It would make sense to me that the Fed wants the US to go off the cliff to raise taxes and cut spending. Why cut a deal? If the Fed actually wants a deal and doesn't get it then I have no doubt they will intentionally let stocks fall to force negotiations again. That's how I'm playing this battle, going mostly cash into the EOY and beginning of '13.
interesting to me is that the so called fiscal cliff that we are facing is much less in spending cuts than republicans like ron paul were proposing and yet now republicans are out there crying that the sky is falling. I guess we are cutting into their corporate masters profit stream. cant have that.
Treasury should simply sell their securities directly to Wall Street. Cut out the middle-man (Fed). What happens to the Fed? Put a good pit trader in charge and it becomes a trading house.
Its too uncertain to do anything anyways. A lot of people I've spoken to recently are talking about holding cash going into next year. A few have talked about shorting equities, but I don't know about all that as things are too uncertain and anything can happen.
Umm, you do realize that both sides don't really want to cut spending. Both parties want to keep spending as high as possible, they just want to spend it in their own way...that is all. There really is no cuts involved, just what to spend it on.
Both sides need the controversy in order to keep the lobbying dollars flowing. If nothing is threatened, then there's no lobbying dollars needed to protect anything. The FED would be fine with going over the cliff in many ways...not the least of which is interest rates, which would likely fall to below 1.5% in the 10Y. This would reduce their need to buy as many Treasury securities in order to keep rates low.