Punting is wrong answer for 'fiscal cliff'

Reports out of Washington suggest President Obama is pushing a short-term postponement of the issue. Not only will that not solve the problem, it increases the pressure on the debt ceiling fight to come.

By Anthony Mirhaydari Dec 28, 2012 4:29PM

Image: Washington, D.C. (Bilderbuch/Design Pics/Corbis)As the country barrels towards 2013 with no "fiscal cliff" deal in sight, headlines are crossing Friday that the politicos are about to revert to what they always do when faced with tough choices on taxes and spending cuts and the dreadful long-term debt trajectory: They punt. Keep the charade of government largess and low taxes going just a little bit longer.


Not only will this not solve the problem (as I've said before, the issue is out-of-control healthcare costs) it makes the situation worse by increasing the pressure on Washington when the debt ceiling fight starts in January. The Treasury has said it will hit its borrowing limit on Dec. 31 -- but the hard deadline, thanks to emergency cash management, will be in February or March.


Here's why this deal should be viewed with skepticism.


Details. The latest suggests Obama is proposing a 60-90 day deal that would extend the Bush tax cuts for those making less than $400,000 a year, delay or replace automatic spending cuts (from the congressional deficit "super committee" failure), keep extended unemployment benefits, and fix issues related to the Alternative Minimum Tax and the Medicare "doc fix."


This is exactly the kind of hollow, kick-the-can option the credit rating agencies have been warning Washington to resist. Moody's recently said that a last minute kick-the-can deal would be the worst possible outcome since it would fail to stabilize the country's debt to GDP ratio. Fitch warned that it would consider a downgrade if the political gridlock continued and the fiscal cliff debate dragged well into 2013.


Remember that Standard & Poor's cut our AAA rating last summer, in large part, because of our dysfunctional politics. 



Markets are already expressing their displeasure with this option, as the Dow Jones Industrial Average slices down through its 50-day and 200-day moving averages for the first time since the November wipeout. Volatility is surging. And investors are scrambling into safe haven assets like the U.S. Dollar and Treasury bonds.


In response, I've added four new defensive, leveraged ETFs to my Edge Letter Sample Portfolio including the ProShares UltraShort Nasdaq QQQ (QID) and the Direxion 3x Treasury Bull (TMF).


Disclosure: Anthony has recommended QID and TMF to his clients.


I found these positions with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)


Be sure to check out his new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.  


Dec 28, 2012 5:15PM


This is a good article by Anthony.


The cliff will hurt, the can kicking will hurt, but the Fitch downgrade will REALLY hurt.


I do not understand why our elected officials cannot see the ramifications of another downgrade.






Dec 28, 2012 5:14PM
The guy is right on!!!  Our President is the CEO of our Country, and continues to do an unbelievably poor job.  Any other CEO of a company would have been fired!!  But, we idiots (not me) re-elect the guy.   Middle class folks who voted for this guy will get what they deserve, and have nobody to blame but themselves!!
Dec 28, 2012 4:48PM
At 1538 hrs scumbags accelerated the selling....America, you fukced up big time by reelecting this arrogant, marxist, incompetent buffoon...He does not want to avoid the fiscal cliff, he doesn't give a rat's behind, all he wants to do is blame and destroy the Republican Party...This guy is a complete piece of garbage and Wall Street knows it thus millions of hard working Americans are not only losing tons of money but they will lose even more next year...So sad.
Dec 28, 2012 6:00PM
Elections have consequences.  And now we get word that Obama's plan is to temporarily postpone the issue ONCE AGAIN, so they don't have to deal with it right now.  This is what we get when we elect people with no executive leadership experience.  Obama has none.  Mitch McConnell is a career politician and has none.  Same with Harry Reid.  Boehner was president of a small packaging business, but that was for a short time 25 years ago.  Pelosi is a career politician and has no executive leadership experience.  Eric Cantor has none. 

We consistently elect and re-elect people with no leadership experience and then expect them to lead us through difficult times.  These people have never had to make a hard decision in their life, relatively speaking.  And yet we somehow think they'll be willing to do it now, when we need them to?  Way to go, my fellow Americans.  Once again, you rolled your fat-a$$es into the voting booth and made terrible choices.  And now, we're all going to have to suffer the consequences for your ignorant partisanship.  To all of you who pulled the lever to re-elect any of our current crop of idiots, the blame falls squarely on you.

Dec 28, 2012 5:57PM

Enough is enough!

The Middle Class is getting squeezed and we pay the majority of the taxes.  I remember the only way our politicians listen to us is when we march in the thousands on their door steps.  That is what we will do on August 28, 2013 - the Middle Class Rights march on Washington, D.C.  THEN THEY WILL KNOW NOT TO MESS WITH THE MIDDLE CLASS AGAIN!!!!

Dec 28, 2012 5:24PM
Looks like the stock market is going down.  Question is when to get back in.  To risky to stay long.  We could be down 1000 points in a matter of minutes.  With my money I will wait and see.  80 percent cash and 20 percent still in the stock market.  I would rather be safe than sorry.  I don't need to be a hero.
Dec 28, 2012 5:32PM

Hey reeffer...what story are you talking about that "Americans" are not buying?  Not buying that you can't spend your way out of debt?  Not buying that you can't tax a country into prosperity? Not buying that if you confiscate ALL WEALTH.....not just the wealthy's money....EVERYBODY'S money, every last dime and asset of every living sole in this country it WILL NOT be enough to pay off the debt and will only fund the government less than a year?

If that's what you're talking about, you are right, we ain't buying it!   By the way, conservatives and republicans are MORE AMERICAN than any fool who thinks this idiot in chief has the best interest of the country at heart.

Dec 28, 2012 6:30PM

The colective sleaze that constitutes government, local, federal, and state, but especially federal, would make Caligulas reign blush. The deception and lying that is the norm while trying to get reelected is a disgrace. I have become convinced that  only a catastrophic fiscal/economic meltdown will bring us to our senses. Patching up our crisis with fed and treasury manipulation will do nothing to start a real long time recovery and politicians attempts to disguise the looting of Americas wealth, whats left of it, with tricky accounting and slogans like spending reductions, which are only proposed slowing of spending, are simple lies. But with a simple uninformed populace, they get away with it.

If you sit with a note pad and add the defecits anounced each day, from the post office to Fannie/Freddie, Amtrak, cities, states, union pensions etc, $16 trillion is pocket change.

Anyone that believes our current admin and their cohorts have any interest in restoring solvency to our nation is in denial. Start paying attention to their actions, not their rhetoric.

Unfortunately the takers will not pay attention until they get the letter stating THEIR IS NO MORE MONEY, WE ARE BROKE, AND CONSEQUENTLY, SO ARE YOU!

Dec 28, 2012 5:56PM

Welcome to Obamaville.  Four more years of a terribly expensive, very bad dream.

Dec 28, 2012 5:59PM
I could have predicted this 5 day loss because W/S always gets bent out of shape because of the budget!!!!! Wall Street is so predictable it's not even funny!  I hate to say this but it's easier for the government to do nothing then to really have to work to straighten things out. If they raise taxes then they don't have to try and fix the budget.  Plus they can do what most school districts do to the elderly.  If you don't like the taxes either vote us out of office or sell your home and go into a retirement community. Find me one person who would win an election for the school board who promised to get taxes lowered by lowering expenses? Plus, when does our government say they are going to lower their expenses that only effects the people who work for the government versus those expenses that effect the common folk?  NEVER, NEVER and MORE NEVER!!!!!!
Dec 28, 2012 6:11PM
we  need to try the whole senate and congress for treason for what they have done to the American economy
Dec 28, 2012 5:32PM
The politicians know we are beyond the point of insolvency as a nation and will only extend and pretend with every policy decision. If left to it's own forces without the massive intervention we have today, the correction in the market would be an epic event.
Dec 28, 2012 7:40PM
Dec 28, 2012 7:36PM
only reason he got elected is because the non working class voted him in and they outnumber the responsible person/persons. why vote for romney he wants us to work for our money obama want to pay us not to work what a joke of a country at least this issue of the country. these politicians dont know whatits like to not have medical insurance or a budget that cant be met as if our budgets dont line up we stress out they just rase taxes
Dec 28, 2012 5:21PM

I expect a little more then a punt...Maybe an extra point that hits an upright and teeters on the crossbar.

With a flag....

Next week should show us an end run going for the two...

If that doesn't happen, we are stuck on the one;  Going the opposite direction.


Hail Mary..............hail.

Dec 28, 2012 7:48PM
Dec 31, 2012 5:36PM
Nice rally to close the year but nothing has been solved...Do not be surprised if we have a total reversal on wednesday....Just remain cautious, nothings is said and done....Hope everyone has a very healthy and happy 2013. Until next year folks.
Dec 31, 2012 4:08PM
A long hour still to go, with these libtards in Washington everything is possible...Do not take anything for granted....Manipulators anxious to pull the trigger....Be careful...More after the close.
Dec 31, 2012 11:34AM

Of course most people down here have an eye on Washington and the other one on what's going on here on the floor...Scumbags ready to hear what they want to hear so they can start selling off...Hopefully these crooks will be disappointed....Oh well, things not looking too good but, its just a waiting game for now...Be careful...More later.

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