Monthly Letter November 2012

We have, as always, spent some time out on the road meeting companies lately. One of the trips went to Washington and Minneapolis. Nothing out of the ordinary but we found some rather interesting little clues to how the world works. The Washington meetings were quite well-timed as the fiscal cliff all of a sudden made a remarkable comeback as a talking point after the US presidential election. We were quite surprised to see the equity markets move lower with the cliff being the apparent reason for the fall.

Our view before the election, before the trip to Washington and after the trip was and still is that the cliff will be avoided. Our understanding of how and why it will be avoided changed somewhat after a few of the meetings. The overriding concern for most lawmakers is how their electorate will evaluate their performance when it comes to striking a deal. The simple logic seemed to be that if they come back with a deal 3 weeks before a deadline they will have a very hard time convincing their constituency that they got the best possible deal. How can you be sure about that when you had another 3 weeks to negotiate?

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