Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16
The Peak Oil Paradox Revisited - 19th July 16
SPX Challenges the Upper Trendline - 19th July 16
Missing ’28 Pages’ of the 9/11 Report Released into Blitzkrieg of World Events - 19th July 16
Likelihood of Organized Disruption at GOP Convention - 19th July 16
More on the ‘Breadth Thrust’ and Stock Market Internals - 19th July 16
FX Traders: Get a Free Week of Forecasts (Details inside) - 19th July 16
Ups and Downs in Gold and Crude Oil Price - 19th July 16
Keep an Eye on ‘Bitcoin’ as the Next ‘Financial Crisis’ Starts! - 18th July 16
Erdogan Might Have Known about the Coup but Didn’t Prevent It on Purpose - 18th July 16
More Deflation Ahead: Silver, Gold And Their Mining Stocks A Must-Have - 18th July 16
Stock Market Minor Top? - 18th July 16
5 Best Gold and Silver Junior Mining Stocks in 2016 - 17th July 16
Gold And Silver – NWO-Created Tragedies Will Never End, Seek Truth - 16th July 16
How Long Can Buybacks Continue To Support A Market Which Is Standing On A Fundamentally Flawed Premise? - 16th July 16
Will They Come For Your IRA? - 15th July 16
Gold’s Record Selling Overhang - 15th July 16
Capitalism Has Entered a New Era—and Historic Stock Market Investing Returns Are Gone Forever - 15th July 16
Gold Price Could Hit $5,000 or Even $10,000 in a Few Years - 15th July 16
Junior Gold and Silver Mining Funds or Individual Gold and Silver Mining Stocks - 15th July 16
The Soaring Risk of Flying in Bernanke's Helicopter - 15th July 16
The Broad Stock Market, Helicopters and Gold - 15th July 16
The Curious Case of Vanishing Lady Liberty; Only Gold and Silver Remember Her - 15th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Forex Forecasts

Fiscal Cliff Deal Averts Disaster… But Now What?

Politics / Taxes Jan 02, 2013 - 10:20 AM GMT

By: Money_Morning

Politics

Keith Fitz-Gerald writes: [Singapore] - It's late Tuesday evening and I'm about to go on air with CNBC Asia in Singapore regarding the impact of the Fiscal Cliff bill which passed minutes ago after Republican leaders decided not to try and tack on amendments nor engage in further bickering.

Passed by a 257 to 167 vote, the bill is now headed to the White House and a draft may even be on the President's desk by the time you read this.


So I'll have to write quickly.

Here's the scoop on the fiscal cliff deal:
1.The Bush-era income tax cuts become permanent for the majority of workers while they expire for so-called "top" earners. The break is at $400,000 for individuals and $450,000 for couples. That's approximately double Obama's campaign level and 80% more than his preferred "married couples rate" according to various sources. Dividend tax rates and capital gains rates for top earners will rise to 23.8% while personal exemptions and itemized deductions that are presently in force expire for individuals earning more than $250,000 and married couples earning more than $300,000. The alternative minimum tax is now fixed to avoid snagging still more middle class households.
2.Expanded unemployment benefits will continue.
3.Automatic spending cuts are deferred for two months.
4.A two percent payroll tax cut expires.
5.Estate taxes will get an inflation indexed exemption of $5 million or more and taxes will top out at 40%.

Key takeaways on the agreement:
1.Once again Washington is kicking the can down the road. While it's already being played up by both parties as an example of bipartisanship, it's really a load of hooey. The bill merely puts off decisions for yet another round of fiscal follies a few months from now.
2.Instead of working diligently for the past year on a meaningful tax bill overhaul and a serious fix to entitlement programs, our leaders dithered, bickered and postured until the last minute. It's an irresponsible and disgusting abuse of the public trust. Anybody trying this kind of nonsense in the private sector would be summarily fired for cause.
3.The deal actually raises taxes on 77% of American households according to the CBO and the non-partisan Tax Policy Center. That's an appalling failure in my book. The top 1%, incidentally, will pay $73,633 more in taxes on average. That's also according to the Tax Policy Center. It will also add another $4 trillion to deficits over the next decade. How is this a win for America?

My take on the markets:
The fiscal cliff bill passed only a few minutes ago so traders around the world are just beginning to react. However, I've already talked with key contacts in Hong Kong, Tokyo, Frankfurt and London to gauge what we might expect here at home come Wednesday morning.

I see three distinct possibilities:
First, as I suggested last week, the fiscal cliff deal is likely to prompt a short-term rally because it eliminates short-term worries. The problem is that nobody knows what short term means. Do not forget that the fiscal cliff is only one of three upcoming problems in our ongoing fiscal madness. There's still the debt ceiling, sequestration and the complete lack of a budget to contend with. In other words, it's on to the next crisis now.

Second, Asian markets are already enjoying a strong run this morning (your evening) as I write this. European futures are on the move, too. But, professional traders may see right through this and, in fact, begin selling the news leading to a down day when U.S. markets close Wednesday afternoon. The question at hand is whether or not they feel confident enough to remain "risk-on" or pick up their toys and seek safety while selling into strength.

Third, we could get a weak opening but then the pros go bargain hunting based on "oversold" conditions and a short "burn." Many traders, in fact, sold heavily into New Year 's Eve and now they've got to unwind those short positions in a hurry if Asia and Europe continue to take things higher between now when I am writing to you and early Wednesday morning when you read this.

How the fiscal cliff deal impacts individual investors:
For the most part, this will be a non-event. Yes...a non-event, especially if you are following along with a disciplined investment approach like the 50-40-10 Strategy I advocate in our sister publication, the Money Map Report.

While there is no question we will face yet more financial hurdles, I don't see any of the changes being larger than the potential gains associated with 3-5-10 year growth targets when it comes to the "glocal" stocks we prefer. So barring a massive sell off that hits our trailing stops, expect dips to remain consistent with the 10% rise I see ahead for the S&P 500 in 2013. Whether or not it finishes at that level remains to be seen but that's a story for another time particularly as we get a clearer look into the Q4 earnings season which kicks off shortly.

I envision gold having another solid year along with other commodities as it becomes clear that the market will place a premium on capital preservation as a result of yet more fiscal nonsense - deal or no deal.

And finally, I actually see the U.S. Dollar strengthening following this evening's news. It won't be immediate; if anything the dollar will drop a bit on news following the fiscal cliff deal. But down the road a bit things will be different when traders begin to focus on yet another looming downgrade and the comparative safety of the US greenback.

It's not that the fiscal cliff bill is anything even remotely resembling financially astute management, but rather that it's "business as usual."

And that means the dollar, which is the best-looking horse in the glue factory is alive and, evidently, still kicking.

Source :http://moneymorning.com/2013/01/02/fiscal-cliff-deal-averts-the-crisis-but-now-what/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife