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We have a few folks that meet at a local coffee house, and discuss and solve the world's problems twice a day, every day. The Coffee Shop knows what Congress is going to do. Therefore we know what will happen to the market, and what we should invest in.

If only the people in Congress would do what we say, then all of these problems would evaporate, and we would all be living in Happy Valley. But because they are not listening to us, we need to figure out what Congress is going to do, its effects, and how we should invest.

So, the question came out: "What will Congress do to work on our financial problems such as the fiscal cliff, employment and, in short, begin to fix what is wrong with the economy here in America?" I don't mean to simplify what is happening, what will be done, and what the effects will be. I am convinced that history has shown me that Congress (and the people who elect them) is not concerned with the big, long term picture. For whatever the reason (getting into that would simply make a longer article).

I believe Congress will do what it usually does: concern itself with the short term fixes, and fool the people into thinking that by raising taxes now, and agreeing to cut expenses later, the people will allow them to raise taxes now, (to fund their programs) and then not cut expenses later. That worked with Reagan and Bush in the past. Perhaps the GOP will fall for it again.

Congress has two ways to fix the problems: 1) Raise Taxes, 2) Cut spending. Did I miss something? So from there we go to, "how much?" Will they cut spending and raise taxes a little, or a lot? What will be the effect? I say, cut a little for both taxes and spending (short-term fixes).

The main consequence I see is inflation. Most people don't understand inflation. You do not need all areas to move up in price to be harmful. We can have increased pricing of consumer goods, without increased wages. Most likely, we will not have a deflation, as costs are rising.

Inflation has two forces which give us two different kinds of inflation. We have a demand inflation, where simply things are good, and there is more demand than goods which force prices and wages up. The other side of the inflation coin is cost inflation, which is what I see coming (and is happening). Demand inflation kind of pulls inflation along, while cost inflation pushes it. Costs are rising, demand is not increasing enough. Wages are not increasing to pay for the new prices. In 1982 I paid $11,200.00 for a new loaded van; last week, I paid just under $42,000 for a 2013 similar vehicle. No inflation, huh? For those of you who don't believe costs are rising, ask someone who has to fund their family's food, clothing, and shelter costs.

Deficit spending, quantitative easing, and "printing of money*" are all causing an effect building up behind a paper dam. Because Congress is not willing to fight the big battle for the long term future, and is, as usual, focused on the short term, the consequences are building up that will cause higher taxes, prices on food, (commodities), agriculture products, metals, (not precious metals in this instance) but iron, steel, stainless steel, and that ilk, but not copper. Copper needs a vibrant growing economy to raise up in price. When copper goes up, in a meaningful way, you will see the recovery under way. Until you see copper prices rising and holding above $4 or higher, we are not in a meaningful increase in growth, or recovery that will help pull us out of the malaise we are in. Copper is used in almost every area of industry and the economy, especially construction, electronics and infrastructure. So, if you want to verify that we are growing, check the price of copper.

I think, by springtime, or early summer, we will begin to see the effects of not "fixing the economy." The Democrats will try to get the GOP to agree to spending cuts later for higher taxes now, as I said, the Democrats have shown us that promise has not been adhered to in the past.

It may come to cutting corporate taxes vs. raising dividend taxes. In any case, whatever is good for the long term, not immediately usable help, will not be in fashion, and never will be. If we get reductions in tax deductions, then the first to suffer greatly will be needful charities, from reduced donations. The main fallout from reduced deduction usage will be job losses. Businesses don't donate out of the kindness of their hearts, they do it for tax advantages to raise their net profit. (Nothing wrong with that, just an observation and a fact). When taxes dictate to the bottom line net profit, actions must be taken by a profit making organization to modify other expenses, belt tightening, to maintain the same profit margin. Lots of times, taxes cause prices to go up, wages down and even unemployment numbers to move higher.

The Long Termers, (conservatives) will not win by worrying about the future, the Short Termers will win because it is in their favor now, not later.

So, The Coffee Shop agrees on the fact we need some higher taxes and big time spending cuts. There is a lot of fat that could be cut out of state and federal governments, and that will not happen to such a degree to make a difference. We also agree that proper spending cuts and higher taxes ain't gonna happen. What will happen will be higher taxes, but not enough to fix anything. In fact, I believe you could not raise taxes enough to continue the foolish spending habits and debts Congress has allowed.

*Note: Before I say what my opinion is to invest in during this settling period, I want to explain this phrase, "printing money." Yes, actual paper dollars are printed daily, millions of dollars, for new bills needed to replace worn money, to increase the money supply to match the new business and many reasons. That is a normal event in a fiat currency using country and not a bad thing. The "printing" I am talking about is the money 'on the ledger', not actual paper money printing. This ledger is not fully understood my me but it is a fact that these 'ledger entries' allow the Fed (a kingdom onto itself) to create money, to buy government paper and keep the liquidity needed to fund the spending of our government when others will not buy our paper. These 'financial instruments', sold to foreign and domestic buyers pay an interest rate, or provide a parking lot for extra cash, and this goes on and on. It is simply actions hardly explainable or understandable and totally foolish, but it goes on and on.

We are experiencing the effects of this nonsense, if you hadn't noticed prices recently. By, as I said, spring or early summer we will see serious consequences begin in earnest. Interest rates will not go up for a very long time if ever. In fact, the Coffee Shop, today, agreed, we'll not see rising rates in the foreseeable future. That would be fuel for a depression. We also agree we have entered a long term Japanese type economy.

So, what to do? (investment wise)

I say REITs, (see my comments on this article) - medical REITs - may prove the best as we enter this segment in and when the new medical picture comes more into focus, then a little spreading out to other REITs. With the expected tax picture to be not so nice as it is now, capital gains, or corporate taxes will go up. I don't like munis at all, and will be clear of all munis.

I have been using BDCs and REITs for some time now, and with my recent retirement, and some problems I felt could be coming approaching election, and the fiscal cliff, back in October I sold most everything, deciding to let some dust settle before I stuck my neck out too far. With luck or brains, The Coffee Shop accurately predicted the 'correction' in the REITs, so selling was pretty good timing. A lot of them have climbed back up a bit, but not where they were. So buying them now could serve as a higher dividend yield from where I was, providing a cheap re-entry level. I have not yet taken action, but I am calming down a little now with the election over with, and talk of what will happen from Congress, and The Coffee Shop saying we are going to get back to where we were, the paper-thin recovery.

I don't like stocks other than a few short term deals for 'trading'. I like PM's, (precious metals) for the longer term, buy some now if you don't have any to hedge the inflation The Coffee Shop says is coming. Even though many issues (stocks) are at 'bargain' prices, I feel they may go lower as things tighten up.

In conclusion, I feel not much will change, as the GOP and the Dems have merged into similar thinking. The two parties are not much apart in their apparent goals, if not in name, but in action (or in-action if you prefer). I feel cost inflation is pulling inflation up in a massive buildup like water behind a dam weakening with every raindrop (overspending) put behind the dam.

Because interest rates will continue to be low, not rising at all, that the interest rate spreads will continue to provide a fertile environment for REITs to continue to flourish. Stick with those in the 10 - 15% range of yield. Even that is lofty enough, higher may be too much risk. I like American Capital Agency Corp (NASDAQ:AGNC), Armour Residential REIT Inc. (NYSE:ARR), Annaly Capital Management Inc (NYSE:NLY), Chimera Investment Corp (NYSE:CIM), Prospect Capital Corp (NASDAQ:PSEC), (a BDC) and am looking at others. I have not chosen which to go for yet, but I am sure I will go with the list herein.

I think the recovery is happening, but on an up divergence line, paper thin. Not much needs to happen to throw us over into a return to the recession, and if a little more pressure is exerted on our paper thin recovery, it will go to the depression we have been skirting for years now. PMs are on top of my list, and numismatic coins on top of that. I still see collectible coins as a sharp edge for hedging against inflation, as the high end coins, PF (Proof) and MS (Mint Strike) 69s or 70s are going to prove out to be one of the best of both worlds. Actual intrinsic value increasing as Gold (AU), Silver (AG), then Palladium (Pd). Please notice, the number of things Palladium can do in addition to and including what Platinum can do. It is actually, in my thinking, more valuable than Pt. And finally Platinum.

Coins, in my opinion, will be the shining glory of inflation hedging. It is currently one third of my entire net worth, and I am adding to it, finally branching out to include Pd coins last week. One can search the annals of history, and not find a more secure long term investment, than gold. For the near term, I feel silver will go up the most percentage wise, or at least until the silver to gold ratio (divide silver price into gold, and your answer is the S to G ratio.) Right now it is (As I write tonight), Gold is at $1750.3 and Silver is at 34.00. Equaling a ratio of 51.479 to 1. The premium of a bag of silver coins (90% Silver) with a face value is rising also. The ratio is dropping from nearly 58 to 1 to present ratio, I feel silver will continue to rise more than gold (%-wise) until the ratio drops to a more normal percentage, probably another 10 points or so. Then, I switch to Pd; and due to the fact that Pd has more uses and is less than half the price of Pt, I say, Pd will soon approach and perhaps go above Pt. I also have many Pt coins already in my 'stash'.

One major caution. Buying numismatic (collectible) coins is a dangerous habit, that can keep you in them a long time to break even, (not counting actual intrinsic value) if not bought properly. Unfortunately, the coin industry is fraught with fraud, fakes (counterfeits), and con men. Yes, a sad commentary, but still a warning, and because these coins can be so valuable, it attracts all types of bottom feeders. Note me, and I will help if I can. As in any investment, knowledge is power, get knowledge. Try, if you like, the American Numismatic Association's main coin grader,Numismatic Guaranty Corporation or NGC. I have been a member of NGC for many years now, and have actually won some awards, so I do know what I am talking about in that arena.

One can invest, with extreme wariness, and attention to a bull phase that can change on a dime. I use stops and percentages, allowing a 10% loss, and no more. There will always be peaks and valleys, but as this thing develops, the string is being pulled ever tighter. I say this due to economics 101. We are not adhering to known principles of financial success. The Coffee Shop says, "There is a storm on the horizon", so beware.

Municipal bonds, or any other bonds, for my money, are not worth the risk involved. Many cities are having troubles making ends meet for the same reason the Federal Government is walking a tightrope. Already bond insurance companies are also walking the edge of a canyon. I am sure you are aware of the growing number of cites not doing well.

Now one other area, speculation, high risk, using leverage and downright dice-rolling with your money. I see, and my advisors have approved of, my plan to take a very small part of my net worth, and 'go for it' with leverage. Some option playing, and even futures funds and letting a broker tell me what to do. I actually am going to do that in the next couple of weeks, as my retirement income is being generated by Social Security, annuities, and some other venues which are low risk and known payers. If you don't risk too much, then you can't lose too much, and if the brokers I choose are 'with it', I will give them free range to 'make a hit of two'. My parameter, which is in writing with them, will be to cancel the account if it drops 10% in value from original investment, and until that, they have the bit in their teeth and I will do what they say. This gives me a leveraged approach, and if it does well, fine, if not, I will not be hurt too badly. Just be sure your risk, without fail, is limited to your agreement.

My main feeling is extreme caution for now. But assuming you need income from your savings, (I call it my 'stash'), then perhaps some of the above will help a little.

I am constantly looking for slants that would show me what Congress is going to do, so we can get a clue on where the market, and or what separate issues may do or go. If history is correct, then this article may just be correct.

Disclosure: I am long DRR, EUO, CIM, TEU, SLV, and SIVR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: Other than listed disclosure, I am currently trying to decide on a direct course of action. Mostly, I feel with a great lack of outside pressures, any investments now should be considered day trading or just stand aside for now. All issues held by me are basically to take advantage of trends I see, dividends, and fully bullish on them. I will however, take out any of them, if I see a tolerable profit or loss, or to go to a sector or issue which I feel the money is at better use, not necessarily because I dislike a current issue. I do have plans to look seriously at medical REITs. I have ONLY Precious Metals and Numismatics as longer term holdings. (I think my wife has had Home Depot for about 10 years) I have no other issues other than matured annuities. No direct plans for any acquisitions at this time other than above.