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Much ado about nothing

Markets jump on news that the fiscal cliff has been avoided, but how long will it last?

Jan 2, 2013

by Max Fawcett

Short of Y2K there may not have been a more momentous non-event than the so-called fiscal cliff, which was resolved at the last minute with all the partisan recriminations and disappointing compromises that anyone who’s spent more than 10 minutes studying American politics was surely expecting. The Washington Post’s Ezra Klein has the big picture analysis here, and it’s worth a read. The markets are responding positively to the news, with bourses in Europe and indexes in North America all posting strong gains.

But it seems certain that the euphoria won’t last long past lunch, given that the markets had largely (but not entirely, based on today’s trading action) priced in a resolution to the fiscal cliff. And there’s another opportunity for American politicians to embarrass themselves (it’ll be hard to top their recent performance, given that House speaker John Boehner reportedly told Senate majority leader Harry Reid to “go fuck” himself – twice) looming in the near future as a result of what this deal didn’t deliver – a resolution to the problem of the country’s debt ceiling. Given the lingering political animosity on both sides, along with the erratic tendencies of the Republican Party’s Tea Party caucus, it’s not out of the realm of possibility that we could see a repeat of the game of debt-ceiling chicken that sent markets spiraling in the summer of 2011. That’s certainly what Robert Parker, the vice-chairman of Credit Suisse’s asset management division, seems to think.

And speaking of cliffs, Petrobank shareholders probably did a double-take this morning if they looked at their portfolios, given that its shares are down over 90 per cent. That’s a product of the company’s announced reorganization, which will see it distribute 1.1051 shares of PetroBakken and one share of New Petrobank for every share of Petrobank held prior to December 31, 2012. New Petrobank, which opened trading a few pennies above $1, will own and operate Petrobank’s heavy oil business and its THAI technologies, and will start with a pristine balance sheet featuring no debt and over $100 million in cash and marketable securities. PetroBakken, for its part, was picked by BI Research’s Tom Bishop as a top pick for 2013.

Finally, Poseidon Concepts shareholders – if there are any left from the heady days when it traded above $10 – must be hoping for some relief in 2013, given the blow they took last Thursday. After suspending its dividend and announcing a reorganization of its head office, the company’s shares were cut in half – and this after they were cut in half already in mid-November. The shares, which traded just a dime short of $17 last Valentine’s Day, closed Thursday at $1.48 and are sitting around that level today.

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