The Fiscal Swerve?

Leading up to New Year’s Eve, there was much ado about nothing the January 1st deadline for striking a deal on the fiscal cliff. Congress, dysfunctional and frequently misguided though they are, knew better. Yes, the economic consequences were going to be dire in the long run had a deal not been hammered out, but to hear the media talk about it, one would have thought that U.S. GDP would have been immediately decimated. In reality, the projections being passed around as disaster porn would have played out over the course of a year or longer, and Congress knew it. No, January 1st didn’t matter, and neither did those projections. Congress just needed to pass a deal prior to the markets opening today in order to prevent a -3% or greater risk off drop that would have backed them into a corner where political capital losses would have been even more steep. Fortunately for them, as the Washington Post reports, a deal was finally struck in the 11th hour:

Congress approved a plan to end Washington’s long drama over the “fiscal cliff” late Tuesday after House Republicans surrendered to President Obama’s demand to let taxes rise on the nation’s richest households.

The House voted 257 to 167 to send the measure to Obama for his signature; the vote came less than 24 hours after the Senate overwhelmingly approved the legislation.

Good news to be sure, and the markets are breathing a sigh of relief:

Source: Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.

So what did this magical deal look like?  The Washington Post continued (emphasis ours):

The bill will indeed shield millions of middle-class taxpayers from tax increases set to take effect this month. But it also will let rates rise on wages and investment profits for households pulling in more than $450,000 a year, marking the first time in more than two decades that a broad tax increase has been approved with GOP support.

The measure also will keep benefits flowing to 2 million unemployed workers on the verge of losing their federal checks. And it will delay for two months automatic cuts to the Pentagon and other agencies that had been set to take effect Wednesday.

In other words, the bill was, in many ways, a cop-out. Decisions were not made on the bigger issues; they were deferred. Discontent on the hill over the way negotiations played out is incredibly high. While the 113th Congress will tackle the delayed issues, much of the Congressional leadership will remain in place, and they’re in no mood to play nice. As Politico reported:

House Speaker John Boehner couldn’t hold back when he spotted Senate Majority Leader Harry Reid in the White House lobby last Friday.

It was only a few days before the nation would go over the fiscal cliff, no bipartisan agreement was in sight, and Reid had just publicly accused Boehner of running a “dictatorship” in the House and caring more about holding onto his gavel than striking a deal.

“Go f— yourself,” Boehner sniped as he pointed his finger at Reid, according to multiple sources present.

Reid, a bit startled, replied: “What are you talking about?”

Boehner repeated: “Go f— yourself.”

The harsh exchange just a few steps from the Oval Office — which Boehner later bragged about to fellow Republicans — was only one episode in nearly two months of high-stakes negotiations laced with distrust, miscommunication, false starts and yelling matches as Washington struggled to ward off $500 billion in tax hikes and spending cuts.

Happy new year? We’ll have to wait and see. Hopefully tempers won’t be running so high a month or so from now… or we could be back in the exact same spot.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

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