Download Plop, Plop, Fizz, Fizz Oh, What a Relief It Is

Plop, Plop, Fizz, Fizz
Oh, What a Relief It Is
As the bells rang in the 2013 New Year, our esteemed leaders in Washington were putting the final touches on
legislation designed to avoid the Fiscal Cliff (or as we referred to it The Perfect Storm). And in the coming days and
weeks while they were collectively patting themselves on the back, the gritty details emerged. The President got
nearly $650 billion in new taxes from an increase in taxes on the wealthy (defined as $450,000 in joint income) and
ending the payroll tax holiday for working class Americans. As for the Republicans? Well they lived to fight
another day as the biggest issues (Sequestration and the debt ceiling) were kicked down the road…all the way to
March 2013.
But in true Washington fashion, the 157 page bill was full of tax breaks for special interest groups. The
Congressional Joint Committee on Taxation puts the tab on these tax breaks at $63 billion in 2013 alone. Among
the tax breaks:
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Tax breaks for offshore loans. This in effect rewards loaning money to foreign companies rather than
American firms.
Tax breaks for offshore jobs. Gives big tax breaks to American companies that sell goods through foreign
affiliates.
Luxury buildings in New York City. Tax free financing is extended to an area around the former World Trade
Center. A large portion of this break has been used by developers to build luxury apartments.
Hooray for Hollywood. Special tax rules are extended for movies and shows that are projected to cost the
US Government between $250-$300 million this year.
From railroad cars to wind farms to hedge funds to taxes on rum in Puerto Rico and the Virgin Islands, there is a
handout for everyone. NASCAR track owners even got in on the fun as they are now allowed to speed up the writeoffs on speedway development …sorry the pun was too easy to pass up.
And how did the financial markets react? In the late 60’s and 70’s it was a character named Speedy who reminded
us what to do when we had stomached something we shouldn’t have; Plop…Plop…Fizz…Fizz oh what a relief it is. So
the markets took 2 Alka Seltzers and rallied to new highs, relief overriding reason.
Even more puzzling, the Labor Department reported that we added nearly 450,000 jobs in November and
December (in the middle of 24/7 reporting of the Fiscal Cliff upcoming collapse) and the Department of Commerce
reported our nation’s economy (measured as GDP) contracted in the 4th quarter, meaning a recession could be just
around the corner!
So what are we to believe…the markets, the jobs report, or the GDP report? The truth is always somewhere in the
middle. The stock market is getting ahead of itself, it is almost impossible for me to believe the jobs numbers, and
the economy is not headed for recession. As I stated in earlier reports, I believe the economy will be slightly better
in 2013 than 2012, as 2012 was slightly better than 2011.
For the economy to take off we need certainty from Washington. For now the only certainty we are getting from
our political leaders is the equivalent of chicken wings, pizza, philly cheese steaks, French fries, and ice cream…all
at one sitting. It might look good on the plate and smell good, but the after effects are brutal.
Think I will keep the Alka Seltzer at my side. Plop…plop…fizz…fizz. Oh what relief we need.
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