Debt cliff and ceiling.

[Vanraw]

I'm posting this here because Im not looking for a political conversation on what color a banana is, or why people where fli flops...... The main question Im pondering is how to play the market in the coming 6 months.

I find it interesting that none of our president, congressional candidates are talking about the single most important issue facing America right now. The January 2013 financial cliff. Its amazing.

A couple of very nasty things are about to happen.

1. Bush tax cuts including things like AMT (worse tax ever) are going collapse and equal one of there largest middle class tax hikes in history.
2. Massive spending cuts will automatically kick in that will basically shut down the corporate welfare drug cold turkey probably causing the next major recession. This will however cut the deficit by some 550 billion.
3. The debt ceiling will still have to be raised as the debt is still going up and the ceiling will still be reached, or America will default on its credit.

In addition there is murmuring from both parties about tax code revisions in (2) Raise their prices outside the USA holes" like mortgage deductions are going to be removed in order to basically raise taxes on everyone as well. This will have a hung impact on housing.

This all happens if congress does nothing. From a political perspective they will probably act. The question is how. I suspect they will basically pass some law that extends the deadline. This is the sort of chicken shit stuff they have done in the past. Or they will pass a law that makes the law they passed on the financial cliff disappear.

There are a couple of different scenarios based on who wins the election, but I think the one thing we can count on is that congress wont act quickly. And the market will not like it. However I also think they will not allow the cliff to go untouched, nor will they allow the government to default.

So I think we will see some dramatic down turns as we approach the end of the year. There might be a pop right after the election, but come end of November and December, if congress has done nothing, the market is going to pull back hard.

[Grieve]

There is no way anything long term happens before the end of the year. Whoever wins, the other party is going to be bitter and hell and in no mood to work with the other. Best case is that they delay the cliff for 6 months and give tempers a chance to cool down. They need to do something next year, though, because I'm pretty sure posturing for 2016 is going to start very soon after the election.

I'm still hopeful we really into year end, but earnings have been pretty dire recently, especially in tech. Still, GDP was above expectations today, so that's something.

Hopefully the election will bring clarity, one way of the other, and so companies won't be able to use the "uncertainty" argument they have been giving for not hiring.