Archives for January 2013

Marina and I are still here in the Bahamas where our Internet and TV reception has been very sporadic over the past two weeks. It started improving on New Year's Day, just in time for us to watch our favorite situation comedy.

You know the one. It's called Congress.

And after much political jockeying and self-serving speeches from a largely empty floor, the House finally voted to pass the Senate's stopgap fiscal cliff Band-Aid.

Of course, the nation had technically fallen over the cliff after midnight January 1, but the holiday spared anybody inside the Beltway the problem of determining what that actually meant.

Welcome to the ongoing way of governing in Washington.  It's called brinksmanship. Along the way, America has dodged another political bullet.

According to the deal, income taxes are going up for individuals making $400,000 or couples earning $450,000 or more; unemployment compensation has been saved; the sequestration of automatic expenditure cuts has been delayed.

But let's face it, two months from now, when the debt ceiling comes up for another debate, we will head right back into crisis mode. In the long-term view, nothing has changed.

In the interim, though, we are going to make some serious money in the energy sector.

How long that advance goes on is an open question. But there is one overriding factor in all of this.

And the sooner you know what it is, the sooner you'll be ready to profit. Here's what I mean…

.

In the end, a last-minute deal emerged. Just like that, the fiscal cliff crisis was averted.

In the waning hours of New Year's Day, Congress voted to avoid a large package of tax increases, along with some modest spending cuts.

Not surprisingly, the markets just loved it. The Dow soared over 200 points on the open and never looked back.   

But first, let's call this deal what it is: a late-day compromise that failed to address serious fiscal issues.

In the end, the agreement reached on Tuesday night will only reduce the deficit by about $60 billion annually over the next 10 years. 

That's less than 10% of the total projected deficits, which means well before 2020 we will likely have a real crisis on our hands.

But the real story in this mess is this: the cold hard truth is that going over the cliff would have actually been beneficial.  And despite the promises of Keynesian economists, the deal that emerged was not an improvement.

In reality, the predictions of doom that surrounded the fiscal cliff were made to achieve a political goal, and we should have ignored them.

Here's why…