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According to various news reports, the 'super committee' has shifted its focus from discussing deficit reduction options to how to best admit their failure to reach a conclusion.
This failure to reach agreement should come as no surprise to anyone. Partisan politics has not changed in the last 90 days, and the opportunity to move the deficit debate into the 2012 elections was too much of a temptation for today's hyper-partisanship.
The consequences of this failure are mandated budget cuts that conveniently do not take effect until January 2013. This date coincides nicely with the December 2012 expiration of the Bush tax cuts.
The stock market reacted accordingly giving Congress an intraday thumbs down 300 point drop in the Dow Jones Indusrial Average.
What should you do now?
- Brace yourself for continued volatility.
- Understand that this is an emotional reaction by the stock market.
- Assess your immediate need for cash and make sure that cash is available.
- Stick with your asset allocation.
- Recognize that stocks are currently "on sale," and if they get cheap enough, rebalancing will allow you to take advantage of the bargains.
- Turnoff CNBC and resist listening to or reading the panicked tone of the media.
- Resist the temptation to bet on the short term direction of the stock market or interest rates.
Failure by the super committee is a good thing because now the decision about what to do about our deficit is in the hands of the voters.
As for the economy, there was some good news recently.
The index of U.S. leading indicators climbed more than forecast in October, signaling the world's largest economy will keep growing in early 2012. The Conference Board's gauge of the outlook for the next three to six months rose 0.9 percent, the biggest jump since February.
So despite the recent negative news about the deficit and our credit downgrade, the risk of a recession in 2012 has subsided. | 
