Fiscal Cliff & More Nonsense

The lawsuit by Hedge Funds against Porsche for manipulating Volkswagen shares was dismissed in NY State Court, while the Feds is still going and in Germany they charged directors of Porsche with insider trading. The charts do not support any such manipulation – just sour grapes (see PDF Volkswagen-Porsche).

The real manipulations of our future continues in Washington. The markets are pausing because as usual the politicians are incapable of ever doing the right thing. Obama is hell bent on following France down the toilet and Boehner is going along for the ride.

House Republicans are hoping Obama may offer to extend the Bush-era tax rates for incomes under $400,000, which is where he was before negotiations blew up. Obama has been pushing for a threshold at $250,000 while Republicans insist that it be set at $500,000. Even France is 1 million Euro. The Republicans are also hell bent on raising taxes because they know there is no money.

Republicans are praying for an extension of the current estate tax, which is a 35 percent rate over a $5 million threshold. Obama wants a 45 percent rate on a $3.5 million threshold. However, even the congressional Democrats are afraid of this one.

Obama wants an extension of unemployment benefits and various tax breaks for businesses and lower-income workers. The Republicans do not want to include the infrastructure funding that Obama has requested to help “stimulate” economic growth, which of course it will not do. The current payroll tax cut is also due to expire, meaning that individuals would see larger withholdings in their paychecks.

If a deal is reached, this would delay sequestration, which if left in place would result in roughly $1 trillion in spending cuts over the next decade since both sides could not agree on what to cut. It would leave the debt ceiling issue unresolved just to keep the drama for the financial markets and the press to sell papers. The Republicans hope to keep this as leverage with the Democrats to secure additional spending cuts and entitlement reforms. Sources on the Hill say this will most likely take place keeping it politics as usual.