So, what about the Fiscal Cliff?

This week, we’ve published excerpts from the latest President’s letter. Yesterday, we discussed one business’s reaction to likely, upcoming tax code reforms and how some are taking advantage of the 2012 rates.

Let’s be clear; we are here to help you maximize your after-tax return. It is not for us to opine on tax policy, per se, but it is our job to assist you in seeking the best deal you can get, within the law, of course.

In our last letter we suggested that the same people in pretty much the same positions just might create a different result this time. And for a few days the market heard signals of flexibility and a commitment to work together to get things done. Then things took a turn for the worse.  We all know it looks bad right now. The two sides are miles apart, and we are hearing more talk every day of just going over the cliff and making political hay out of it, blaming the other guys. Nothing at all promising in the recent proposals. Is it time to worry, even panic?

Speaking of poor Roger (as opposed to poor Richard, who wrote an almanac), we caught some flak for a past letter in which we pointed out that raising the debt limit was not a true crisis, it was all show, just political theatre. And that it would end at midnight, kicking the can down the road, and not making the changes being demanded. Which is exactly what happened.

We are in a similar position now. Except that we are past the presidential election, which might change the calculus. I think it fair to say that any deal will be, as always with these people, a midnight deal. Posturing right to the deadline, then – well, we will see. Our thought is to be concerned; the issues here are certainly important. But discount most of what you hear for now, and wait to see what happens just before Congress adjourns. There is no point in letting all this posturing drive you crazy, we might as well get used to it, and learn to wait for the endgame to see what the result will be. Kind of like basketball, where most games are fairly close and all the decisive action occurs in the last two minutes.

Our point is simple: do not believe what you are hearing and don’t worry about the markets; none of us can guess the outcome or the market’s reaction to it. It might be bad, or really good, or no reaction at all. Or all of the above, in random order.

Even if we go over the Fiscal Cliff, all will not be lost. It will certainly be problematic, but you just never know how all this will work out. Maybe the “endgame” will not happen in mid December, but instead in January, as a response to “the cliff.” And it might work out well despite the drama.

Seriously, have a wonderful Holiday Season everyone! All our best to you and your families.


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So, what about the Fiscal Cliff?

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