Dave Gonigam

“This could be absolutely huge!” says Jim Nelson of our income desk.

Seldom does Jim indulge in exclamation points, so we sat up and took notice when he tipped us off to a “fiscal cliff” issue you won’t hear about from the financial media.

First, the essential background: Remember the Simpson-Bowles commission, the “blue-ribbon panel” appointed by President Obama to solve the debt-and-deficit issue once and for all?

Well, they didn’t, because they could never come to terms… but now White House and Congressional negotiators are dusting off Simpson-Bowles as they try to tiptoe back from the edge come Dec. 31.

Amid a laundry list of proposals to change the tax code, Jim has helpfully highlighted one for you…

“That single line has one of the largest areas of fixed-income investors petrified,” says Jim.

“Matt Posner, legislative coordinator at Municipal Market Advisors, had this to say: ‘In the Senate, even before this election, there was bipartisan talk already that this 28% idea had legs.’ The 28% Posner is referring to is the maximum amount of muni bond interest an investor can deduct from taxable income under some more recent, more detailed proposals.

“Any proposal that would put the tax-exempt status of municipal and state bonds into question could have absolutely devastating effects. Even if, as the Simpson-Bowles report stated, only new issues fall into this tax status, we’ll still see billions of dollars in withdrawals.

“After current munis mature, there will be nowhere to roll those investments into if new ones are taxable — that whole allure of munis is their tax exemption. And with the run-up of bond prices across the board, those current muni investors will just take their gains and move on.

“That’s just one more nail in the fixed-income coffin,” says Jim… but it also opens the door to some advanced income solutions on his radar.

Cheers,
Dave Gonigam

The preceding article was excerpted from Agora Finacial’s 5 Min. Forecast. To read the entire episode, please feel free to do so here.

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

Recent Articles

In the Downdraft of Hormegeddon

Bill Bonner

The economist Milton Friedman didn’t go far enough when he said, “Concentrated power is not rendered harmless by the good intentions of those who create it.” Oftentimes, that power is rendered more harmful -- to the point of Hormegeddon -- the better the intentions behind it. In today's essay, Bill Bonner highlights the conditions necessary for popular delusions and the disasters they lead to. Read on...


Addison Wiggin
Health Care Costs: Still the Pig in the Federal Python

Addison Wiggin

Right now, health care makes up about 25% of the federal budget. A scary statistic to be sure... But here's an even scarier one: health care's portion of the federal budget doubles roughly every 20 years. Yikes! Addison Wiggin explains why this is and what needs to change to prevent health care from taking up half the federal budget. Read on...


Six Signs Your Government’s Too Big

Chris Campbell

Is your government too big? Find out in today’s Laissez Faire Today with six “red flags” to look out for. Chris Campbell covers everything from one ObamaCare whistleblower to the strange case of our new Ebola czar. Read on…


McDisaster: Fast Food Is Dying – Make a Killing From It…

Greg Guenthner

McDonalds stock is getting crushed right now. Shares have been in a tailspin since June. But it’s not just Mickey Dee’s. Coca Cola shares are in freefall, too. Bad news for them. But if you want to rake in a pile of easy money, it could be great news for you. See, Americans just aren’t choking down this junk like they used to. The fast food burger, fries and a Coke are just down payments on an early coronary - and Type II diabetes. And everyone’s finally gotten the message. So how can you play the trend? Greg Guenthner explains…


In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...