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fiscal cliff- Money Morning - Only the News You Can Profit From.

  • The Fiscal Cliff5

    Obama's Fiscal Cliff Plan Sends Message to GOP: You Lost

    • By , Associate Editor, Money Morning
    • November 30, 2012
    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?"

    To continue reading, please click here...
  • The Fiscal Cliff
    Avoid 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.

    To continue reading, please click here...

  • Stock Market Today
    Stock Market Today: GDP Revised Higher, but Data Still Ugly
    • By , Associate Editor, Money Morning
    • November 29, 2012

    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.
    Yet, today's number missed estimates which called for 2.8% growth, and was driven largely by government spending which accounted for 0.67 percentage points of the reading and inventories which contributed 0.77 percentage points. This was the first positive reading for government spending in over two years and the increased inventories suggest businesses could limit production in the fourth-quarter, especially with the looming fiscal cliff.

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  • Top News / U.S. Economy4
    Why Warren Buffett Doesn't Fear the Fiscal Cliff, and How He'd Fix it
    • By , Associate Editor, Money Morning
    • November 28, 2012

    Warren Buffett, CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), is doubtful that Congress can get its act together and compromise on the fiscal cliff before the Dec. 31 deadline.

    However, Buffett expects a deal to be reached shortly after that deadline, and he is not concerned with going over the infamous fiscal cliff.

    "The fiscal cliff does not enter into my long-term investment decisions... and it wouldn't surprise me if we go past January 1," Buffett said on CNBC's Squawk box Wednesday morning. "[If that happens] I don't think the world will come to an end."

    Buffett is in the minority with that sentiment, as investors have been fretting over the fiscal cliff since the election and will continue to do so until Washington finalizes a deal.

    To continue reading, please click here...

  • Top News / U.S. Economy
    Fiscal Cliff Meeting: Here's What U.S. CEOs Expect from Obama

    In what looks like a "Who's Who Among America's Corporate Leaders," some of the biggest and best U.S. CEOs are meeting with U.S. President Barack Obama today (Wednesday) in Washington to discuss the fiscal cliff.

    With just 35 days left for congressional lawmakers to hammer out a deal before Americans face the largest tax increase in history, the pace has quickened in the race to avert falling off the cliff.

    Those present at White House meeting included business leaders in healthcare, finance, commodities, entertainment, construction and consumer products.

    Among the attendees: Lloyd Blankfein, Goldman Sachs Group Inc. (NYSE: GS); Muhtar Kent, The Coca-Cola Co. (NYSE: KO); Marissa Mayer, Yahoo! Inc. (Nasdaq: YHOO); Doug Oberhelman, Caterpillar Inc. (NYSE: CAT); Ian Read, Pfizer Inc. (NYSE: PFE); and Patricia Woertz, Archer Daniels Midland Co. (NYSE: ADM).

    U.S. companies want Washington to act now as many are already feeling the pre-effects of the fiscal cliff. None want to experience the full impact, which the Congressional Budget Office warns will thrust the U.S. economy back into recession next year.

    In anticipation, scores of businesses have laid off workers and shelved expansion projects. The uncertainty, Bank of America Corp. (NYSE: BAC) CEO Brain Moynihan recently explained, is holding back the nation's recovery from the Great Recession.

    Putnam Investment CEO Robert Reynolds recently told The Wall Street Journal, "The greatest stimulus is certainty. You don't know what your tax rate is next year, you don't necessarily know what you're going to be paying in health care, capital gains, dividends. They all have a tremendous impact on the way people act."

    To continue reading, please click here...

  • Top News
    OECD Sees These Threats Beyond Fiscal Cliff 2013
    • Jeff Uscher, Contributing Writer

    At a press conference announcing the release of its new Economic Outlook report, the Organization for Economic Cooperation and Development (OECD) issued a stern warning to the U.S. to resolve the impasse over fiscal cliff 2013 or risk falling into recession, possibly dragging the rest of the world economy down with it.

    "The US "fiscal cliff,' if it materializes, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn," said OECD Secretary-General Angel Gurra. "Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere."

    The OECD expects growth in the U.S. to decline from 2.2% in 2012 to 2.0% in 2013 "provided the "fiscal cliff' is avoided," then increasing to 2.8% in 2014. U.S. unemployment is expected to decline from 8.1% in 2012 to 7.5% in 2014, using a harmonized measure of unemployment that allows comparisons between countries.

    Although the consequences of failing to resolve fiscal cliff 2013 loom large, the European debt crisis was cited as the main risk to global economic growth. Gross domestic product (GDP) growth in the Eurozone is expected to improve from -0.4% in 2012 to -0.1% in 2013 and a positive 1.3% in 2014.

  • Stock Market Today / Top News
    Stock Market Today: Fiscal Cliff Fears Can’t Stop This 160% Gainer
    • By , Associate Editor, Money Morning
    • November 27, 2012

    The stock market today opened flat before turning negative as negotiations on the fiscal cliff have not progressed, outweighing Greece's new deal concerning its debt.

    • Greece Close to Massive Bailout- Late Monday the International Monetary Fund, Eurozone finance ministers, and Greece came to an agreement that drastically eases the terms regarding Greece's repayment of debt and sets the stage for a third bailout. The deal lowers interest rates for bailout loans, suspends interest payments for a decade, pushes the deadline back for final repayments until the 2040s, and initiates a bond buyback program. Greece is also now on the brink of receiving a $44.7 billion loan beginning Dec. 13. "The big challenge now is to implement the decisions," Greek Finance Minister Yannis Stournaras said. "Greece has huge potential." The agreed upon measures aim to bring Greece's debt-to-GDP ratio down to 124% by 2020 from the projected level of 190% in 2014. The deal was accomplished by installing unprecedented measures such as carefully monitoring how Greece spends the debt, keeping an account strictly for debt servicing, and insisting that Greece completes the bond buyback before receiving more aid. "Euro-zone countries have put their money where their mouth is," Carsten Brzeski, an economist at ING Group NV in Brussels told Bloomberg News. "However, it is clearly not a carte blanche for Greece but rather a very tight leash."
    • Fiscal Cliff Talks Resume- Congress returned from its Thanksgiving recess and the fiscal cliff will be at the forefront of discussions this week. After last week's short burst of optimism there has not been any further progress on a deficit reduction deal. But for now consumers seem unfazed by the whole debacle, as today the consumer confidence index reached levels not seen since February 2008. The onset of higher taxes coupled with deep spending cuts was thought to lower consumer confidence, but instead consumers spent a record amount of money through Black Friday and Cyber Monday. The consumer confidence gauge interestingly showed expectations for six months from now, when we could be off the fiscal cliff, unexpectedly rose. The percentage of respondents expecting more jobs to be available in six months rose to its highest level since February 2011, and the percentage expecting to buy a home in the next six months hit a new all-time high. "The consumer is in a better place than several years ago," Michael Gapen, a New York-based senior U.S. economist at Barclays PLC (NYSE ADR: BCS), told Bloomberg. "A lot of the numbers are improving, whether it is household balance sheets or the state of the housing market or employment."
    While the market is trying to turn positive, here is one stock surging on a medical breakthrough, another soaring on a settlement with Google Inc. (Nasdaq: GOOG), and a third that is up after announcing a special dividend.

    To continue reading, please click here...

  • Top News / U.S. Economy3
    How to Prepare for Recession 2013
    • By , Contributing Writer, Money Morning
    • November 26, 2012

    U.S. President Barack Obama recently met with congressional leaders in attempts to carve out a way to avoid falling off the quickly approaching fiscal cliff.

    If no deal is reached, President Obama and scores of economists warn, the U.S. is destined to plummet into a recession in 2013.

    Money Morning Global Investing Strategist Martin Hutchinson cautions that even if lawmakers avoid the fiscal cliff by the most likely scenario of raising taxes on wealthy Americans while leaving the majority of the budget deficit status quo, the short-term outlook for the health of the U.S. economy is far from rosy.

    "U.S. economic growth has been held back in the last few years by the blizzard of regulations coming out of Washington, and there's reason to believe there is an especially heavy storm of them in the next few months, having been held up before the election," said Hutchinson.

    And despite the easy monetary policies of Fed Chief Ben Bernanke, and the latest round of QE3 (dubbed QE Forever), "the U.S. economy is not going back to robust growth in 2013," Hutchinson added. Creating more money, he said, will just increase inflation.

    "In the long run, a recession is coming," Hutchinson warns.

    To continue reading, please click here...

  • Top News
    This New Fiscal Cliff Report Issues $200 Billion Warning

    A fresh fiscal cliff report from the White House today (Monday) has predicted that falling off the cliff will deliver a damaging blow to U.S. consumer spending.

    The report from the White House's National Economic Council and Council of Economic Advisers cautioned that consumers will rein in spending next year to the tune of some $200 billion should Congress let taxes increase for middle class American families come 2013.

    "American consumers are the bedrock of our economy, driving more than two-thirds of the overall rise in real GDP over 13 consecutive quarters of economic recovery since the middle of 2009. And as we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can't afford the threat of tax increases on middle-class families," the report stressed.

    The report is the latest ammo that U.S. President Barack Obama is using to sway lawmakers to go along with his plan to extend tax cuts for American families making less than $250,000 a year, while raising tax rates on the wealthiest 1%, which Republicans vehemently oppose.

    "The president has called on Congress to act now on extending income tax cuts for 98% of American families and not hold the middle-class and our economy hostage over a disagreement on tax cuts for households over $250,000 per year. The Senate has passed this bill and the president is ready to sign it," the report read.

    With the Dec. 31 fiscal cliff deadline quickly approaching, Democrats and Republicans continue to butt heads over tax issues, as well as government spending and entitlement expenditures. If the two sides don't come to some kind of deal and we fall over the fiscal cliff, a 2013 recession is likely.

    To continue reading, please click here...

  • Investment Advice
    9 Ways To Save Your Portfolio From The Fiscal Cliff

    Many investors believe that a fiscal cliff "dive" is inevitable.

    It's hard to disagree.

    Our politicians have refused to do anything but kick the can down the road to date.

    The blame game started mere days after the election and it's highly unlikely that we'll see anything other than more foolishness out of Washington.

    So what do you do about it?

    Simple: First, you need to protect your savings from getting destroyed by the fiscal insanity. Second, you should look to reposition your portfolio with the goal of making a hefty profit. We call this one-two punch... Survive & Conquer the Fiscal Cliff.

    In a minute we're going to show you exactly how to do both...

    But first, here's why you need to pay very close attention, even if a miracle happens and Washington comes to an agreement.

    To continue reading, please click here...

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