Fiscal Cliff 2013- Money Morning - Only the News You Can Profit From.
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May 24
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Last price15,303.10Prev Close15,294.50
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Change8.60% Change0.1%
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Open15,290.74Volume27,580,800
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Day Low15,163.64Day High15,350.91
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Bid0.00Ask0.00
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52 Wk Low12,101.4652 Wk High15,387.58
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Market Cap0ExchangeN/A
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Last price15,303.10Prev Close15,294.50
-
Change8.60% Change0.1%
-
Open15,290.74Volume27,580,800
-
Day Low15,163.64Day High15,350.91
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Bid0.00Ask0.00
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52 Wk Low12,101.4652 Wk High15,387.58
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Market Cap0ExchangeN/A
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Last price15,303.10Prev Close15,294.50
-
Change8.60% Change0.1%
-
Open15,290.74Volume27,580,800
-
Day Low15,163.64Day High15,350.91
-
Bid0.00Ask0.00
-
52 Wk Low12,101.4652 Wk High15,387.58
-
Market Cap0ExchangeN/A
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Last price15,303.10Prev Close15,294.50
-
Change8.60% Change0.1%
-
Open15,290.74Volume27,580,800
-
Day Low15,163.64Day High15,350.91
-
Bid0.00Ask0.00
-
52 Wk Low12,101.4652 Wk High15,387.58
-
Market Cap0ExchangeN/A
-
Last price15,303.10Prev Close15,294.50
-
Change8.60% Change0.1%
-
Open15,290.74Volume27,580,800
-
Day Low15,163.64Day High15,350.91
-
Bid0.00Ask0.00
-
52 Wk Low12,101.4652 Wk High15,387.58
-
Market Cap0ExchangeN/A
-
Last price15,303.10Prev Close15,294.50
-
Change8.60% Change0.1%
-
Open15,290.74Volume27,580,800
-
Day Low15,163.64Day High15,350.91
-
Bid0.00Ask0.00
-
52 Wk Low12,101.4652 Wk High15,387.58
-
Market Cap0ExchangeN/A
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Top News2
What the Fiscal Cliff Means for Investors
Beyond the rhetoric and posturing in Washington, what does the fiscal cliff mean for investors?
The phrase is usually accompanied by dire warnings about what will happen to the nation's economy if the country fails to avert the fiscal cliff.
Even talk about a possible compromise has sent shivers up investors' spines.
One compromise would cap the tax exemption on municipal bonds - a tax break in effect since 1913. That has sent investors in that segment of the bond market scurrying for cover.
The compromise would also raise borrowing costs for municipalities.
As Mike Nicholas, CEO of the Bond Dealers of America, told CNBC, "It's a tax on everyone."
Another more likely part of any compromise would involve raising the capital gains tax rate from the current 15% to perhaps 25% or more.
That prospect affected many high-flying stocks, including Apple Inc. (Nasdaq: AAPL), in which investors have large capital gains. Investors are selling Apple and other stocks before year's end to lock in the lower capital gains tax rate.
Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, told Reuters, "You're going to see selling in the likes of Apple and other companies that have had good runs."
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The Fiscal Cliff Is Set To Clobber The Middle Class With Nearly 50% Tax Rates
If I didn't know any better, I'd think there's a small but growing group of people in Washington who think it would actually be good if we temporarily went over the fiscal cliff.
I say that because I am seeing a smattering of articles recently suggesting that somehow going over the cliff "won't be all that bad" or that we're "really just talking about cuts that need to happen in the first place."
President Obama seems to think the same way judging by the fact that he's dug in his heels, telling the GOP there will be no fiscal cliff bargain that doesn't include tax hikes.
Now noted budget hawk Republican Senator Tom Coburn has broken ranks, noting that he'd rather see rates rise because that "will give us a greater chance to reform the tax code and broaden the base in the future."
I find that to be an absolutely appalling argument given how much further the president's proposals will squeeze the middle class.
As Fox Business Network's Gerri Willis, an expert on consumer and personal finance issues, recently pointed out to me, the average middle class tax rate is already 43.12%, according to the non-partisan Tax Foundation.
Beyond that, Willis says if we do go over the cliff, the average middle class tax burden jumps to nearly 50%.
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Here are the Hefty Fiscal Cliff Automatic Spending Cuts
While much of the fiscal cliff debate has focused on possible tax increases, failure to reach a deal to avert the cliff could bring massive automatic spending cuts.
Barring an agreement between U.S. President Barack Obama and Congress, $1.2 trillion of spending cuts over the coming decade would begin taking effect Jan. 2.
The automatic spending cuts, known as "sequestration" - a result of Congress's 2011 negotiations to raise the debt ceiling - would total $109 billion in 2013, CBS News reported.
Here's a closer look at where the cuts would be targeted.
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Fiscal Cliff 2013: Why It's Looking Like No Deal
Expectations have changed lately regarding fiscal cliff 2013. It's looking increasingly likely that we are going over it.
U.S. Treasury Secretary Timothy Geithner, U.S. President Barack Obama's lead delegator on the fiscal cliff talks, told CNBC the Obama administration is "absolutely" prepared to go over the cliff if Republicans don't change their tune on taxes.
President Obama and Republican House Speaker John Boehner on Wednesday, along with Congressional Republicans, reiterated their stance on the fiscal cliff. No compromise was reached, with just 25 days remaining before zero hour.
President Obama maintains there could be a quick deal if Republican lawmakers withdraw their resistance to raising taxes for individuals earning more than $250,000 a year, swapping for concessions on federal spending cuts and entitlement reforms.
"If we can get the leadership on the Republican side to take the framework, to acknowledge the reality, then the numbers aren't that far apart," the president told "The Business Roundtable."
He added, "Another way of putting this is we can probably solve this in about a week. It's not that tough, but we need that conceptual breakthrough."
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How the Fiscal Cliff Deal Threatens Grover Norquist's Tax Pledge
Washington doesn't need any more hurdles than it already has in reaching a fiscal cliff deal.
But one man, and the power he holds over our elected officials, is trying to prevent a deal.
I'm talking about Grover Norquist, the founder of Americans for Tax Reform, and his tax pledge.
Norquist is both hailed and loathed for his "no new taxes pledge." It commits to never raising marginal income tax rates on businesses or individuals, and opposing any net reduction or elimination of deductions andcredits, unless matched dollar-for-dollar by further reducing tax rates.
Norquist's tax pledge has been signed by almost every Republican in office. Only four current House representatives and six senators have not signed it.
But lately, those who signed on have started to change their minds concerning the 20-year-old pledge.
You see, U.S. President Barack Obama has made clear that higher tax rates for the wealthy must be part of a fiscal cliff deal - something 95% of Republicans have pledged to oppose.
And now the need for a fiscal cliff deal has caused some high-ranking Republicans to reject the pledge, threatening to loosen Norquist's ironclad grip on the party's stance toward taxes.
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Everyone's Getting Antsy with No Fiscal Cliff Deal in Sight
After another day and still no progress on fiscal cliff discussions, many are beginning to think we might not see a deal before the end of the year, or even at all.
Republicans on Monday proposed their counter-offer to U.S. President Barack Obama's initial deal and, like his, it was basically the same plan previously offered.
This has led many, including Bank of America Corp. (NYSE: BAC) CEO Brian Moynihan, to wonder how far apart the two sides really are, and how long the effects of delaying a deal will be felt.
"I'm more concerned about business behavior slowing down than I am about consumer behavior," Moynihan told CNBC this morning. "I think we're in danger if this thing strings out into 2013 that you could start to have problems of what 2014 would look like."
The Republican-proposed deficit reduction deal, which was quickly rejected by the White House, would save $2.2 trillion over the next decade by generating an additional $800 billion in tax reform, but not by raising rates, and saving $300 billion by cutting discretionary spending, $600 billion in "health savings," $200 billion in changes to the consumer price index and another $300 billion in mandatory spending.
This is in stark contrast to the president's offer, and so far it seems neither side will budge from their original positions and even begin to compromise.
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Don't Bet on a Fiscal Cliff Deal
Fresh reports reveal that fiscal cliff talks have not resolved a thing as Democrats and Republicans continue to haggle over a deal ahead of the Dec. 31 deadline.
"Right now, I would say we're nowhere, period. We're nowhere," House Speaker John Boehner, R-OH, stressed on Fox News.
Last week it wasn't clear if a deal would be reached. This weekend the chances looked downright dismal.
Boehner, who is spearheading negotiations with U.S. President Barack Obama, told reporters last week that "no substantive progress has been made in the talks between the White House and the House over the last two weeks."
The Speaker's meetings last Wednesday with the president and Thursday's with U.S. Treasury Secretary Timothy Geithner were also fruitless, Boehner acknowledged. By Friday, Boehner said both sides were at a stalemate.
"I've got to tell you that I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks," Boehner admitted.
He detailed on Fox News, "They won the election, (but) they must have forgotten that Republicans continue to hold the majority in the House. But the president's idea of a negotiation is, "Roll over and do what I ask.'"
The two sides, just rows apart on Capitol Hill, might as well be thousands of miles away.
Congressional aides, tracking the back-and-forth negotiations, shared with the Washington Post that it is growing increasingly more likely that no deal will be inked in time to avoid the fiscal cliff.
Or, as Sen. Lindsey O. Graham, R-S.C., said on CBS's "Face the Nation," "I think we're going over the cliff."
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The Fiscal Cliff5Obama's Fiscal Cliff Plan Sends Message to GOP: You Lost
Flush with confidence after winning re-election by a convincing margin, U.S. President Barack Obama delivered a fiscal cliff plan heavy on Democratic ideas and light on compromise.
U.S. Treasury Secretary Timothy Geithner presented the president's fiscal cliff proposal to GOP Congressional leaders yesterday (Thursday).
It would raise $1.6 trillion via taxes, primarily on those making $250,000 a year and up, while delaying talks about spending cuts until later this year. The plan also proposes about $50 billion of assorted stimulus spending, which would include another extension of unemployment benefits, infrastructure, and mortgage relief.
Republican leaders were said to have literally laughed during Geithner's presentation.
"We can't move any closer to them because they're not even on our planet," one GOP aide told Reuters. "It was not a serious proposal."
No Compromise in Obama Fiscal Cliff Plan
The fiscal cliff is political shorthand for the combination of spending cuts and tax increases scheduled to hit Jan. 1, 2013. It's the result of the expiration of the President Bush-era tax cuts combined with $1.2 trillion in automatic reductions in federal spending made last summer as part of the deal to raise the debt ceiling.
Republicans and Democratic leaders have both acknowledged the importance of dealing with the fiscal cliff, and even made some statements in recent weeks hinting that they were moving toward compromise.
That ended abruptly on Thursday.
The president's fiscal cliff proposal did not change even slightly since it was initially pitched to Republicans several weeks ago.
"The day after the White House meeting, we gave them our framework," a GOP aide told the Huffington Post. "It took them 10 days for them to give us theirs, and it didn't reflect any of the conversations we've had since then."
Even many economic experts were startled by the one-sidedness of the proposal.
"What's been put forward is insulting in terms of its arrogance," said Money Morning Capital Waves Strategist Shah Gilani. "More unmarked stimulus spending? No accountability as to which sinkhole it will fall into, is an abomination. Where are the other cuts? Where is the spending discipline now and into the future? Oh, we're supposed to believe it's going to get here? Santa's coming too, right?"
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The Fiscal CliffAvoid the Fiscal Cliff with These Three Investments
- Money Morning staff reports
As most income investors know, the Bush-era dividend tax reduction is among the old tax cuts that could become a new increase if we "fall off" the fiscal cliff.
This uncertainty is one reason stocks have slumped since Election Day. Predictably, investors are fearful companies will be less inclined to pay new dividends or raise existing payouts if the dividend tax rate jumps.
As it pertains to U.S. stocks, there is at least one bright spot, that being the average payout ratio of U.S. dividend-paying firms is just 30%. That is well below the rates of 50% or higher seen in the 1950s through the 1970s.
The even better news for dividend seekers is the fiscal cliff can be dodged to some extent by establishing a bias toward international dividend stocks. Remember, the fiscal cliff is a U.S. phenomenon and many international companies have diverse, global shareholder bases.
In other words, just because a U.S. telecommunications stock is suffering due to fiscal cliff fears, it does not mean a European or Latin American equivalent will be treated the same way.
Consider these international dividend plays before letting fiscal cliff fears get the better of your investing emotions.
How to Avoid the Fiscal Cliff: Europe Without the Euro
The WisdomTree Europe Hedged Equity Fund (NYSE: HEDJ) is a new twist on an old exchange-traded fund (ETF).
Previously, the fund was heavily exposed to international financial services stocks, and featured stocks from multiple regions. These days, HEDJ is light on financials (less than 8% of the fund's weight) and focuses solely on Europe-based dividend equities.
Alone, exposure to Europe might imply a high degree of risk with HEDJ - but that is not the case because the ETF features a couple of unique twists.
First, HEDJ's index is designed to be a hedge against euro weakness, meaning this a fine ETF to be involved with when the U.S. dollar is rising against the controversial common currency.
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Stock Market TodayStock Market Today: GDP Revised Higher, but Data Still Ugly
The stock market today opened higher as third-quarter U.S. gross domestic product (GDP) was revised from its original 2.0% reading to 2.7%. The market boost could reverse depending on what happens after key political figures meet in Washington today to discuss the fiscal cliff.
Here's a closer look:
- GDP lifted for all the wrong reasons- Today the U.S. Commerce Department reported its second estimate for third-quarter GDP, and at first glance the 2.7% revision seems to indicate growth after the second quarter's dismal 1.3% level.
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