Fiscal Cliff


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I was recently asked by the media relations people at CFP Board to provide some feedback on the Fiscal Cliff  that is so much in the news right now.  They expect the media frenzy on this issue to continue to escalate and wanted to be ready when reporters called with questions. They asked a series of questions and as I started to answer them I thought that I should share them with my faithful readers of Dan’s Two Cents.

Are you worried about the fiscal cliff?  Why or why not?

In the word’s of the immortal Alfred E Neuman , “What - Me Worry?” First, what good would it do? I cannot control it, change it or influence it. What will happen, if anything, will occur based on the action or inaction of two leaders in Washington. Neither has called to ask my opinion. Second, Neither of these two leaders gains by causing all the dire consequences you hear in the media. They may be stubborn but they are not stupid.  A deal will be struck that allows both sides to save face and come back to fight another day.

Are your clients worried about the fiscal cliff?  What are they saying and how are they coping with the uncertainty of a deal?

I haven’t had a single call or question so I would have to say that either they are not worried or, they don’t think that there is anything I can do to help. I do have smart clients.

What questions are your clients asking about the fiscal cliff?

They are not asking anything. That may be because every news broadcast has featured so much coverage of the issue that there isn’t much that hasn’t been covered.  I am waiting for the first network to mount a “Fiscal Cliff Countdown Clock” so we can know exactly how many days, hours and minutes remain until Armageddon.

Have you been advising any specific strategies (estate planning, investment, gifting) in light of the fiscal cliff?

I’ve long since learned “when in doubt, do nothing.” So given the uncertainty about where the compromises may appear, I have not come down from the mountain bearing a tablet with the best steps to take now. I’ll leave that to the personal finance magazines. I take a long-term view based on certain principles such as - Save More, Spend less, Diversify, Ownership beats Loanership, Costs Matter, and Don’t Let the Tax Tail Wag the Dog.

Have any clients requested you to take major action in their portfolios (i.e., selling, recognition of capital gains, deferral in realizing losses)? Have you recommended these types of major actions?  Why?

I have discussed harvesting capital gains with several higher income clients - those with the giant red target on their backs for future tax increases. But this is usually in connection with other asset allocation rebalancing decisions and not simply to avoid a possible increase in the rate.  It is just part of the discussion concerning the benefits of acting now versus the possible drawbacks that may result from tax reform that looks more like class warfare than economic reform.

“Nature abhors a vacuum.” And the financial press abhors the lack of a crisis. They need news and stories and drama to get us to watch, listen or read so the sponsors who pay the bills can sell us stuff we don’t want or need. There is a line in the Tennessee William’s play “Cat on a Hot Tin Roof” where Brick reminds Big Daddy about nature and a vacuum. I think Big Daddy had the right response, “That’s what they say, but sometimes I think that a vacuum is a hell of a lot better than some of the stuff that nature replaces it with.” 


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