Steadfast FinancesHow Obama's Flip Flop on Bush Tax Cuts Screwed Fixed Income Investors

How Obama’s Flip Flop on Bush Tax Cuts Screwed Fixed Income Investors

Filed in ETFs , Investing 101 , Politics 2 comments

Like it or not, political policy, and the uncertainty it creates, is a major influence in the financial markets.

Case in point: the massive sell off in municipal bond funds and ETFs, in what is usually a historical snooze fest, over the last two weeks when President Obama caved to political pressure by extending the Bush tax cuts (or at least giving the impression he will).

Which, ostensibly, had the net effect of telling every high net worth investor, fixed income money manager and tax advantaged fund manager in the USA that they need not worry about tax sheltered investments, at least for the near term.

In other words, anyone seeking moderate fixed income returns don’t have to hide out in tax sheltered investments eking out mid single digit interest rates… and they’re free speculate/invest wherever they want without fear of those “government penalties”.

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Posted by CJ   @   17 November 2010 2 comments
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2 Comments

Comments
Nov 19, 2010
9:11 am
#1 ctreit :

Flip flopping has gotten a very bad reputation since Rove stamped Kerry with that distinction, but I don’t think it is that bad. Flip flopping aka compromising in this case gets things done. If everybody dug his and her heels in, negotiation becomes obsolete and nothing gets done. Besides, what is wrong with changing one’s opinion in the face of new evidence or a new reality?

Investing and life itself is full of uncertainty. I think we are delusional if we expect certainty from politics or financial markets or business activities in a capitalist system. Further, uncertainty itself may lead to flip flopping since none of us can ever be certain of anything. Some people would disagree with this statement, but rationally speaking we can’t say anything with certainty including statements about physical events, for example.

Nov 20, 2010
4:19 pm
#2 Matt SF :

I think my biggest critique of his “change of thinking” on the Bush tax cuts is the suddenness of the decision after the election.

I’m not a political strategist by any means, but even me and my elementary knowledge of beltway politics tells me this was a serious lapse of judgment not doing so BEFORE the November elections.

Since he was undecided about extending the cuts, he should have caved prior to the election, try to save as many Congressional seats as possible since Republicans made it a major crux of their campaign, and live to fight another day.

In my humble opinion, he became more the chess piece and got played on this one, instead of being a chess player and seeing the whole third person view.

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