You're watching...
Jim Bianco, Bianco Research president, on why he has little confidence that a deal can be reached on the fiscal cliff, and how it’s impacting the ma...
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
The being solidly higher since the president said yes he hopes to have a deal.
In place before Christmas wishful thinking well we'll -- for more on the market and its reaction.
Let's bring in Jim Bianco president of Bianco research Jim thanks -- for joining us.
So let's just start with the big picture here the market clearly at the mercy of the fiscal cliff and all the comments of the coming out on -- are you confident that a deal can be done before Christmas and have you see this playing out.
No I'm not confident a deal can be done during Christmas.
This fiscal cliff -- is the deal it was the deal to stop the debt ceiling negotiations from last year that created the super committee which did one of doing any thing.
-- -- -- -- -- -- -- -- -- -- -- -- -- And both sides are very die again and I don't think that there's going to be a deal that's where I -- I hope I'm wrong I hope they have a deal.
I also don't think the markets had really been focusing on this at all until the election so up until three weeks ago the markets were not discounting anything.
In terms of the fiscal -- And that's why every time John Boehner says something of -- president says something.
Our Harry Reid says something we get violent movements -- the markets you know only in the last couple weeks -- they finally starting to pay attention to this.
-- -- so we don't get a deal let's play this out.
Do you think punted to next year and we see a bunch of retroactive taxes put in -- place.
Are we gonna see any entitlement spending cuts and ideas already see this in the end.
Well there's two constituencies out there that you have to keep in mind the president won -- election and he feels he has a mandate and that's correct.
There's also the financial markets they matter to so.
If we -- -- no deal into January.
And the CBO's estimates are right now I have no reason to doubt that.
The economy takes a hit the financial markets take a hit.
And there's enormous pressure on everybody in Washington.
To stop the bleeding.
The markets are going down the economy's going down and then therefore I think they're gonna start to have pressure on -- the president as he sounded today.
Doesn't sound like he wants to really negotiate he won he wants the taxes on everybody over 250 to go walk the rate to go up he's got a -- ready to sign it.
Well unless the markets put pressure on -- he's gonna come off of that and that's why I think we're gonna have to watch for the markets to kind of tell us what's gonna happen next.
Jim we've seen rushed issue these special dividends now from a number of companies trying to -- serve a higher tax rates all the threat of a higher tax rates.
That you say will this comes with a risk what is that.
Yeah -- it's it's perfectly reasonable for all these companies to do this although we now.
-- taxes are gonna be a certain level for five more weeks and then we don't know what's gonna happen after that most likely they go up.
The money that they're issuing its special dividends is worth more now to give it to the shareholders -- after January 1 now.
The risk is if after January 1 in the economy starts to -- a little bit.
They're gonna wish they had that extra money to cushion themselves throughout the deed the future but you can't hold on -- -- meaning that it will be worth last.
Just because something might happen is a rational decision based on what we know now.
That they should be issuing special dividends congress put them in this position by not letting them know what the tax rates going to be in five weeks and they're reacting up for rationally to it.
And unfortunately it could be negative if the economy suffers and they don't have those cash questions going in the 2013.
Then you could -- of the market's really saying there's not going to be a deal right -- -- companies are coming out issuing these special dividends.
Pay -- so to speak because.
They don't think anything's gonna get done they think tac rate tax rates are going up already presuming that this thing is getting pushed off into -- -- thirteen.
Yeah I especially when you consider that most dividend owners are most people that receive dividends make more than 250000.
Are even more much more than that they're going to have their taxes go up.
So yeah I think that the market is assuming that tax rates up.
Are going to go up and and corporations are responding in kind to that right now they're not assuming that there's going to be -- to prevent no taxes from going up.
-- writes I believe Jim Bianco of Bianco research and thank you so much for joining us.
And as Jim points out thank you both sides very dug in on these issues and that's compromises to -- -- not working here very often on -- a couple of buildings and.
Market is presuming taxes are going up most of us are yet -- maybe DCCC.
Just.
Comes as little on Batman when they most of us -- kind of you know we're settled until it resigned to it -- -- unfortunately.
