Joe Kinahan (JJ), chief derivatives strategist for TD Ameritrade, began his career as a Chicago Board Options Exchange (CBOE) market maker in 1985, trading primarily in the S&P 100 (OEX) and S&P 500 (SPX) pits. While mainly an independent market maker, Mr. Kinahan also worked for ING Bank, Blue Capital, and was managing director of option trading for Van Der Moolen, USA. In 2006, he joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. After leading the educational events team, serving to implement the instructional path for thousands of investors throughout the United States, in 2009 Mr. Kinahan became the managing director of Autotrade, overseeing TD Ameritrade’s Autotrade services, as well as the firm’s registered investment advisory firm, RED Option, and the integration of the thinkpipes trading platform. Mr. Kinahan, a 24-year trading veteran, is a frequent guest on CNBC and is often quoted in the Wall Street Journal and Reuters News, along with many other...
JJ Kinahan discusses when the fiscal cliff debate will end and who stands to benefit from its resolution.
I am here talking to JJ Kinahan. We are discussing this fiscal cliff issue that has been going on for quite some time now. How do we know when the fiscal cliff has really been resolved and who stands to gain the most from a resolution?
First of all, if we look toward the end of 2012 heading into 2013, it is my belief that we are not going to come to a full resolution. I think what is going to happen is the leaders of Congress and the President are going to come to some sort of a kick-the-can type resolution.
Push it down the road a bit.
Push it down the road where they can both save a little bit of face; the President getting a little bit of a tax hike; Congress getting a little bit of some entitlement cutbacks but just enough so it doesn’t have a huge effect on the economy. The rest of the bill could be kicked because you don’t want to do this with a lame duck session of Congress anyways, so I really believe you are going to see that. That would benefit the overall market, I believe, particularly some of the financial stocks; some of the manufacturing stocks and the tech stocks; really, anybody who just wants some clarity. Now—that being said—I don’t think you get clarity until perhaps even as late as mid-2013. This could last as long as the campaign season did.
Would they be a new Congress that is more reconciliatory and a President that wants to negotiate with those individuals?
We hope it is not going to be a showdown at the OK Corral—so to speak—at the end of the year. That is not good for anybody. There are just so many cutbacks; raising tax rates on people who, right now in this economy, are going to have a tough time with it. Let’s face it. We’re in an economy right now where every dime is precious to everyone, so to speak. That’s always the case, hopefully, but more so right now perhaps than at other times. Now with all that, I really think that the overall economy will benefit by us knowing what the rules are. Right now we are in this limbo; very tough for businesses to expand when they don’t know what the tax policy is going to be. They don’t want to go out and hire. They don’t want to go out and expand clients until they have rules. In the end, even if it is not the rules you want, if you know what the rules are, you can find your ways around them, and that is what I think we are having a problem with right now but are going to be the rules for the next four years.
So you are saying that even a mild—even kicking the can—that gets some of those questions answered by the rules can be mildly or even quite beneficial for some of the financial stocks and consumer stocks.
I would say it is mildly to begin when we have a final bill; things are finally settled, and I really believe that might take another six months. That is when we can actually see the economy go into high gear, and that is what could lead to a really nice rally because again, then businesses will know okay; we can hire up to this amount because here are the new tax rules they are about. We can build this plant because here the tax breaks we are going to get for doing so; this is why it makes sense or it doesn’t make sense; so I really think that is what we need. Once we do, the economy can take off.