Wes Moss: Don’t be distracted by Super Committee

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Think the markets have been unpredictable so far this year? You ain’t seen nothing yet. As the 2012 political season ramps up, Washington is sure to add to the insanity with the two parties battling to win over voters and special interest groups. Some might wonder whether they should head for a safe harbor until the political seas calm down.

Believe me, I understand that frustration. Still, it’s a bad idea to modify a carefully devised long-term investment plan based on short-term developments. If you allow yourself to be distracted by the latest headline from Europe, newest economic report or most recent juvenile antic from Washington, you will never achieve your investment goals. And you’ll drive yourself crazy – after all, something ridiculous comes out of Washington just about every day.

And things will only get crazier this week. Congress’ bi-partisan “Super Committee” is currently tasked to find $1.5 trillion in deficit reductions (spending cuts and/or tax increases) by Wednesday.

Nearly any outcome of those deliberations will impact the market in the short term. The committee’s failure to reach an agreement would likely cause stocks to tumble, at least briefly. A hollow deal that consists of cuts in areas already slated for reduction (military spending in Iraq, for example) would also be greeted negatively. That unfavorable response might even include yet another cut in the government’s credit rating.

Oddly, a recommendation to raise some taxes could cheer the market, especially if the increases are modest and are part of a deal to retain the Bush tax cuts, which are set to expire next year.

The Money Matters team thinks there is a likelihood some reductions will be made and whatever is leftover will roll into the automatic cuts mandated by the law that raised the debt ceiling and created the Super Committee — not a terrible outcome for the markets. We also see a chance for tax and entitlement reform, which would be viewed positively by investors.

It is important for you, as a citizen, to stay informed on how our country is managing its finances. But it is equally important that you, as an investor, don’t over-react to the latest developments. Investing is like canoeing down a river full of rapids. You need to chart a careful course, hold on tight, and understand that there’s always more turbulence ahead. If you keep pulling the boat out of the water in an attempt to avoid the rough water, it will take you twice as long to get to your objective.

Do you think there is any chance of a “Grand Plan” or that comes up with the full $1.5 Trillion? Beyond the $1.5 Trillion?

– By Wes Moss, for Atlanta Bargain Hunter

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6 comments Add your comment

Jack

November 21st, 2011
7:02 am

Those on the Super Committee want to keep their jobs: Their decisions will have nothing to do with what’s best for the country.

Toby

November 21st, 2011
7:54 am

I don’t know what will happen, but the committee should not balance the budget by cutting such important programs: 70% of Republicans, and an even higher percentage of Democrats & Independents do not want law makers to give lower tax rates to the richest in the US while cutting Social Security, Medicaid or Medicare. The Republican platform is, thus, a fringe platform because it proposes to exactly what most people don’t want: we want millionaires & billionaires to pay their fair share of taxes & we don’t want cuts to Social Security (which has a surplus of funds to last 25 years) or Medicare or Medicaid. We’re in this mess because of two unfunded wars & because of a lack of regulation allowed big banks & big investment firms to take the world economy down; we’re not in a mess because of Social Security or Medicare or Medicaid & those programs save lives. We should balance the budget by moving that 18% tax rates of the richest (much of which is avoided via loopholes & accounting anyway) up to at least the 24% rate paid by people who earning a few hundred thousand & by asking mega-corporations like Bank of America & GE to taxes (they paid none last year)… not by hurting middle class & working class people by taking away their social safety nets.

Aware

November 21st, 2011
8:00 am

Toby hasn’t realized that the Congress, both Republicans and Democrats, has approved of the fiscal condition we are in, through its budgets and current non-budget approval or lack thereof.

Buzz G

November 21st, 2011
8:13 am

Don’t worry. There will be no spending cuts. This nation is addicted to government over-spending and just like someone who needs to get his next fix of heroine, we will lie, cheat and steal to get it. There are 47 million people on food stamps, we collect unemployment for 2 years and have more government agencies than anyone can even name. $16 trillion in debt? Don’t worry. We are heading for more. Government at all levels takes nearly half of all we produce, and yet that is not enough and we are borrowing more every day.

The spending will continue until no one will lend the government any more money and then we will roll out the printing press and crank out those hundred dollar bills until the printer begins to smoke.

One day soon we will have to bring a $1,000,000,000,000,000,000,000,000.00 bill to buy a gallon of gas and the bill will have Obama’s picture on it.

jayone

November 21st, 2011
8:25 am

Toby Thank you for that writing that statement, it is so correct.

Buzz G: Somewhere in your statemnt I think your a closet GOP’er. Again you and those like you want to place all the blame on Obama. His not the one driving the economy to the state that it is in now, Gas will never get that high. The GOP will see to that and realize they need to help the low – middle class to save there party.

Ole Guy

November 23rd, 2011
1:20 am

I’m not too sure we can simply “not be distracted” by the indecisions of the cowards in the (so-called) super committee. These indecisions will surely…at one level or another…have an impact (directly or indirectly) on everyone, whether in the investment community or within the vast ocean of consumerism.

While, perhaps, wandering far afield and just a wee bit left of centerline, Buzz makes avery good point: we are addicted to government’s overspending. Any talks of reining in spending would surely spark the NIMBY reaction from both special interest groups and individual consumers.

The next few years/perhaps decades are going to be like that ride on the wild (economic) bronco. Those who manage to hang on will be the victors; will be all that much stronger for it. Those who “get pitched off the bronc”/those who cannot/will not adapt to the new economic realities which we will most-certainly see in the very near future…well…Darwin will be alive and well.