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fiscal cliff

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Where Oil Prices Are Headed In the Face of the Fiscal Cliff

You have heard all the stories of what will happen when the U.S. economy falls over the fiscal cliff.

As I write this, it appears that will happen--at least on paper.

Of course, it will take some time for the tax increases to kick in, while the automatic spending cuts may take a month or longer.

That may make it easier for some Members of Congress to act. Since the taxes will have technically increased, it will be easier for them to vote for an artificial tax cut.

I consider this the pinnacle of absurdity.

Subjecting most Americans to this charade-making them vulnerable to cuts in paychecks, dividends, and social security benefits merely to make some political brownie points-is the height of travesty.

But here we are.

Even if there is a this weekend or Monday, nobody will know what that means for several weeks. This will drag the drama on for a while longer as the precocious children inside the Beltway refuse to play on the same ball field.

Now we all know how this will end. There will be a stopgap measure rather quickly (probably around the time most receive that first paycheck of the New Year) to prolong the process into the first quarter - right into yet another showdown on increasing the debt ceiling.

Isn't there anybody else out there as sick of this as I am?

But in the end, we are interested in what the shenanigans mean for the energy sector.

Oddly enough, gas and oil prices have acted as if the cliff were an ant hill.

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Fiscal Cliff Deal Gets Lost in "Blame Game"

U.S. lawmakers headed back to Capitol Hill Thursday to try and avoid falling off the fiscal cliff, but the chances of doing so before the New Year have practically disappeared.

Sounding alarm bells Thursday were stern words from Senate Majority Leader Harry Reid, D-NV, who cautioned that there is hardly any time left for a deal.

"I have to be very honest. I don't know time-wise how it can happen now," a pessimistic Reid said in a press conference from the Senate floor.

Acknowledging the urgency for some kind of deal by New Year's Eve, U.S. President Barack Obama cut short his Hawaiian Christmas vacation to return to Washington.

According to CNN, a Republican senator said President Obama told Sen. Mitch McConnell, R-KY, that the president would send a proposal to the GOP on Thursday.

Retiring Rep. Steve LaTourette, R-OH, told CNN that lawmakers are putting finger-pointing ahead of deal making.

"Nobody is willing to pull the trigger" on an agreement because "everybody wants to play the blame game," he said. "This blame game is about to put us over the edge."

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Stock Market Today: Holding on to Fiscal Cliff Deal Hopes

The stock market today (Thursday) was quiet on the open as investors waited on the sidelines for a fiscal cliff deal update.

About a half hour into trading, the Dow Jones Industrial Average was off 12 points, the Standard & Poor's 500 Index was lower by 2 points and the Nasdaq gave back 3.

Sen. Harry Reid, D-NV, gave a mid-morning press conference to warn we are likely to head over the fiscal cliff. All eyes remain on developments, or lack thereof, on Capitol Hill. If Democrats and Republicans don't come to some kind of agreement by New Year's Eve, the slowly recovering U.S. economy will be struck with some $600 billion in tax increases and across the board spending cuts at the federal level that threaten to deliver a 2013 recession.

U.S. President Barack Obama was due back in the White House today to continue negotiations.

Economists say the resilience of equity markets is due to the fact that most market participants are still betting that a deal will get done, if not by year's end, then soon after the New Year.

That is part of the reason that a stronger bearish sentiment hasn't plagued stocks.

"People are expecting some sort of compromise to save the day, so they're hesitant to short the market because news on that front will push the market higher," Mark Helweg, founder of financial tech company MicroQuant, told CNN Money.

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Fiscal Cliff Deal Talks on Hold

U.S. President Barack Obama will cut his Hawaiian Christmas vacation short and return to the White House tomorrow (Thursday) to continue fiscal cliff deal negotiations.

Just five days remain for Democrats and Republicans to hammer out some kind of deal before the U.S. economy gets walloped with some $600 billion in tax increases and spending cuts at the federal level.

It's unclear if the parties can reach a fiscal cliff deal before the New Year, although they've shown little hope they can agree.

Republican House Speaker John Boehner on Friday put the burden on the president and the Democrat-controlled Senate to make the next move after they rejected his big concession on tax rates. Boehner agreed to extend tax rates on incomes under $400,000 (reduced from his previous threshold of $1,000,000) in exchange for steep spending cuts to reduce the swollen federal deficit.

"I don't want taxes to go up; Republicans don't want taxes to go up. But we only run the House. Democrats continue to run Washington," a frustrated Boehner said in a press conference Friday after he failed to rally support for his "Plan B," which never even made it to a vote among his own party.

While both sides have reduced expectations for an all-or-nothing deal, the two parties are still miles apart. Lawmakers are already prepping for the blame game should the New Year come without resolution.

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The Hilarious Comedy Behind John Boehner's "Plan B"

I am laughing right now, really.

I am laughing because of what happened last week. I am laughing that House Speaker John Boehner's "Plan B" for the Fiscal Cliff wasn't even voted on.

Why not? I can't imagine - it had all the right stuff.

According to Mr. Bonehead's website, "The bill focuses on stopping waste, fraud, and abuse in federal programs, eliminating government slush funds (including an ObamaCare slush fund), and reducing waste and duplication in government bureaucracies."

And that was just the trash talk about cutting wasteful spending in the bill. He also wanted a tax cut for Americans making under a million dollars a year. I'm for that!

So what's making me laugh, when on the surface the bill seems to make some sense?

It's what you can't see (because most of it is hidden, or if it's there it's buried) that's funny. In fact, two things in the bill are so funny that they almost brought me to tears.

Let's go have a laugh together.

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Four Fiscal Cliff Investing Strategies

With fiscal cliff talks stalled in Washington, investors are in limbo wondering how the outcome - deal or no deal - will affect their money.

That's why we've put together the following fiscal cliff investing strategies, thanks to Money Morning Global Investing Strategist Martin Hutchinson, so you can be prepared for whatever happens.

While Hutchinson thinks a deal is likely, it might not come until the early New Year. In the meantime, here's his fiscal cliff investing strategy overview, straight from a recent report for his Permanent Wealth Investor subscribers.

  • Fiscal Cliff Investing Strategy No. 1: Put Dividend Stocks in IRAs and 401(K)s
Since capital gains will continue to be taxed at a favorable rate, growth stocks are at less risk from possible tax rises. Hence your true dividend stocks should go in tax-free accounts.

  • Fiscal Cliff Investing Strategy No. 2: Maximize Your "Roth Conversions" in 2012
There are two types of individual retirement accounts: regular IRAs (in which contributions are tax deductible but withdrawals are taxed), and Roth IRAs (in which contributions are not tax-deductible, income and capital gains are tax free, and withdrawals are not taxed).

Since taxes are going up in 2013 and are likely to trend higher thereafter, you want most of your money in Roth IRAs unless you are very sure your income after retirement will be low enough to be in a low tax bracket. You can't make Roth IRA contributions directly unless your income is less than $100,000, roughly.

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What's Next for Fiscal Cliff Deal Talks?

After a lot of talk from Washington this week, we could actually be farther away from a fiscal cliff deal than we were before.

Republican House Speaker John Boehner's "Plan B," created to avert a tumble over the fiscal cliff, failed to garner enough support Thursday night from his own party.

Boehner said before the voting that he was confident his Plan B, which proposed extending the Bush era tax cuts, would sail through.

But around 8 p.m., House Majority Leader Eric Cantor, R-VA, emerged and announced the measure wouldn't go up for a vote.

This left the country asking, "What's next for the fiscal cliff?"

Boehner later said in a statement, "The House did not take up the tax measure today because it did not have sufficient support from our members to pass. Now it is up to the president to work with Senator (Harry) Reid to avert the fiscal cliff."

Equity markets reacted by tumbling on the open Friday. A majority of market participants had been optimistic until now, hopeful that a fiscal cliff deal would be reached and a recession in 2013 avoided.

But just 10 days remain before America faces the largest tax increase in history, coupled with steep automatic spending cuts, the outlook for next year has dimmed.

With Congress on recess for the Christmas holiday and no fiscal cliff deal in sight, investors are worried and rightly so.

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Why Recession 2013 Could Hit Regardless of Fiscal Cliff Deal

Stalled fiscal cliff negotiations have fueled concerns the U.S. could face a recession in 2013 if the country fails to avert the cliff.

But recession 2013 may be on the way regardless of what happens with the fiscal cliff talks.

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Fiscal Cliff Deal Talks Hit Major Roadblock

The apparent breakdown of talks between U.S. President Barack Obama and Republican House Speaker John Boehner on a fiscal cliff deal took the optimism out of the markets on Wednesday, with the Dow Jones Industrial Average falling nearly 100 points.

As the markets prepared to open for trading Thursday, U.S. stock futures were lower.

Boehner has decided to go ahead with a vote on his "Plan B," which would extend the Bush-era tax rates for all taxpayers with income of less than $1 million but would not deal with any of the automatic spending cuts that would take effect after Jan. 1.

In an effort to win support from wavering House Republicans, it has been reported that a companion bill could be brought to the floor with Plan B. The bill would prevent across-the-board cuts required by the fiscal cliff from being applied to the military and other specific programs.

Assuming Boehner can round up enough votes to pass Plan B, then "the president will have a decision to make," Boehner said. "He can call on the Senate Democrats to pass that bill or he can be responsible for the largest tax increase in American history."

Senate majority leader Harry Reid, D-NV, has indicated Plan B will not pass in the Democrat-controlled Senate, and President Obama has vowed to veto the bill if it reaches his desk.

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What the Fiscal Cliff Deal Could Do to You

Depending on the deal Congress makes for the fiscal cliff, middle-class Americans could face a total average tax burden of nearly 50%.

Middle-class Americans already pay an average of 43.12% in taxes, according to the non-partisan Tax Foundation.

Money Morning Chief Investment Strategist Keith Fitz-Gerald detailed the possible increase in the tax tab, citing data from FOX Business Network's expert on consumer and personal finance, Gerri Willis.

Absent a fiscal cliff deal, the mean middle class federal tax rate would climb from 25% to 28%, as Bush-era tax cuts expire in 2013. Payroll taxes would rise from 13.3% to 15.3%.

"Keep in mind that doesn't include state income tax hikes, city or county taxes, many of which are on the rise no matter where you live, thanks to decades of poor fiscal management," Fitz-Gerald said.

Add in state taxes, which average 4.82%, and the middle-class tax burden would average a whopping 48%.

As Fitz-Gerald put it, the possible tax increases amount to "an assault on the middle class."

The Most Painful Fiscal Cliff Hit to the Middle Class

The biggest tax increase threatening individuals for the 2012 tax year is a hike in the alternative minimum tax.

Read More…

Fiscal Cliff Deal: Plan B or Plan CYA?

Markets were higher in Europe and the United States yesterday (Tuesday) as progress was made on a fiscal cliff deal as well as on resolving debt ceiling issues before year end.

But then Republican House Speaker John Boehner rattled everyone's cages by proposing his "Plan B," which would make permanent the Bush tax cuts for all taxpayers with annual incomes under $1 million.

"Right now we need to do something to get the president's attention," Rep. Frank Lucas, R-OK, said in an interview with Bloomberg News. Boehner's approach "might just help," he said.

Fiscal Cliff Deal: What is Plan B?

The Washington Post reported that Plan B legislation was still being drafted late Tuesday but, in addition to making the Bush tax rates permanent for incomes under $1 million, Plan B would create a permanent alternative minimum tax patch and maintain the 35% inheritance tax on estates of more than $5 million.

Plan B does not address the automatic, across the board spending cuts that will go into effect if a fiscal cliff deal fails, nor does it address the looming debt ceiling.

"I believe it's important that we protect as many American taxpayers as we can," Boehner said Tuesday. "And our Plan B would protect American taxpayers who make a million dollars or less and have all of their current rates extended."

Plan B is intended to avoid tax hikes on the vast majority of Americans and to buy time to address spending cuts and other issues in January, following the holiday recess.

Boehner plans a House vote on his Plan B on Thursday.

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Fiscal Cliff Deal: The President's Latest Counter Offer

Equity and commodity prices rallied in Europe and Asia while the U.S. dollar and Treasury bond prices fell as U.S. President Barack Obama and Republican House Speaker John Boehner have made progress on a fiscal cliff deal.

On Friday afternoon, Speaker Boehner called the White House with an offer to raise taxes on Americans earnings more than $1 million, altering his position on no tax increases for anyone.

With that concession in hand, the president devised a counteroffer, which was presented to the Republicans late Monday. The president's new proposal reduces tax increases from $1.6 trillion over ten years to $1.2 trillion, offset by $1.2 trillion in spending cuts.

But Republicans are questioning the president's math.

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Fiscal Cliff Deal: Boehner Takes a Huge Step

U.S. House of Representatives Speaker John Boehner, lead negotiator for the Republicans, took the first step late Friday in making a fiscal cliff deal when he agreed to accept a tax hike for the wealthiest Americans (those making more than $1 million).

Boehner also agreed to a one-year increase to the debt ceiling.

In return, the GOP wants U.S. President Barack Obama to implement steep cuts to entitlement spending, including Social Security, Medicare and Medicaid.

"Boehner has now accepted the premise of higher rates. So now we're just arguing over details. I think it's a significant step," Greg Valliere, chief political strategist at Potomac Research Group told Reuters.

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How to Prepare for the Fiscal Cliff

Fiscal cliff negotiations continued Thursday, but with Republicans not budging on their staunch opposition to raising taxes, and Democrats refusing any deal that doesn't include higher taxes, hopes for a compromise by year's end have waned.

Investors are worried, and rightly so.

In fact, the Wells Fargo/Gallup Investor and Retirement Optimism Index turned in a score of -8 in November, down from double-digit positive readings in early 2012. That means investors polled are back to being as pessimistic about the investing climate as they were a year ago when Washington was battling over the debt ceiling.

About 70% of investors polled said the fiscal cliff was already slowing the economy, and feared a deep recession would hit in 2013 if the economy fell off the cliff.

With no deal in sight, here's how investors can prepare for falling off the fiscal cliff.

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Fiscal Cliff 2013: GOP Plans Retaliation

Republicans appear to be losing the fiscal cliff 2103 fight over raising taxes on affluent Americans.

Now they're threatening to retaliate by intensifying Washington's next battle: the U.S. debt ceiling.

Sen. Lindsey Graham, R-SC, pledged Republicans, who control the U.S. House of Representatives, would put up "one hell of a fight over raising the debt ceiling" next year if U.S. President Barack Obama succeeds in getting the tax increase for wealthy Americans without a plan to reduce the national debt. The country is approaching the $16.4 trillion debt ceiling.

On CNN's "Piers Morgan Tonight" Tuesday, Graham threatened, "There will come a time in February and March where we have to raise the debt ceiling. I will not raise the debt ceiling ever again until we get significant reforms, because if we don't reform entitlement we're going to become Greece."

If the country's debt ceiling is not raised, the fallout would send shockwaves across the globe, as the United States, with the world's largest economy, would face the prospect of default. That in turn could threaten global confidence in U.S. Treasury bills should there be non-payment.

In addition, exceeding the debt ceiling could mean the U.S. government would be unable to pay its bills, including salaries of federal workers, who could go unpaid or be laid off. That could have far-reaching effects, disrupting business and reducing consumer spending at a time when the economy can ill afford either prospect.

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