Don't worry about the fiscal cliff
While I normally try to stick to my knitting in terms of investing and ignore much of the shenanigans that go on in Washington, I made an exception last night and looked into what was happening with the "Fiscal Cliff." When I heard that the Republican's "Plan B" had fallen apart I knew that we were going to see some red in the markets today. Sure enough, that's exactly what we're getting.
Don't let this whole ordeal ruin your holiday though. The Fiscal Cliff is no big deal. In fact, while I'm not buying anything today if the carnage continues into next week with year-end tax selling and increased thinking that a deal on the cliff might not get done I probably will buy. I've been expecting something like this to happen and I have a nice slug of cash ready to deploy in my real-life portfolio, around 15% or so in my investment accounts...which is a lot for me.
Whether people want to admit it or not, it's a fact that the economy is slowly but surely getting better. A deal will eventually get done to fix this cliff issue. How do I know? Because 99% of the voting public will blame the already battered Republican party if a deal is not reached (this is coming from a registered Republican who is becoming increasingly alienated by the extreme right). Just in talking with most of my friends, the more moderate ones anyhow, every single one of them sees the situation like what is described in this Business Week article (link). Basically that the GOP is threatening to blow up the entire U.S. economy to protect the rights of a few "millionaires and billionaires" despite the fact that the top tax rates are half of what they were in the 1980's. Now I know that there's more to it than that, and that we have to get the deficit under control, but that's what the public perception is likely to be.
So I personally would be shocked if a deal doesn't get done in a reasonable period of time. In the meantime, enjoy the buying opportunity and check out the sort of news that we all need from time to time:
26 Moments that Restored our Faith in Humanity This Year.
By the way, for someone who has a CAPS portfoio that contains 196 long positions and zero short, I find it fascinating how I always outperform in bear markets. Today for example, I'm up nearly 200 points to over 5,000...the highest level that I can remember. I guess that some of my picks could be considered conservative and most of them pay dividends, but it is interesting nonetheless.
If I don't blog again before then, have a very Merry Christmas everyone!