. Frankly I hope that this is the outcome. However, I do not believe that to be the case. We are living in a time of unprecedented fiscal stimulus ($1.2billion/year) and unprecedented monetary stimulus ($40-80 billion/month). With these stimuli, all the economy could do was grow at an anemic 2% during 2012. Seems like we are “pushing on a string” to me. Now the politicians are going to correct the whole problem by changing the deficit from $1.2 billion to $1 billion and that is good news? Hogwash! I would hate to see bad news. If we fall over the fiscal cliff the deficit would still be $600 billion. And that is assuming a growing economy and continuing the manipulated low interest rates. Back in 2008 when the market fell hard and the Fed jumped to the rescue by providing liquidity, I said that we need to feel some pain before this gets resolved. I still believe that. The Fed has been able to push the pain down the road but the pain still needs to come. When an economy solves a debt crisis with more debt, eventually someone gets hurt. Yes the Fed has been able to keep the ball in the air longer than I thought possible last year. The continuing support of liquidity in the system can keep moving equity markets higher in the short term but they are on fragile ground. Austerity is around the corner for the good old USA. Markets will demand it and politicians will react. This cleansing process is good for economies and markets. The world financial system will be stronger going forward and the USA will be a powerhouse of growth again. Manufacturing will expand and America could be energy self sufficient in 10 years. Do not underestimate the power of the American ingenuity and the resolve of the people to do the right thing when there is no other choice.

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** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **

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