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Subject:  Re: Fiscal cliff Date:  12/4/2012  9:13 PM
Author:  pauleckler Number:  259779 of 277982

I agree that no one knows what Congress will decide to do. So all of this is risky. But you have until Dec 24 to make changes this year. Congress probably will decide by the end of next week.

We do hear that some people are selling stocks taking profits this year in anticipation that capital gains rates will be higher next year.

Some are selling dividend stocks in anticipation that dividends may be taxed at ordinary income tax rates next year.

Some are selling defense industry stocks in anticipation of major reductions in federal defense spending.

Some fear that going off the fiscal cliff could produce another recession. That would impact all stocks, but it implies a defensive position. Cash or counter cyclical stocks. Recession should keep interest rates low and perhaps make bonds attractive, but a possible downgrade of the governments credit rating might cause lenders to demand higher interest rates--making bonds risky.

The major driver of the US economy is the consumer. Christmas sales have been going well, but that could change in the next quarter. Most at risk is probably the recovery of the US housing market.

Stay turned. We shall see how this all comes out.
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