BIG STOCK SELL-OFF IN YEAR END FINALE?

December 10, 2012

The approaching fiscal cliff and the probability of higher taxes could prompt an end of year sell-off in the stock market. Investors should prepare by diversifying into assets which are not positively correlated with stocks. Gold investments in particular are well-suited for this purpose…

Wall St Week Ahead: “Cliff” worries may drive tax selling

Investors typically sell stocks to cut their losses at year end. But worries about the “fiscal cliff” – and the possibility of higher taxes in 2013 – may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

 

http://ca.news.yahoo.com/wall-st-week-ahead-cliff-worries-may-drive-171035415–sector.html

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The Fiscal Cliff: An Economic “Heart Attack”

December 4, 2012

800px-Car_off_cliff_sign

Bank of America/Merrill Lynch economist Ethan Harris is warning that the game politicians in Washington are playing ahead of the “fiscal cliff,” is dangerous and could amount to an “economic heart attack.”

Letting the country careen over the fiscal cliff as part of a bargaining strategy to push through fiscal reforms would serve as a dangerous game politicians would be playing with the economy, said Bank of America Merrill Lynch economist Ethan Harris.

At the end of this year, tax hikes are scheduled to kick in at the same time government spending cuts take effect, a combination known as a fiscal cliff that could tip the economy into a recession next year if left unchecked by Congress and the White House.

Some lawmakers have suggested Jan. 1 can come and go without a deal and address the issue by putting one another’s feet to the fire or punting on deadlines as tax hikes and spending cuts take root.

Even talk of such strategy can damage the economy.

“One of the most dangerous ideas circulating in Washington is that it is okay to go over the cliff temporarily,” Harris said a note to clients, according to CNBC.

“Threatening or actually going over the cliff will likely do serious damage to economic and market confidence. What some people are calling a ‘bungee jump’ could cause an economic heart attack.”

Investors, meanwhile, are growing increasingly nervous.

“The clock is ticking,” said Quincy Krosby, market strategist for Prudential Financial, Bloomberg added.

“The focus is on what goes on in Washington. The market will be volatile. You’ve got to be very well-hedged given that the market is so much headline-driven.”

The best hedge against uncertainty in the stock market has historically been gold.