Before I really get in depth with this article I would just like to give a warning. None of this is based on facts. In reality, no one knows – it has not happened yet and until it does, we will not know for sure. When I say “it” I am referring to the the new buzz word used on all the news networks recently – sequestration. Recently the news networks have started to pick up on this and have been pumping it as a major story (whether it is or not), because they can. Whenever the networks began to do this I find the Twitter/StockTwits networks (including me) also try to make it a big deal. Whether we do this on consciously, or unconsciously I do not know, but it is intriguing. When you first hear “sequestration” you most likely think bad, or even worse “fiscal cliff all over again”.
The Fiscal Cliff brought a lot of fear into the market, and I mean alot. The $VIX was soaring to multi year years, and all the news networks were jumping for joy. In hindsight, the fiscal cliff was not a big deal at all. When you look back on the charts from when we had the “drastic”pullback you will see that it really was not large at all. What made it feel larger than it was all the negative news, and the large gap down we suffered from. Now that we are sitting about a week away from this sequestration that will happen if Washington does not do something you are starting to see the fear feeders come out again. Apparently these people already know what it is going to happen as they are certain the market will plummet WHEN (according to some) this deal does not go through. Where do they get this information? Do they have a crystal ball? A time machine? Or maybe, is it possible, that they could just be relating two unrelatable things, the fiscal cliff to the sequestration.
I often find people trying to find something in the past (the fiscal cliff for example) and they relate it back to something in the present (sequestration). What these people do not understand is that these are two different times, two different states of the market and, two different Washington problems. In closing I would like to remind you that this is not an opinion on whether we trade higher and wall street actually “wants” this sequestration, it is more of a reminder that history does not repeat it’s self exactly, especially when they are two different things.
Ben C Banks