Jason Bernabei: "The Fiscal Cliff & Recession Redux"

Jason Bernabei, TriCastle Realty

DEL MAR : December 3, 2012 – Good Monday morning Saaaaan Dieeegggo!!! The Holiday season is soon at hand, and that means time off from school for the kids, and hopefully a little time off from work for moms and dads. One thing it definitely means is that Congress will be taking their usual holiday break, and this year that could mean leaving a lot on the table, from The Mortgage Debt Relief Act sunset expiration of Dec. 31 to the Bush Tax Cuts, and of course the looming, ominous Fiscal Cliff(which is taking on an identity all its own).

As for this week on the bond and mortgage markets: well, they opened weaker this morning than they did late last week, with US stock indexes following all of Europe’s key markets upwards. Last Friday the 10 year note moved to 1.60%, and this morning came in at 1.64%. The 30 year MBS was down over 20 basis points to start the day.

Overshadowing the market activity of the week is the dreaded fiscal Cliff. All eyes on this growing, darkening, and all-encompassing entity of Terror, from whose heights no one can see the bottom when looking over the side. How to slay this monster? Well we can make it go back to the Netherworld from whence it came with the power of our political process in Congress, right? … Right? … Anyone?

If recent history has taught us anything, the Dems and Repubs in Congress are unlikely to agree on anything until the eleventh hour, that is, if they come to any agreement at all. With the bases of both parties hunkered down and hardened on key issues that will impact the magnitude of the so-called Fiscal Cliff, and whether we face it at all, the political stakes when weighed will be detrimental to which side of the bed we as a Nation wake up on come January 1^st, that is, if the monstrous Fiscal Cliff allows us to wake up at all(gulp!) 

Will the gridlock in Congress cause us to go over the Cliff, and tumble aimlessly to the untold depths below? It depends on who you listen to. If you listen to John Boehner over at the ole House of Representatives we are “just about nowhere” in realizing a compromise. One thing most everyone agrees upon is that going over the Cliff seems to mean Recession Redux, with tax hikes kicking in not only on just the wealthiest of the wealthiest Americans as the Dems propose, but on the middle and lower income earning classes as well. President Obama continues to wield the political capital earned over the recent Election season to insist on a bargain closer to his vision. The Repubs, and to no surprise, the Teapubs, are as obstructionist and obstinate as ever.

Jay’s Outlook: storm clouds rising out from over the Fiscal Cliffside

I'm going on record. There will be no “grand compromise” prior to the end of 2012. Expect a small extension(perhaps a fiscal quarter long?) on the Bush Tax Cuts and the Mortgage Debt Relief Act, and so another few months of duking it out, and watching the Fiscal Cliff grow in reputation, stature, and Legend. Until next time folks, Jason Bernabei, TriCastle Realty signing out...

Jason Bernabei, TriCastle Realty