Anyone positioning their portfolio for the "fiscal cliff"? I have been looking hard at mine...nothing that I don't want to own anymore, so I don't really plan on selling anything. I am 15% in cash though, so I have my list of high quality stocks that I will look to pull the trigger on if there is a big drop.
Anyone making any plans?
Positioning Portfolio for Fiscal Cliff
In a word, "no". This is mostly media hype. More importantly, I've admitted to myself that I don't really know what the impact on my investments will be -- and neither does anyone else. And that impact is likely to change over time based on unpredictable factors relating to politics and Fed policies.
I keep wondering if this could be a lifetime opportunity with respect to bonds. In the mid-1860s there were questions about whether US (Union) civil war debts would be honored. Savvy investors at that time (notably Hetty Green, later known as the "Witch of Wall Street") bought lots of it up at 50 cents on the dollar. When the 14th Amendment was passed guaranteeing repayment (among other things), the value of these investments doubled overnight.
I can see various "panic scenarios" playing out in the next couple years, including ones involving the debt ceiling and US debt. Trouble is, I don't know which one will come to pass. But if you are a gambler, the correct strategy is probably to wait for a panic and then buy up the hated asset cheap and wait for the rebound.
I keep wondering if this could be a lifetime opportunity with respect to bonds. In the mid-1860s there were questions about whether US (Union) civil war debts would be honored. Savvy investors at that time (notably Hetty Green, later known as the "Witch of Wall Street") bought lots of it up at 50 cents on the dollar. When the 14th Amendment was passed guaranteeing repayment (among other things), the value of these investments doubled overnight.
I can see various "panic scenarios" playing out in the next couple years, including ones involving the debt ceiling and US debt. Trouble is, I don't know which one will come to pass. But if you are a gambler, the correct strategy is probably to wait for a panic and then buy up the hated asset cheap and wait for the rebound.
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RealPerson
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The fiscal cliff is mostly media hype, I think. However, taxes will almost certainly go up, and that will have a generally depressing effect on the economy. The especially large tax increases on investments worry me more. There seems to be a lot of downward pressure building in the stock market. From the retiring baby boomers looking to cash in to sustain their retirement, to the fact that so many people left the market in the last 12 years due to the roller coaster, to the increase in taxes on investment income, I don't see too many bright spots for the stock market for now. The massive Obamacare law coming online is another major reason companies are unwilling to invest, so not much growth from business investment. Then there is section 179! I hope I am wrong on the stock market but I am concerned about it.
As far as bonds are concerned, I am having trouble seeing much potential in these because of the historically very low interest rates. Could rates go down from here? Probably not. A rise is much more likely, which would inevitably depress the value of your bonds. I guess buying individual shorter term bonds and holding them to maturity is a possible strategy.
I have increased my cash position in tax deferred vehicles (by selling stock) to avoid capital gains taxes and level out the volatility of my portfolio. Other than that, not sure what you can do other than sit tight. It sort of like boarding up the house because the hurricane may be coming this way.
As far as bonds are concerned, I am having trouble seeing much potential in these because of the historically very low interest rates. Could rates go down from here? Probably not. A rise is much more likely, which would inevitably depress the value of your bonds. I guess buying individual shorter term bonds and holding them to maturity is a possible strategy.
I have increased my cash position in tax deferred vehicles (by selling stock) to avoid capital gains taxes and level out the volatility of my portfolio. Other than that, not sure what you can do other than sit tight. It sort of like boarding up the house because the hurricane may be coming this way.
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secretwealth
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I have to agree with RealPerson--a lot of investments look crummy these days. I'm overall bullish about the economy (I think 2013 is going to be a strong recovery year), but I think the stock market crash of 2008 has left a bad taste in a lot of people's mouths and they're hesitating to jump back in. Junk bonds are overplayed and expensive, and historical low rates won't help bonds appreciate further. Demand for gold has driven prices up over the past couple years partly because of Basel III, but this may be played out too.
This is why I've been turning to real estate. Prices seem to have bottomed out and an economic recovery might encourage people to start spending--including on buying houses. Maybe this would help retail stocks too, but volumes would have to recover first.
In short, now seems to be one of the hardest times in history to invest.
This is why I've been turning to real estate. Prices seem to have bottomed out and an economic recovery might encourage people to start spending--including on buying houses. Maybe this would help retail stocks too, but volumes would have to recover first.
In short, now seems to be one of the hardest times in history to invest.
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George the original one
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Fiscal Cliff - like it or not, federal spending on services (not including debt service & not including state/local government spending) is about 25% of GDP. When you cut that by 10%, which is what going over the fiscal cliff will do, you will reduce GDP by 2.5% for at least one year. On top of that, the average schmoe will be paying about 3% more taxes (increased SS plus increased federal taxes) than they did this year.
If we've been expecting GDP growth of 2-2.5%, then the result is that we will experience a minor recession as a penalty for going over the cliff.
In recessionary times, technology and construction and discretionary goods are not the places to be invested until there's evidence of a turnaround.
***
So what am I doing? Nothing in particular because we still don't know whether we're actually going over the cliff. In general, my portfolio is already geared for the lack of boom times. My mental stop losses are in place and if something I don't own gets mispriced low, then I'm ready to take advantage of it.
If we've been expecting GDP growth of 2-2.5%, then the result is that we will experience a minor recession as a penalty for going over the cliff.
In recessionary times, technology and construction and discretionary goods are not the places to be invested until there's evidence of a turnaround.
***
So what am I doing? Nothing in particular because we still don't know whether we're actually going over the cliff. In general, my portfolio is already geared for the lack of boom times. My mental stop losses are in place and if something I don't own gets mispriced low, then I'm ready to take advantage of it.
It really isn't a cliff in that sense, George. In other words, going over the "cliff" doesn't mean a 2.5% hit to GDP "for at least one year." If congress acts on January 7, for example, then spending for the year will likely not be any different than if congress had acted on December 31. It's slightly worse if they act on January 14, etc.
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George the original one
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LiquidSapphire
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I've been wondering if all of this uncertainly on what government is going to do is at least partially at fault for the not-so-great state of the economy. I mean directly at fault.
Don't know what tax rates are going to be, so a lot of people don't know if they have enough to "retire", so they hang on to their jobs... exacerbating unemployment.
Don't know what healthcare is going to cost, so a lot of people don't know if they have enough to "retire" or even just take a different job, buy a new house, invest in something else, etc etc, so they hang on to the status quo...
Businesses don't know what business is going to cost in light of tax reform, so (maybe?) they are hoarding cash and not making too many investments (or doing too much hiring), taking a "wait n see" attitude...
I am certain this is the case with government agencies, not taking on new projects or hiring just to have to curtail or run RIF later - has been the case for over a year now.
This is totally guessing on my part but even if this whole thing resolves in a not-optimal fashion, I think a lot of people in a lot of places are going to be relieved to have it settled somehow already, so they can move on with their lives/businesses/retirements... and I am hopeful the economy will improve because of that alone.
I have no proof, I might be totally wrong, just speculation on my part, but I wonder....
Don't know what tax rates are going to be, so a lot of people don't know if they have enough to "retire", so they hang on to their jobs... exacerbating unemployment.
Don't know what healthcare is going to cost, so a lot of people don't know if they have enough to "retire" or even just take a different job, buy a new house, invest in something else, etc etc, so they hang on to the status quo...
Businesses don't know what business is going to cost in light of tax reform, so (maybe?) they are hoarding cash and not making too many investments (or doing too much hiring), taking a "wait n see" attitude...
I am certain this is the case with government agencies, not taking on new projects or hiring just to have to curtail or run RIF later - has been the case for over a year now.
This is totally guessing on my part but even if this whole thing resolves in a not-optimal fashion, I think a lot of people in a lot of places are going to be relieved to have it settled somehow already, so they can move on with their lives/businesses/retirements... and I am hopeful the economy will improve because of that alone.
I have no proof, I might be totally wrong, just speculation on my part, but I wonder....
-Bank deposits
-Bank loans
The two have closely tracked one another for as long as records have been kept. When deposits went up, loans went up, and vise versa. All that changed when the housing market crashed. Today deposits continue to surge while loans plunge.
Some have focused on the potential problems this may cause...
What does it say about where we are in the recovery and how fragile we are to any fiscal-cliff disruptions?
-Bank loans
The two have closely tracked one another for as long as records have been kept. When deposits went up, loans went up, and vise versa. All that changed when the housing market crashed. Today deposits continue to surge while loans plunge.
Some have focused on the potential problems this may cause...
What does it say about where we are in the recovery and how fragile we are to any fiscal-cliff disruptions?
It's a lie being told by the media to scare people.
There will be a deal cut eventually. Also, taxes WILL GO UP no matter what because we are in the middle of a ponzi scheme, debt economy.
In short, long term prospects for the economy and stock market are not good.
I keep thinking of buying land and tangible things I can use for the future.
There will be a deal cut eventually. Also, taxes WILL GO UP no matter what because we are in the middle of a ponzi scheme, debt economy.
In short, long term prospects for the economy and stock market are not good.
I keep thinking of buying land and tangible things I can use for the future.
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Christopherjart
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In general, I just am trying to diversify more, but the fiscal cliff really hasn't changed my plans or speed. I'm going for almost half bonds (short and long term) and cash and the other half stocks (domestic (Mexico) about 50%, international about 25%, and REIT about 25%). This was a goal I determined before I heard of the fiscal cliff. I've been getting stock heavy since all but one of my stocks are way up for the year.
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jennypenny
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I'm not convinced there will be a deal. Oh, I'm sure they'll do something and call it a deal, but I fear it will be meaningless and taxes will go up significantly. My biggest concern right now is the lack of an AMT patch. We took some income this year instead of next year to try and avoid some taxes and I'm going to be PO'd if I have to pay AMT.
Re: investing--I'm 1/3 cash right now. I really don't like holding cash (I've never had this much sitting around before), but one thing I've learned from jacob and others on the forum is better risk management. I'd rather sit out a little and wait for the right investment opportunities.
Re: investing--I'm 1/3 cash right now. I really don't like holding cash (I've never had this much sitting around before), but one thing I've learned from jacob and others on the forum is better risk management. I'd rather sit out a little and wait for the right investment opportunities.
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ICouldBeTheWalrus
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I have way more cash than I'd typically like to hold.
I have a little money committed to some options positions:
- I'm long some calls on specific stocks which are beat down a bit over the fiscal cliff fear (military-industrial complex stuff) in the hope they go springing back.
- I'm long some stock index puts in case I'm wrong and there isn't a deal.
I have a little money committed to some options positions:
- I'm long some calls on specific stocks which are beat down a bit over the fiscal cliff fear (military-industrial complex stuff) in the hope they go springing back.
- I'm long some stock index puts in case I'm wrong and there isn't a deal.
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dot_com_vet
- Posts: 603
- Joined: Mon Jan 31, 2011 2:07 am
I think the fiscal cliff thing is a scam. The idea that the issuer of a fiat currency (as the US government is for the Dollar) can't make payments in that currency (in the form of medicare and social security payments) doesn't make much sense.
http://www.youtube.com/watch?v=GdOsybbB ... r_embedded
http://www.youtube.com/watch?v=-_N0Cwg5 ... r_embedded
Especially not in a demand-starved recession economy. I guess imposing artificial austerity in this economic state will cause unneccessary suffering for lots of people and worsen the economic situation in the US. My cynical side would argue that the goal of this all is to privatise social programs like social security. This is profitable to some (those who suddenly receive fees for managing all that money) - which is probably why it is done in the first place, but idiotic as far as I see it, since it means changing the provider of social security from the one member of the economy that cannot default on regular payments (the US government) to private financial institutions which are without meaningful oversight and can and do fail miserably. This may seem conspiracy-esque, but my cynical side is right more often than I would like.
The result of this (assuming that my cynical idea proves to be correct) would probably be more money flowing into the stock market and rising stock prices in an otherwise downward economy.
http://www.youtube.com/watch?v=GdOsybbB ... r_embedded
http://www.youtube.com/watch?v=-_N0Cwg5 ... r_embedded
Especially not in a demand-starved recession economy. I guess imposing artificial austerity in this economic state will cause unneccessary suffering for lots of people and worsen the economic situation in the US. My cynical side would argue that the goal of this all is to privatise social programs like social security. This is profitable to some (those who suddenly receive fees for managing all that money) - which is probably why it is done in the first place, but idiotic as far as I see it, since it means changing the provider of social security from the one member of the economy that cannot default on regular payments (the US government) to private financial institutions which are without meaningful oversight and can and do fail miserably. This may seem conspiracy-esque, but my cynical side is right more often than I would like.
The result of this (assuming that my cynical idea proves to be correct) would probably be more money flowing into the stock market and rising stock prices in an otherwise downward economy.