The "Fiscal Cliff." What to do?

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Re: The "Fiscal Cliff." What to do?

Postby VictoriaF » Thu Dec 27, 2012 5:06 pm

The markets have mostly recovered by the end of the trading day. Perhaps, we are now over the hill ... er cliff?

Victoria
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Re: The "Fiscal Cliff." What to do?

Postby STC » Thu Dec 27, 2012 5:09 pm

VictoriaF wrote:The markets have mostly recovered by the end of the trading day. Perhaps, we are now over the hill, er cliff?

Victoria


Perhaps. Perhaps not. Either way, won't change what I do on what I can control.
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Re: The "Fiscal Cliff." What to do?

Postby chaz » Thu Dec 27, 2012 5:11 pm

Don't panic - stay the course.
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Re: The "Fiscal Cliff." What to do?

Postby Xanadu » Thu Dec 27, 2012 5:14 pm

...I'll load up on popcorn and enjoy the show.


or maybe a clif bar instead? :D

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Re: The "Fiscal Cliff." What to do?

Postby nisiprius » Thu Dec 27, 2012 5:17 pm

Since the topic is a cliff, and since the action in "The Catcher in the Rye" takes place at Christmas time, let me offer this:
"I keep picturing all these little kids playing some game in this big field of rye and all. Thousands of little kids, and nobody's around– nobody big, I mean–-except me. And I'm standing on the edge of some crazy cliff. What I have to do, I have to catch everybody if they start to go over the cliff–-I mean if they're running and they don't look where they're going I have to come out from somewhere and catch them. That's all I'd do all day. I'd just be the catcher in the rye and all. I know it's crazy, but that's the only thing I'd really like to be. I know it's crazy."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: The "Fiscal Cliff." What to do?

Postby larryswedroe » Thu Dec 27, 2012 5:20 pm

http://www.cbsnews.com/8301-505123_162- ... cal-cliff/

My thoughts

Just wrote another piece this morning, hopefully will be posted in next few days, it's in a queue

Best wishes
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Re: The "Fiscal Cliff." What to do?

Postby ResNullius » Thu Dec 27, 2012 6:04 pm

sscritic wrote:
Leif Eriksen wrote:I'm a bit surprised that is an allowed topic, but since it was posted by Taylor I guess it is.

Taylor is no longer a moderator. He has the same right to break the rules as any of the rest of us. :)

viewtopic.php?p=1490921#p1490921

[Please read the words I wrote, not the words I didn't]


Yeah, I too thought this was a somewhat political topic. I've been barred from the Board many times for topics and comments that were much less political in nature. Taylor, more power to you. Keep on keeping on. Expect nothing, take what you can get.
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Re: The "Fiscal Cliff." What to do?

Postby baw703916 » Thu Dec 27, 2012 6:14 pm

VictoriaF wrote:The markets have mostly recovered by the end of the trading day. Perhaps, we are now over the hill ... er cliff?

Victoria


Hopefully the market timers went to 100% equities at precisely 2:30 pm.
Most of my posts assume no behavioral errors.
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Re: The "Fiscal Cliff." What to do?

Postby The Wizard » Thu Dec 27, 2012 6:16 pm

ResNullius wrote:Yeah, I too thought this was a somewhat political topic. I've been barred from the Board many times for topics and comments that were much less political in nature. Taylor, more power to you. Keep on keeping on. Expect nothing, take what you can get.

I don't agree.
The underlayment of the topic is certainly political, but wisely, we've not been exploring that.
The issue has become a Media Event and we are discussing personal investment responses to that, which is allowed...
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Re: The "Fiscal Cliff." What to do?

Postby Sidney » Thu Dec 27, 2012 6:23 pm

The Wizard wrote:
ResNullius wrote:Yeah, I too thought this was a somewhat political topic. I've been barred from the Board many times for topics and comments that were much less political in nature. Taylor, more power to you. Keep on keeping on. Expect nothing, take what you can get.

I don't agree.
The underlayment of the topic is certainly political, but wisely, we've not been exploring that.
The issue has become a Media Event and we are discussing personal investment responses to that, which is allowed...

Plus, the cliff is composed of existing tax and other laws.
I always wanted to be a procrastinator.
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Re: The "Fiscal Cliff." What to do?

Postby Beagler » Thu Dec 27, 2012 6:26 pm

One issue I haven't seen addressed: many paychecks will be smaller in the face of expiration of current tax rates, plus new Obamacare taxes: are all investors planning to continue to fund their 401(k)/403(b) and similar plans at their current levels?
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Re: The "Fiscal Cliff." What to do?

Postby rr2 » Thu Dec 27, 2012 6:32 pm

Beagler wrote:One issue I haven't seen addressed: many paychecks will be smaller in the face of expiration of current tax rates, plus new Obamacare taxes: are all investors planning to continue to fund their 401(k)/403(b) and similar plans at their current levels?

No, we do not plan to contribute at current levels. Instead, we are planning to increase funding our 401k and IRAs up to the new limits.
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Re: The "Fiscal Cliff." What to do?

Postby umfundi » Thu Dec 27, 2012 6:42 pm

I think, as much as ever, the doctrine is: Diversify and then sit tight. Whatever is known is factored in the markets, we do not have any special knowledge.

Stay the course.

Keith
Déjà Vu is not a prediction
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Re: The "Fiscal Cliff." What to do?

Postby livesoft » Thu Dec 27, 2012 6:42 pm

At least next week we will be able to ask questions about the current tax laws again. :twisted:
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: The "Fiscal Cliff." What to do?

Postby NYBoglehead » Thu Dec 27, 2012 6:49 pm

Starbucks baristas are now putting "come together" on the coffee cups. Now that this has happened I can rest easy knowing it will be resolved. Thank you, Starbucks. The good news for them is this is only their second worst idea in the past few years, after soliciting donations that would be used to help the economy.
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Re: The "Fiscal Cliff." What to do?

Postby Blue » Thu Dec 27, 2012 6:53 pm

The market does not seem to be worried. S&P500 down 0.12% today.
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Re: The "Fiscal Cliff." What to do?

Postby lloydbraun » Thu Dec 27, 2012 6:57 pm

I'm 33 years old, I'm staying the course. In fact my wife and I are opening up Roth IRAs this week. The "fiscal cliff" is not a big deal unless nothing gets done within the next 3-6 months and even then it would likely have very little impact on developments 20-30 years down the road. In fact Ken Rogoff's and Carmen Rienhart's book on financial crises shows that even severe crises tend to have 5-10 year impacts (like the 2007-08 crisis) but countries often return to normal growth after that and the crises they talk about are far more severe than the current fiscal cliff.
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Re: The "Fiscal Cliff." What to do?

Postby umfundi » Thu Dec 27, 2012 7:02 pm

livesoft wrote:At least next week we will be able to ask questions about the current tax laws again. :twisted:

Well, we know what the current law is. And, assuming Congress will be ineffective and do nothing is hardly speculation. :P

But, seriously: I can see no actionable strategies. Something will happen, we do not know what.

Keith
Last edited by umfundi on Thu Dec 27, 2012 7:14 pm, edited 1 time in total.
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Re: The "Fiscal Cliff." What to do?

Postby kenyan » Thu Dec 27, 2012 7:05 pm

lloydbraun wrote:I'm 33 years old, I'm staying the course. In fact my wife and I are opening up Roth IRAs this week. The "fiscal cliff" is not a big deal unless nothing gets done within the next 3-6 months and even then it would likely have very little impact on developments 20-30 years down the road. In fact Ken Rogoff's and Carmen Rienhart's book on financial crises shows that even severe crises tend to have 5-10 year impacts (like the 2007-08 crisis) but countries often return to normal growth after that and the crises they talk about are far more severe than the current fiscal cliff.


Sure, Lloyd. You may look all put together on the outside, but one day all those suppressed feelings of panic and rage will erupt out of you. Serenity Now!

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Re: The "Fiscal Cliff." What to do?

Postby chaz » Thu Dec 27, 2012 7:06 pm

Possibilities in an article:

[link removed because it contained political content]
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Re: The "Fiscal Cliff." What to do?

Postby lloydbraun » Thu Dec 27, 2012 7:10 pm

[quote="kenyan"][quote="lloydbraun"]I'm 33 years old, I'm staying the course. In fact my wife and I are opening up Roth IRAs this week. The "fiscal cliff" is not a big deal unless nothing gets done within the next 3-6 months and even then it would likely have very little impact on developments 20-30 years down the road. In fact Ken Rogoff's and Carmen Rienhart's book on financial crises shows that even severe crises tend to have 5-10 year impacts (like the 2007-08 crisis) but countries often return to normal growth after that and the crises they talk about are far more severe than the current fiscal cliff.[/quote]

Sure, Lloyd. You may look all put together on the outside, but one day all those suppressed feelings of panic and rage will erupt out of you. Serenity Now!

:beer[/quote]

Never mind "Serenity Now", I'm still trying to get over the Dinkins campaign!
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Re: The "Fiscal Cliff." What to do?

Postby VictoriaF » Thu Dec 27, 2012 7:11 pm

lloydbraun wrote:I'm 33 years old, I'm staying the course. In fact my wife and I are opening up Roth IRAs this week. The "fiscal cliff" is not a big deal unless nothing gets done within the next 3-6 months and even then it would likely have very little impact on developments 20-30 years down the road. In fact Ken Rogoff's and Carmen Rienhart's book on financial crises shows that even severe crises tend to have 5-10 year impacts (like the 2007-08 crisis) but countries often return to normal growth after that and the crises they talk about are far more severe than the current fiscal cliff.


We don't know yet what the fiscal cliff will entail. Early next year most working people will receive a reduced paycheck. After paying for necessities, their discretionary spending will be significantly reduced. Here is an example:

Let's say someone brings home $3,000 net. He pays $1,500 for housing and utilities, $500 for food, and $300 for transportation, the total of $1,500 + $500 + $300 = $2,300. This leaves him $700 in discretionary spending. The fiscal cliff reduces his paycheck by 5%, which is $3,000 x 0.05 = $150. While the mandatory expenses remain at $2,300, the discretionary spending is reduced by over 30% from $700 to $550. If discretionary spending of many people is reduced by 30%, what will happen to businesses and to the economy? Who will be creating new jobs, or preserving old jobs for that matter?

Victoria
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Re: The "Fiscal Cliff." What to do?

Postby lloydbraun » Thu Dec 27, 2012 7:22 pm

Victoria, I can't give a detailed answer to your question out of respect for the forum's rules on political and economic policy discussions, but the congressional research service and the congressional budget office have put out reports on these issues and the consensus is that the cliff is more of a hill and that even in the worst case scenario, the long run prognosis will not be significantly altered as most middle class Americans pay less income tax than in 1980 and we know that most higher income Americans pay significantly lower rates today than in the 1990s. Neither decade was particularly terrible for investors or the economy. There's a lot of gloom and doom out there, regardless of political affiliations, but nobody is predicting that the fiscal cliff will lead to a depression. Ironically some writers who are basically modern day adherents of the Austrian school continue to predict inflation but the more probable result of the fiscal cliff is slight deflation, based on a short-term lack of aggregate demand.
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Re: The "Fiscal Cliff." What to do?

Postby Bungo » Thu Dec 27, 2012 7:26 pm

I don't plan any adjustments except a possible rebalance if appropriate. Asset allocation will remain unchanged.
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Re: The "Fiscal Cliff." What to do?

Postby jvclark02 » Thu Dec 27, 2012 7:31 pm

.........and this too shall pass. I'm staying the course
Experience is something you gain shortly after you really needed it.
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Re: The "Fiscal Cliff." What to do?

Postby user5027 » Thu Dec 27, 2012 7:34 pm

What to Do?

Take a cruise. :D
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Re: The "Fiscal Cliff." What to do?

Postby Mel Lindauer » Thu Dec 27, 2012 7:36 pm

Time to lock. Several political links posted in this thread already and we Mods have had to spend way too much time moderating this thread.
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