The Week Ahead: More Noise Than Signal Regarding Fiscal Cliff

This week will provide the usual flow of data, some political posturing, and more than the typical quota of speeches.

Expect more noise than signal!

• Congress resumes the lame-duck session. There will be plenty of talk, followed breathlessly by the pundits.
• Lobbying groups are joining in to influence the fiscal cliff debate.
• The Fed is out of the "quiet period" and participants will be on the speech circuit.
• Data will continue to show the effects of Sandy.

The BLS new investor resource page -- a starting point for the long-term investor. (Comments and suggestions welcome. I am trying to be helpful and I love feedback. We have a good discussion going on bonds versus funds, and I plan a separate article that will provide a further forum.)

Final Thoughts on a Week of Noise

I have been speaking with many intelligent people who are reaching the wrong conclusion about current problems. Most people see the current issues as a replay of the debt ceiling debate of last year -- same players after the election, and they sound the same on TV.

I also see many people whose minds are closed to changing data -- Europe, China, and housing. Those who are unwilling to focus on data, as I recommend each week, can always find commentary to support their positions.

We actually now have more clarity on the fiscal cliff issues. Here is what I see:

• A resolution to tax issues that will cover at least the entire calendar year of 20

13. This will include the Alternative Minimum Tax, the "doc fix" for Medicare adjustments, and the extension of Bush-era tax cuts.

• Despite the more extreme comments, everything is on the table. The revenue package will include more from the very rich, but the dividing lines and rates could be something you have not even heard yet. I expect capital gains and dividend taxes to peak at 20-25%
• Some of the longer-term changes in spending and entitlements may get very hard targets right now, with the opportunity for the new Congress to fill in the details.
• This could all happen very quickly. It is NOT like last year. There are specific consequences for individual taxpayers, not just a general principle like the debt ceiling or a recession. Congress also wants to adjourn before Christmas.

My conclusions are based on watching and reading dozens of reports. There has been plenty of action behind the scenes. The incentives have changed for all of the participants. Those who do not see the difference just don't know what to watch for.

I continue to expect that the resolution to these issues will provide comfort for businesses who are holding back on investment and hiring.

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Written By: Jeff Miller