Cliff Notes: Pride and Prejudice
With the fiscal cliff just a few short weeks away and Congress planning to pack it in for the holidays before that, there isn’t much time to work out a deal. The current state of negotiations has involved each side blasting the other’s proposal and then reverting to politics as usual. The Wall Street Journal went so far as to compare the negotiations to Lindsay Lohan, not a good sign for the millions of Americans worried about a tax increase and the budget deficit which is still on pace to top $1 trillion.
NO GOOD FAITH NEGOTIATING AT THE MOMENT
No Progress Made In Averting Fiscal Cliff As Politics Trump Policy:
“The Fiscal Cliff Negotiations Are At Such A Standstill That Not Even Aides To President Barack Obama And House Speaker John Boehner (R-Ohio) Talked Tuesday.” (Jake Sherman et al, “The Fiscal Cliff PR War,” POLITICO, 12/4/12)
Obama And Boehner Not Planning To Meet Any Time Soon. “And the way the White House sees it, there won’t be further face-to-face talks between the two leaders until Boehner says he’s willing to raise income tax rates. If you believe Boehner’s leadership team, it’ll be a long December because he’s nowhere close to caving on raising rates.” (Jake Sherman et al, “The Fiscal Cliff PR War,” POLITICO, 12/4/12)
House Speaker John Boehner: “Right Now I Would Say We’re Nowhere. Period. We’re Nowhere.” (Greg Clary, “Boehner ‘Flabbergasted’ At Fiscal Cliff Proposal,” CNN.com, 12/2/12)
Politics Trump Policy With Each Side Mocking The Other’s Proposal:
“The Fight Right Now Is All About Politics, Not Policy.” “In this high-stakes battle over trillions of dollars in budget cuts and tax increases, the lack of any visible movement shows the fight right now is all about politics, not policy. Obama and Boehner are locked in a struggle for public opinion, the weapon that provides the upper hand in the negotiations.” (Jake Sherman et al, “The Fiscal Cliff PR War,” POLITICO, 12/4/12)
- “Press Secretary Jay Carney Ridiculed Boehner’s Proposals As ‘Magic Beans And Fairy Dust.’” (Jake Sherman et al, “The Fiscal Cliff PR War,” POLITICO, 12/4/12)
- “Boehner Said He Was Shocked At Geithner’s Proposal To Republicans Last Week. ‘I Was Flabbergasted. I Looked At Him And I Said, “You Can’t Be Serious.” I’ve Just Never Seen Anything Like It,’ Boehner Said.” (Greg Clary, “Boehner ‘Flabbergasted’ At Fiscal Cliff Proposal,” CNN.com, 12/2/12)
The Wall Street Journal: “If the fiscal cliff talks make Lindsay Lohan look like a productive member of society, perhaps it’s because President Obama and John Boehner are playing by the dysfunctional Beltway rules.” (Editorial, “The Budget Baseline Con,” The Wall Street Journal, 12/4/12)
WILL POLITICS TRUMP THE AMERICAN PEOPLE?
Some Including The White House Willing To Go Over The Cliff For Political Reasons:
White House Willing To Go Over Fiscal Cliff To Prove A Point. “It may be just a bluff or a bargaining ploy, but the White House is signaling that President Barack Obama is willing to let the country go over the ‘fiscal cliff,’ a hard-line negotiating strategy aimed at winning concessions from Republicans on taxes.” (Julie Pace, “Obama Could Risk Going Over Cliff,” The Associated Press, 12/5/12)
“Call Them The Cliff Jumpers. A Growing Bloc Of Emboldened Liberals Say They’re Not Afraid To Watch Defense Spending Get Gouged And Taxes Go Up On Every American If A Budget Deal Doesn’t Satisfy Their Priorities.” (Seung Min Kim, “Fiscal Cliff: Will They Jump?” POLITICO, 11/25/12)
“Ending The Year Without A Deal Could Roil Financial Markets And Dent Consumer Confidence Just As The Economy Is Strengthening.” (Julie Pace, “Obama Could Risk Going Over Cliff,” The Associated Press, 12/5/12)
Spending Daily | December 5, 2012
Fiscal Cliff Fight “about politics, not policy” Right Now
Politico reports, “The fiscal cliff negotiations are at such a standstill that not even aides to President Barack Obama and House Speaker John Boehner (R-Ohio) talked Tuesday. And the way the White House sees it, there won’t be further face-to-face talks between the two leaders until Boehner says he’s willing to raise income tax rates. If you believe Boehner’s leadership team, it’ll be a long December because he’s nowhere close to caving on raising rates. In this high-stakes battle over trillions of dollars in budget cuts and tax increases, the lack of any visible movement shows the fight right now is all about politics, not policy. Obama and Boehner are locked in a struggle for public opinion, the weapon that provides the upper hand in the negotiations. The advantage, at this point, clearly belongs to Obama. Senior administration aides say the president doesn’t want to go over the fiscal cliff — but he’s willing to if Republicans don’t yield on tax rates.”
White House Signals Obama Willing to Go Off Cliff
The Associated Press reports, “It may be just a bluff or a bargaining ploy, but the White House is signaling that President Barack Obama is willing to let the country go over the ‘fiscal cliff,’ a hard-line negotiating strategy aimed at winning concessions from Republicans on taxes. If Washington really does fail to avert the looming series of tax hikes and spending cuts, the White House will portray Republicans as the culprits for insisting on protecting tax cuts for the wealthy, an effort the administration is laying the groundwork for now. ‘This is a choice of the Republican Party,’ said Dan Pfeiffer, White House communications director. ‘If they are willing to do higher rates on the wealthy, there’s a lot we can talk about. And if they are not, then they’llpush us over the cliff.’ … Of course, the White House warning could be a bluff, offered in the belief that Republicans are unlikely to back down on taxes unless they believe Obama is willing to go over the cliff.”
Obama Standing Firm on Tax Rates
Bloomberg reports, “President Barack Obama is hardening his stance in his first post-election confrontation with Republicans, declaring he will make no deal on the country’s fiscal future unless congressional leaders first accept tax-rate increases on top earners. During an appearance yesterday on Bloomberg Television, Obama’s first media interview since his re-election, the president paired his ultimatum on taxes with signals he is ready to make concessions to Republican House Speaker John Boehner’s calls for cuts to entitlement programs such as Medicare health insurance for the elderly. His demands on taxes and a public relations offensive to engage voters are a shift from Obama’s approach to the budget battles of the last two years, reflecting greater political leverage after his re-election and lessons the administration has drawn from past negotiations.”
Baseline Budgeting: It’s a Trap!
The Wall Street Journal editorializes, “If the fiscal cliff talks make Lindsay Lohan look like a productive member of society, perhaps it’s because President Obama and John Boehner are playing by the dysfunctional Beltway rules. The rules work if you like bigger government, but Republicans need a new strategy, which starts by exposing the rigged game of ‘baseline budgeting.’ Both the White House and House Republicans are pretending that their goal is ‘reducing the deficit,’ which they suggest means making real spending choices. They are talking about a ‘$4 trillion plan,’ or something, regardless of how that number is reached. Here’s the reality: Those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill’s ‘baseline’ has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms.”
Obama to Call for Increase in Debt Ceiling
Reuters reports, “President Barack Obama will renew his case for tax hikes on wealthy Americans to avert a year-end fiscal crunch and call for a smooth increase in the nation’s borrowing limit in a speech to a business group on Wednesday, a White House official said. … He will argue to corporate executives that it would hurt the nation’s economy to have another protracted political fight over raising the debt limit, the official said. … The statutory ceiling on U.S. Treasury borrowing is $16.4 trillion. The nation is expected to hit the legal limit near the year’s end, although it can tap emergency measures to stave off a default and keep the government running into early 2013. If Congress fails to raise the borrowing cap, analysts expect the Treasury would run out of options to avoid a default some time in the latter half of February.”
Obama May Consider Trading Entitlement Reforms for Tax Increases
According to The Hill, “President Obama rejected Speaker John Boehner’s (R-Ohio) $2.2 trillion deficit-reduction proposal on Tuesday while signaling he could consider entitlement reforms if congressional Republicans agree to higher tax rates for upper-income households. On entitlements, Obama avoided specific commitments, but said he would be ‘happy’ to look at ways to ‘strengthen’ Social Security and Medicare if Republicans agreed to higher rates on the wealthy.
Leading House Dem Urges His Party To Accept Entitlement Reforms
The Wall Street Journal reports, “A leading House Democrat said that the $2.2 trillion in budgetary savings in a plan released Monday by House Republicans wasn’t sufficient to tackle the country’s burgeoning budget deficits, while urging his fellow Democrats to accept substantial changes to major entitlement programs as part of a bipartisan agreement to avert the so-called fiscal cliff. Speaking at a weekly press conference at the Capitol Tuesday, Rep. Steny Hoyer (D., Md.), the House minority whip, said that the GOP plan wasn’t nearly large enough, contrasting it with the plan put forward by the Obama administration last week.” He added “that major changes to Medicare and Social Security such as increasing the eligibility age for the former and changing how inflation impacts benefits paid out through the latter may have to form part of a broad deficit deal to tackle the country’s fiscal woes. He said both sides needed to be ready to accept some of changes on spending and tax revenues they don’t support as part of a larger deal if one was reached.”
GOP Between a Rock and a Hard Place
According to the New York Times, “With President Obama insisting on higher tax rates for affluent Americans and winning public support for the idea, Congressional Republicans find themselves in an increasingly difficult political spot and are quietly beginning to look for a way out. Senior Republican leadership aides say they are contemplating a fallback position since a standoff over expiring tax rates will be portrayed by Democrats as evidence that the opposition is willing to allow taxes to rise on the middle class to keep taxes from rising on the rich — and their intransigence could mean taxes go up on rich, poor and middle class alike. The leadership officials now say that if no deal can be struck to avert the automatic expiration of all the Bush-era tax cuts and the onset of deep, across-the-board spending cuts, they could foresee taking up and passing legislation this month to extend the tax cuts for the middle class and then resume the bitter fight over spending and taxes as the nation approaches the next hard deadline: its statutory borrowing limit, which could be reached in late January or February. … But any move toward compromise with Democrats on fiscal issues quickly comes under attack from conservatives as a surrender and unsettles the rank and file.”
“Senate Passes $531 Billion Defense Budget”
The Associated Press reports, “The Senate overwhelmingly approved a sweeping, $631 billion defense bill Tuesday that sends a clear signal to President Barack Obama to move quickly to get U.S. combat troops out of Afghanistan, tightens sanctions on Iran and limits the president’s authority in handling terror suspects. Ignoring a veto threat, the Senate voted 98-0 for the legislation that authorizes money for weapons, aircraft and ships and provides a 1.7 percent pay raise for military personnel. After a decade of increasing Pentagon budgets, the vote came against the backdrop of significant reductions in projected military spending and the threat of deeper cuts from the looming ‘fiscal cliff’ of automatic spending cuts and tax increases. … Spending solely on the base defense budget has nearly doubled in the past 10 years, but the latest blueprint reins in the projected growth in military dollars.”
Moderate Dems Held Hostage in Tax Debate
The Hill reports, “Senate Democratic centrists, whom Grover Norquist describes as the ‘hostages’ in the tax debate, are lying low and keeping quiet about competing proposals from President Obama and House GOP leaders. These centrists have declined to endorse Obama’s opening offer to raise taxes by $1.6 trillion, twice the size of the tax increase most of them voted for in July. They have also held their fire on House Speaker John Boehner’s (R-Ohio) plan, released Monday, that would raise $800 billion in tax revenues and cut $1.2trillion in spending, which is closer to the ratio of the Bowles-Simpson plan popular with many of them this Congress. … Democrats running for reelection in swing- and Republican-leaning states know they will be pummeled by millions of dollars’ worth of attack ads from third-party groups for any votes they cast to raise taxes.”
President Obama’s Own Words
President Obama Once Admitted That ‘$1.2 Trillion In Additional Revenues… Could Be Accomplished Without Hiking Taxes — Tax Rates’
PRESIDENT OBAMA: “What we said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking taxes — tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.” (President Obama, Remarks At The White House, 7/22/11)
Zero Hedge – Toward the end of every year Goldman Sachs discloses what its top 10 or so thematic trades for the next year are. This is not to say that these trades perform better than others, or at all: the firm’s top trades for 2011 and 2012 were largely a dud. But for those interested which way Goldman is axed (i.e., always the opposite of what it recommends by definition) here are the first Top Trades for 2013 as just released by the Squid.
From Goldman Sachs
Longer-term structural views are expressed in our Top Trade recommendations. These are typically managed with a wide stop, and assessed on the basis of whether the fundamentals continue to support the medium-term investment theme.
- Stay short AUD/NOK, opened at 5.90 on 03 Dec 2012, with a target of 5.00 and a stop on a close above 6.35, currently at 5.88.
- Stay long risk (sell protection) on the CDX High Yield on-the-run index, opened at 506bp on 04 Dec 2012, with a spread target of 450 and a stop on a close above 550, currently at 516.
- Go long the Commodity Carry Basket (Crude, Corn and Base), opened at 100 on 05 Dec 2012, with a target of 112 and a stop on a close below 94, currently at 100.
Some detail on the Commodity Carry Basket:
The Commodity Carry Basket: Crude, Corn and Base (CCB)
To take advantage of this increasing carry in key commodity markets, we recommend opening an equally weighted position in GSCI-style rolling front month indices in petroleum, corn and, for base, copper less aluminum.
Crude: long the S&P GSCI® Petroleum Index
Corn: long the S&P GSCI® Corn Index
Base: long the S&P GSCI® Copper Index against short the S&P GSCI® Aluminium Index*
Studio: New Line Cinema (Warner Bros. Pictures)
Director: Peter Jackson
Screenwriter: Fran Walsh, Philippa Boyens, Guillermo del Toro, Peter Jackson
Starring: Ian McKellen, Martin Freeman, Cate Blanchett, Orlando Bloom, Ian Holm, Christopher Lee, Hugo Weaving, Elijah Wood, Evangeline Lilly, Andy Serkis, Richard Armitage, John Bell, Jed Brophy, Adam Brown, John Callen, Luke Evans, Stephen Fry, Ryan Gage, Mark Hadlow, Peter Hambleton, Barry Humphries, Stephen Hunter, William Kircher, Sylvester McCoy, Bret McKenzie, Graham McTavish, Mike Mizrahi, James Nesbitt, Dean O’Gorman, Lee Pace, Mikael Persbrandt, Conan Stevens, Ken Stott, Jeffrey Thomas, Aidan Turner, Billy Connolly
Genre: Adventure, Fantasy
MPAA Rating: Not Available
Official Website: TheHobbit.com
Review: 6/10 rating
DVD Review: Not Available
DVD: Not Available
Movie Poster: One-Sheet | Comic-Con Poster | Poster | Wallpaper
Production Stills: View hereComing Soon – Plot Summary: “The Hobbit: An Unexpected Journey” follows title character Bilbo Baggins, who is swept into an epic quest to reclaim the lost Dwarf Kingdom of Erebor, which was long ago conquered by the dragon Smaug. Approached out of the blue by the wizard Gandalf the Grey, Bilbo finds himself joining a company of thirteen dwarves led by the legendary warrior Thorin Oakenshield. Their journey will take them into the Wild; through treacherous lands swarming with Goblins and Orcs, deadly Wargs and Giant Spiders, Shapeshifters and Sorcerers. Although their goal lies to the East and the wastelands of the Lonely Mountain, first they must escape the goblin tunnels, where Bilbo meets the creature that will change his life forever… Gollum. Here, alone with Gollum, on the shores of an underground lake, the unassuming Bilbo Baggins not only discovers depths of guile and courage that surprise even him, he also gains possession of Gollum’s “precious” ring that holds unexpected and useful qualities… A simple, gold ring that is tied to the fate of all Middle-earth in ways Bilbo cannot begin to know.