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« Fiscal Cliff Notes: Interpreting the deadline news | Main | Analyzing the Fiscal Cliff Outcome »

December 29, 2012


Kevin Tan

Hi Jeff,
Happy New Year.

While the focus is on the cliff and Japan stimulus/yen/politics, something that may be overlooked at the moment is the stopping of federal guarantees on bank deposits. That may cause banks to tighten credit policy, which in turn lead to other trajectories.

Have you heard anything about that?


Mike C --

The Senate started with a revenue bill that had already been passed in the House. They then proposed what amounted to a complete substitute.

This is nothing new. It has been done many times in the past and cleared tests by the Supreme Court.

The Senate process is such that any single objector could have blocked this. One expert stated that Paul or Rubio might do so. Mostly Congress depends upon general agrement to get anything done.

The fact is that this compromise is the will of the vast majority of the people and also their representatives.

Extreme elements of both parties are disagreeing. The final deal actually reflects the power of minorities.

Those with a political/economic/investment agenda have actively misled people with information of the sort you are citing.

Good question!


Mike C

Given what it appears is going to take place later tonight, and your expertise in political science and the political process, I'm curious what you think of this:

Section 7.

All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.

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Sorry - did my last comment go through?

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What lies over the cliff indeed, will the dollar stretch as much as the euro had to and if not, what does that mean for the stock market?


Hi TK --

Those using the bungee jump metaphor (which I have borrowed here) are normally expecting a descent followed by a rapid rebound. None of us are predicting an extended period of oscillation:)

I'll take it up further, but I would be happy if we just get past the tax issues, which I see as the most threatening for the economy.

Thanks for the helpful question, and Happy New Year!



Hi Jeff,

Happy New Year! Forgive me if this is a duplicate. I tried posting it once and it disappeared:

I noticed you used the term "bungee jump" three times in this issue of WTWA. This implies several outcomes:

1. A precipitous drop followed by a rapid and violent rebound, or...

2. A precipitous drop followed by several undulations and an eventual settling near the bottom of the initial drop, or...

3. We misjudged the length of the bungee and the height of the cliff and, well...not good!

If we do go off the "cliff," do you see a "snap back" rally, a bottoming out, or worse?

Please base it on the outcome you feel is most likely to occur in the event we do go off the cliff.

Thanks as alway for taking the time to keep the rest of us informed with your valuable insight.



Hi Jeff, and Happy New Year!

i couldn't help notice you used the term "bungee jump" three times in this iteration of WTWA. "Bungee jump" implies several things: a rapid and violent decent with an equally rapid and violent "rebound" or severe undulations with a final settling near the bottom of the plunge.

If we do go off the cliff, do you expect a "snap back" or will we bounce around awhile and settle near the bottom?

I always look forward to your blog. Thanks for making me think and thanks as always for taking the time to provide your valuable insight.


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