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fiscal cliff

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CEOs, CFOs Voice Concerns over Crippling Fiscal Cliff

While the fiscal cliff might not be at the forefront of concerns for the average American, it is deeply affecting the spending and hiring plans of many businesses.

Four recent surveys show that corporate chief executive officers and chief financial officers are taking measures to prepare for the Jan. 2, 2013 actuation of the fiscal cliff.

According to a recent study by the Congressional Budget Office, this could easily take the U.S. economy back into another recession. Despite that threat, it appears less and less likely that anything will be done by the Obama administration and Congress to avert the crisis.

Needless to say, this has not gone unnoticed by the high level executive leadership of corporate America.

"This complete Mexican standoff that we have now is not getting us anywhere," Jim McNery, Chief Executive Officer of Boeing Company (NYSE: BA) said about the looming failure of Congress and the Obama administration to mitigate the impact of the fiscal cliff.

Business Feels Bearish

Since businesses see fiscal cliff talks failing to deliver progress, growth expectations of the country's biggest companies have fallen.

Members of the Business Roundtable, an association of chief executive officers, expressed in a recent survey bearish sentiment for every business measure (sales, capital spending and hiring).

From the results of this research, the Business Roundtable has lowered its projections for a wide range of economic indicators for its most recent CEO Economic Outlook Survey. These were registered at the lowest level since 2009, the nadir of the Great Recession.

Those closest to the fiscal operations of a company, the chief financial officers, are similarly bearish due in a large part to fiscal cliff 2013.

The CFO Signals Survey found that 47% of chief financial officers are more pessimistic about how well their company will do this quarter.

According to the survey, that sentiment represents the "most somber year-over-year expectations" ever in the history of that research report.

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CEOs and CFOs view hitting the fiscal cliff as a huge failure in the economic leadership from the elected political leaders in Washington, DC.

John Engler, the former governor of Michigan who is now the President of the Business Roundtable, compared the negligence to the recent standoff between the National Football League (NFL) and its referees.

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As We Near Fiscal Cliff, Avoid These Vulnerable Stocks

According to a recent study by CEO organization Business Roundtable, major corporations are preparing for the Jan. 2 onslaught of the fiscal cliff.

Unless an accord is reached, the fiscal cliff could lead to negative U.S. economic growth for the first half of 2013 and unemployment soaring to 9.1%, according to research from KBW.

The fiscal cliff will deliver a market-wide impact, but the brunt of vulnerability will be placed on a lot of the same sectors and companies that suffered during the Great Recession.

The good news for many of these stocks is they've all enjoyed good runs this year, delivering healthy returns for investors.

The bad news is that could all change by Jan 2.

Fiscal Cliff Danger Zone: Three Stocks to Avoid

Defense, housing and finance stocks are sure to be clobbered if the fiscal cliff is crossed.

Federal spending is the lifeblood of the defense industry, which will feel the most pain from fiscal cliff spending cuts. Many of these companies do not have the diversity in business operations to survive.

Lockheed Martin Corp. (NYSE: LMT) is particularly exposed as it is the nation's largest defense contractor.

Already Lockheed Martin has created fiscal cliff survival plans. According to its Chairman and Chief Executive Officer, Robert Stevens, Lockheed Martin has slowed down hiring new employees and is prepared to lay off workers.

LMT's share price fell about 50% from September 2008 to February 2009 due to the Great Recession, but the fiscal cliff effect could hit it much harder since defense spending was still strong during the stock's last tumble. Lockheed is up almost 17% this year to over $94, and 50% since 2009.

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The fiscal cliff spending cuts affecting the defense sector will have a ripple effect into related markets. That includes the Washington, DC housing market which won't be able to continue a recovery if people in the region start losing jobs.

That's why home builder NVR Inc. (NYSE: NVR) is in trouble.

Building luxury homes in the Washington, DC area, NVR had to file for bankruptcy back in 1992 due to adverse economic conditions in the mid-Atlantic region at that time.

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Fiscal Cliff: How Each Candidate Plans to Save Us

America is moving closer to falling off the dreaded fiscal cliff, but Congress continues to move at a snail's pace in addressing the pressing subject.

And while the nation waits for a resolution, the costs of doing nothing are rising, with U.S. taxpayers' money at risk.

Lawmakers have taken a "hurry-up-and-wait" stance, putting off until after the November presidential election any decision-making about the most crucial matter currently facing Congress.

At issue is whether to extend some or all of the Bush-era tax cuts and how to handle the nearly $1 trillion in spending cuts slated to kick-in starting Jan. 1.

If the expiration of tax cuts comes to fruition, the result will be the biggest tax increase ever levied on Americans (Taxmageddon 2013).

If the spending cuts start rolling out, thousands of jobs will be lost, our country's security will be put at risk, businesses will sorely suffer and programs that rely on government contracts will disappear.

With just a few weeks before ballots are cast for our next president, the looming fiscal cliff has become a heated topic on campaign trails. Falling off the cliff would undoubtedly thrust the struggling U.S. economy into a recession in 2013, a consequence neither contender wants to tackle.

So how do they plan to avoid the fiscal cliff? Let's take a look.

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Fiscal Cliff 2013: The Biggest Threat To Your Profits?

Fund managers aren't taking any chances with fiscal cliff 2013 - they're making sure their portfolios are ready now.

That's because global money managers view the looming fiscal cliff as the biggest current threat to investors' profits.

A new Bank of America Merrill Lynch Fund Managers survey this month revealed anxieties about the approaching and almost imminent fiscal cliff, which the country will go over Jan. 1 if Congress doesn't act, now for the first time in 18 months trump fears about the Eurozone sovereign debt crisis.

At the forefront are worries over trillions of dollars of spending cuts set to kick in at the start of next year that will threaten our national security, millions of jobs, and government-funded programs. Those colossal cuts will coincide with the expiration of Bush-era tax cuts which will amount to the biggest ever tax increase on American taxpayers.

The double whammy now has 35% of fund managers citing the fiscal cliff as the biggest danger to investments.

On the flip side, angst over the European debt mess as the top investment worry has waned to 33% from 48%. The drop follows the recent announcement of further support from the European Central Bank and its launch of outright monetary transactions (OMT), or bond buying, to reduce the cost of buying for bordering Eurozone countries.

The figures are from a Sept. 7-13 BofA survey of 253 managers who invest some $681 billion for clients.

Uncertainty surrounding Election 2012 has made the fiscal cliff effect a bigger threat.

"The upcoming election is putting these fears into sharper focus," noted Michael Hartnett, chief investment strategist at Bofa Merrill Lynch Global Research.

But instead of living in fear, you can feel safer by following the same preparation as some of the biggest global money managers.

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Fiscal Cliff Deals "Devastating" Blow to Defense

The potential effect of the fiscal cliff on our national security spending just became clearer - and more unsettling.

Friday, amid pressure from Congress, the Obama administration for the first time outlined how some $100 billion in spending cuts scheduled to take effect Jan. 1 will disrupt thousands of federal programs if no action is taken to avert the fiscal cliff.

The automatic cuts, known as sequestration, are a kind of threat Congress implemented on itself in the 2011 Budget Control Act. Yet, they were never meant to actually happen.

As White House press secretary Jay Carney explained in Friday's briefing, the idea was to make the cuts so objectionable that Congress would come up with a more acceptable way to reduce the deficit.

"The sequester was designed to be bad policy, to be onerous, to be objectionable to both Democrats and Republicans," Carney said.

The detailed report is aimed at putting Congress into action. The Office of Management and Budget clarified in its introduction, "The specter of harmful across-the-board cuts to defense and nondefense programs was intended to drive both sides to compromise. The sequestration itself was never intended to be implemented."

But to date, no concessions have been agreed upon and the perilous looming cuts are coming closer to reality. The announcement brings the U.S. nearer to going over the dreaded fiscal cliff, which scores of analysts say will thrust the economy into a recession in 2013 by draining mountains of money out of the already besieged economy.

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Will Fiscal Cliff Trigger Muni Bond Defaults?

Turns out our nation's counties and cities are in much worse financial shape than previously believed - and the impact of the fiscal cliff could drag these municipalities down even lower.

A recent report by the New York Federal Reserve determined that while Moody's Investment Service reported only 71 defaults from 1970 to 2011, there were actually 2,521.

That's because Moody's only reports on the defaults of rated bonds, which are safer for investors. Taking all U.S. muni bond defaults into account, the default rate is actually 4%, not 1%, according to The New York Times.

It's not just Moody's that missed on municipal bond default statistics. The Fed's combined database indicated 2,366 defaults from 1986 to 2011, compared with Standard & Poor's 47 defaults during this same period.

And now the looming fiscal cliff, scheduled to be reached on Jan. 2, 2013, could drive up many more city debt levels to dangerous highs.

If Congress doesn't agree on a solution, $530 billion in tax increases and reductions in federal spending will take place at the start of next year. According to a recent study by the Congressional Budget Office (CBO), going over the fiscal cliff could take the United States -and its cities and counties - back down into the valley of another recession.

That's when muni bond defaults could tick up.

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Fiscal Cliff a Far Bigger Threat Than Most Investors Think

The United States may or may not go over the fiscal cliff in January, but few investors are taking the possibility seriously enough.

That's the message Goldman Sachs (NYSE: GS) chief U.S. equity strategist David Kostin had for his clients in a recent note.

He believes investors are not focusing enough on the potential impact of the fiscal cliff, which could set the stage for jittery markets akin to last year when the debt ceiling debates sent stocks tumbling.

When it comes to anticipating the impact the fiscal cliff will have on markets, "portfolio managers have been swayed by hope over experience," Kostin recently said in his note.

Kostin compared the current situation to last year's debt ceiling crisis when Congress waited until the eleventh hour to reach a deal.

"Investors were stunned and the S&P plunged 11% in 10 trading days (and more than 17% from the level one month prior to the deadline)," Kostin said. "Eventually Congress reached a compromise on raising the debt ceiling."

"We believe the uncertainty is greater this year than it was 12 months ago," Kostin said. "Political realities and last year's precedent suggest the potential that Congress fails to reach agreement in addressing the "fiscal cliff' is greater than what most market participants seem to believe based on our client conversations. In our opinion, equity investors seem unduly complacent on this issue."

The market rally enjoyed this month is a markedly different from last year's showing as markets skirted past the one-year anniversary of the debt ceiling face-offs. But Kostin says the S&P 500 is headed for a fall-and a steep one at that.

Kostin warns: "Assigning a P/E multiple to various fiscal cliff and earnings scenarios is difficult because ultimately we expect Congress will the address the situation. But investors must confront the risk they may not act until the final hour."

His year-end target for the S&P is 1,250; quite a bit lower than the current 1,424.

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Fiscal Cliff 2013 Will Bury Debt-Ridden U.S. Cities

With fiscal cliff 2013 approaching on January 2, it is struggling U.S. cities that stand to suffer the most if Congress fails to help.

These U.S. municipalities are already in terrible fiscal shape due to the effects of The Great Recession. Now they're facing the effects of automatic tax increases and deep spending cuts of 9%, about $560 billion in total.

Like Gramm-Rudman-Hollings from 1985 that imposed automatic spending cuts, these powerful one-two combinations will floor cities that have unwisely come to rely on federal aid.

"Cities are going to be facing very rough waters for the next couple of years," predicted Michael Pagano, dean of the College and Urban Planning and Public Affairs at the University of Illinois-Chicago.

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Fiscal Cliff Could Cost You Your Job

While Americans stash extra cash to prepare for the economic effects of the looming fiscal cliff in 2013, another more immediate concern has developed: How many people will get laid off as companies brace for spending cuts and tax hikes?

The fiscal cliff will pack a double whammy to some businesses. Companies in certain tax brackets will be paying more to Uncle Sam, while some will see their government funding disappear.

The substantial fiscal cliff effect has prompted firms to rein in spending, delay projects, defer bids - and cut staff.

In fact, a study last month from Ernst & Young, the National Federation of Independent Business, the U.S. Chamber of Commerce and other business advocates revealed the fiscal cliff could slash 710,000 jobs from the already beleaguered job market.

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Fiscal Cliff 2013 Fears Already Stifling U.S. Economy

Fiscal cliff 2013 remains poised to throw the struggling U.S. economy into recession when tax increases and spending cuts kick in Jan. 1 – which has scared companies away from spending any more money than they have to this year. Even worse, the country's fiscal cliff fears have increased as a bevy of fresh data […]

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No Need for Vacation When You Can Fight Over the Fiscal Cliff

Republicans are not willing to let Democrats go over the fiscal cliff and take all of us with them - at least, not without a good fight.

Just the sound of it - going off the cliff - echoes disaster. But that is where we're heading if Congress doesn't act to extend the Bush tax cuts or avoid the automatic spending cuts that will go into effect Jan. 1.

Little can be expected to be resolved over the next month as Congress takes off for its annual five-week August recess.

However, House Speaker John Boehner (R-Ohio) vowed Wednesday to call the House back into session to cement approval if Senate takes action to prevent fiscal cliff. The GOP has made its commitment to averting the fiscal cliff crystal clear and is encouraging the Democrats to work out some kind of agreement.

"If the Senate follows the House in passing legislation to stop the entire tax hike-including the small business tax hike-in a manner that requires House approval before it can be sent to the president, it is our commitment that the House will reconvene immediately to ensure the measure is enacted at the earliest opportunity. But, in order to avert the threat to our economy, the Senate must join the House in acting to stop the entire tax increase," Boehner and three other House GOP leaders wrote in a letter to Senate Majority Leader Harry Reid (D-NV).

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Expect QE3 After Geithner's Warnings

In testimony yesterday (Wednesday) before the House Financial Services Committee, U.S. Secretary of the Treasury Timothy Geithner may have inched us closer to QE3 when he warned that the U.S. economy will be slammed by two major factors: the immediate danger from the Eurozone debt crisis and fiscal cliff 2013 that is fast approaching.

"The economic recession in Europe is hurting economic growth around the world, and the ongoing financial stress is causing a general tightening of financial conditions, exacerbating the global slowdown," Geithner said in his testimony.

As much of the revenue for major U.S. corporations such as Ford Motor Co. (NYSE: F), DuPont (NYSE: DD) and Cisco Systems Inc. (Nasdaq: CSCO) comes from Europe, the damage is already being felt by both employees and shareholders. Cisco, down 20.52% for the quarter, recently announced the layoffs of 1,300 workers, about 2% of its global labor force.

Geithner cited other factors harming the U.S. economy, including the rise in oil prices earlier this year, cuts to government spending and slow rates of income growth.

Possible adverse developments in the future, particularly the fiscal cliff, led Geithner to warn that, "These potential threats underscore the need for continued progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run."

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Fiscal Cliff 2013: Politicians Playing Chicken with Your Money on the Line

Americans are caught in the crossfire as U.S. policy makers continue to battle over "fiscal cliff 2013."

Republican and Democratic lawmakers remain deadlocked over what to do regarding the expiring tax a nd spending cuts, but its taxpayers' money that's at stake.

On Dec. 31, if no action is taken, Bush-era tax cuts will run out, thrusting the struggling U.S. economy back to the lofty Clinton-era tax rates. Plus, steep spending cuts will kick in, hitting a broad range of sectors from education to national defense.

U.S. President Barack Obama and his administration want a tax extension for those making less than $250,000. They are also calling on the top 2% of earners to pa y higher rates on income exceeding $250,000, maintaining it's their duty to do so.

Republicans, however, want the tax breaks to remain intact for all.

So it goes, and so it has gone for months. If Democrats get their way and let some $600 billion worth of tax hikes and spending cuts go into effect in January, it will drive the nation back into a recession. But that can be avoided if Republicans back off on their opposition of higher taxes for our nation's wealthiest.

While the two parties clash, Americans of all tax brackets are stuck in a wait- and- see mode--waiting for action and not seeing much except their nest eggs getting fried.

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Fiscal Cliff: Bernanke Urges Congress to Take Action

U.S. Federal Reserve Chairman Ben Bernanke on Tuesday once again reiterated Congress' need to prevent the economy from succumbing to the "fiscal cliff" that as of now will hit taxpayers and the country in 2013.

The fiscal cliff refers to the numerous tax increases and steep spending cuts slated to go into effect Jan. 1, and will throw the already struggling U.S. economy back into a recession.

In his semi-annual monetary report to the U.S. Senate, the chief voiced his concerns. What was missing though was what Congress should actually do to hammer out a budget deal that would prevent a fiscal cliff.

"I don't have a specific recommendation, other than to think not just about the individual policies, but of the collective impact. Congress is in charge here," Bernanke said.

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How the Fiscal Cliff will Deal a Blow to U.S. Defense Industry

The fiscal cliff is taking down more than U.S. taxpayers - it will tear through the U.S. defense industry.

At the end of this year, current tax policies are set to expire and new ones will go into effect at the start of 2013. What Americans can expect if the policies are not extended is a painful combo of tax increases and spending cuts that will thrust the struggling U.S. economy back into a recession.

If U.S. lawmakers fail to act, scores of economists agree what we'll get is a $600 billion drag on the already sluggish economy. The tax implications have been widely discussed, but there has been little chatter about the impact on the defense sector, which stands to sorely suffer since it is subjected to half of the proposed spending cuts.

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