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 5:54PM
The blame falls square on the shoulders of Boehner.  The uber rich need to pay more taxes (>$250K).  Period.
Dec 28, 2012 5:54PM

if only we could punt you, your fckd up messiah obama, reid, pelosi and every communist scumbag that has caused this "cliff" disaster off that cliff!!, this is an entire democrapic disaster, the democraps own this mess, that idiot john boehner is just bendin' over and goin' along with it, so no surprise there, he may as well be a democrap himself, totally useless!! but as long as you dirtbag libs burn with the rest of society now, it's all good, you've gained nothing having this black bitch re-elected, NOTHING!! and guess what mid class AMerica! you're gonna get hammered with new taxes, not the RICH, but the MID CLASS as well, enjoy!

Dec 28, 2012 5:39PM
Hey, Mirhaydari: What happens if we just "punt" you off the cliff? "Markets Soar!"
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 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 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 5:21PM

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 5:19PM

Why can't the Republican Conservatives understand that Americans are not buying their story.  The country elected President Obama knowing what he believed in but the Conservatives don't seem to understand that. Our President has come more than half-way to meet the Republican Conservatives demands but it seems to make no difference. Anyone with any intelligence knows that we have to decrease spending and to increase revenue.  It is time for everyone to work together and to fix the problems that this country faces. 



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.
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