This column originally appeared on Real Money Pro at 8:53 a.m. EST on Nov. 30.
NEW YORK ( Real Money) --
"Disaster has a way of not happening."Recently, I opined that not only are the fiscal cliff fears overblown but so are the economic, political, geopolitical and tax fears overblown. Nevertheless, the earnings cliff fears (which will ultimately limit Mr. Market's upside) are not overblown. In understanding why we will likely see a timely fiscal cliff compromise, it is essential to also go back to the November election, in which the message was one of moderation, and moderation equates to an ultimate compromise. Some market participants (and certainly the media) seem to be now incorrectly playing the last war (which took place during the budget deliberations in August 2011). By contrast, I believe that fiscal cliff fears are likely misplaced, as we are at the point of necessity, and my view is that both parties get this. Sleeves will be rolled up in the next three to four weeks, and the outcome will likely be a relatively pro-economy/pro-business compromise with multiple concessions from both sides. Compared to the budget deliberations of August 2011, this time around neither party can risk the perception of being obstructionists in the negotiations. Americans clearly have voted with their feet, and they want and prefer compromise over drama.
-- Byron Wien, Vice Chairman of Blackstone Advisory Partners
Once Bitten Twice ShyMy bet is that having been disappointed once and with the domestic economic recovery still subpar, we won't be disappointed twice. Fifteen months ago, neither the Democrats nor Republicans thought through the consequences of their partisanship. This time, they have clear knowledge of the potential adverse impact of stalled negotiations regarding the fiscal cliff -- both with regard to the economy and our stock market. Arguably, both parties are now damaged goods (though for different reasons) and have to prove that they can legislate for the common good rather than on partisan terms. They cannot afford to do otherwise; they are not likely to make the same mistake twice. Both parties find themselves in trouble, neither party is trusted (the overall voter turnout was weak), and it appears that Democrats and Republicans finally might/should recognize that the serious secular financial and economic problems should be addressed in a more bipartisan manner.
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