frank friday, page-3

Recently, somebody (I forget who) asked what I thought about the "fiscal cliff". Well, most of us have an opinion about everything - so I gave mine - although, really, I wouldn't have a clue. :)

Anyway - it's all over the media - if the fiscal cliff isn't solved we're all going to hell in a hand basket. At least, the economy will.

But what about stocks? hmmmm.

The fiscal cliff refers to the probability that, if the American democratic system doesn't act, America will see a wide range of tax increases and spending cuts. The conventional wisdom is: the stock markets will tank. Historically, what's happened?

Here's a fascinating article - like most conventional "wisdom", it ain't so - at least not in the past.

http://www.minyanville.com/business-news/politics-and-regulation/articles/fiscal-cliff-gdp-spending-stock-returns/11/8/2012/id/45682?from=ameritrade&camp=syndication&medium=portals

The article starts:

"For years people have been warning of the perils of the Federal debt. Now that it looks like the government may finally be addressing this important issue, many of these same people are now issuing dire warnings of an impending fiscal cliff. Let’s take a look at the data to see what actually happens to stocks when taxes go up and spending goes down."

This is how it finishes:

"As for equities, ignore the fiscal cliff myth and ride the fiscal rocket."

Redbacka