A fiscal cliff deal is reached and the market is gaping up this morning, which my portfolio likes (up >2% in the first 45 minutes), but nothing is solved. Congress and the President have averted a self imposed "crisis". This appears to be stage one of this year's battle. While the news media reports that Republicans lost ground, I say that they decided to move the spending debate to March when the debt ceiling debate comes up again. So let's recap:
1) Congress passes legislation that raises taxes on those making over $450K/annum but does not cut spending and markets around the globe rally...
2) The CBO raises the long term ramifications for the federal debt...
3) Thus, not much changes in the long term and the US is still in fiscal peril.
Not to sound too pessimistic, but we see a prime example of politics outweighing common/economic sense. Once again the burden of this negotiation fell mostly on the middle class. Those collecting paychecks would see the most immediate impact, had a deal not been reached. However, as my father stated, investors would not have to deal with implications until April 15, 2014, at which point additional deals would surely be made with the possibility of retroactive application. While the politicians may say they work for their constituents, the investors, of the institutional stripe, wield the influence. An adverse reaction to this deal in the coming weeks will likely result in a reexamining of the policy in the coming year.
-JGM
1) Congress passes legislation that raises taxes on those making over $450K/annum but does not cut spending and markets around the globe rally...
2) The CBO raises the long term ramifications for the federal debt...
3) Thus, not much changes in the long term and the US is still in fiscal peril.
Not to sound too pessimistic, but we see a prime example of politics outweighing common/economic sense. Once again the burden of this negotiation fell mostly on the middle class. Those collecting paychecks would see the most immediate impact, had a deal not been reached. However, as my father stated, investors would not have to deal with implications until April 15, 2014, at which point additional deals would surely be made with the possibility of retroactive application. While the politicians may say they work for their constituents, the investors, of the institutional stripe, wield the influence. An adverse reaction to this deal in the coming weeks will likely result in a reexamining of the policy in the coming year.
-JGM
