Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

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