So we went over the cliff after all, but only for a day. There is much to dislike about the deal that avoided the worst-case scenario for across-the-board tax increases; what one decides to dislike will depend on politics, but regardless the deal was a compromise and these days that means no one will be happy with it. What is perhaps lost in this year-end excitement is that this was one last in a long line of crises averted in 2012.
I am not the superstitious type – of course it is bad luck to admit to being superstitious, so I would say that regardless – but as I understand it, 13 is an unlucky number. Now we are going to have a whole year of 2013. I am not sure what to make of that except it seems unlikely that we could have as much luck as we did in 2012.
A year ago the outlook globally was bleak. In January 2012 there was probably a better than 50 percent chance that the Euro would not survive the year. There is still much wrong with Europe, but intervention from the European Central Bank has averted the worst-case scenario there.
A war between Israel and Iran was predicted before the end of last spring. The Middle East is hardly a model for world peace, but no bombs flew between these two in 2012.
China’s economy was slowing and a hard landing was feared for the second largest economy in the world. However by year-end, signs of life have begun to show in the Chinese economy.
We faced an election at home and a fiscal crisis of our own. This last minute deal to avert the worst of the tax increases still punted spending cuts and the debt ceiling down the road, but those are now 2013’s problems.
Of course no 2012 crisis aversion discussion should be had without bringing up that, according to the Mayans, the world was supposed to end on December 21, and here we are. This may have been the largest crisis averted of all.
Will 2013 be as lucky? No one knows for certain, but there is reason for cautious optimism. Economic indicators have been improving at the margins, and many of the fears from a year ago have been diminished. This is not to say that we are completely out of the woods, but are we ever? Any of the scenarios that didn’t happen in 2012 could very well take place in 2013; after all Europe is still a mess, Iran and Israel still don’t like one another, and we still have debt ceiling and spending cut battles in our future. There is no doubt that we must stay vigilant, but it is the beginning of a brand new year. What better time to see the glass as half full?
Happy New Year to everyone, and may 2013 be our luckiest year yet.
Chuck Osborne, CFA