The Looming Fiscal Cliff (FC -129 Days)
Or Brinkmanship 2.0
The FC Crisis can only be defused if both sides cooperate. Unfortunately this challenge appears to be structured as a prisoner’s dilemma, in that even though it is in the best interest for everyone if both sides cooperate, each side views it that it is in their own self-interest to NOT cooperate.
On July 18, 2011, the Dow Jones Industrial Average closed at 12385. I warned how the brinkmanship game that Congress was playing over the debt ceiling could jeopardize the stock market.1
On 5 August, 2011, Standard and Poor (S&P) downgraded US Debt, to AA+ for the first time in history. John Chambers, the head of sovereign ratings at S&P, told CNN that the “political brinkmanship” over the debt ceiling proved to be a key issue, with the U.S. government downgrade. The Dow Jones Industrial Average closed at 11445.
I am not reminding you of my previous blog to brag that I was right. (Well, maybe a little bit) I’m trying to establish a little (Wall) street cred (idibility) so you will take heed to the following message.
The Fiscal Cliff is coming!
When Congress decided to put the Debt Ceiling on the table as a bargaining chip, they opened up a Pandora’s Box which is now opened and cannot be closed. To resolve the Crisis that Congress Created, they created a super committee, which had a super failure. They wrapped the crisis in a ticking time bomb, which will begin to unravel in September.
- Farm bill (SNAP/food stamps)
- Temporary Assistance for Needy Families
- Bush tax cuts
- Unemployment Insurance
- Spending cuts kick in (aka “sequestration”)
- Debt ceiling reached
Run for cover.
In this uncertain environment your focus should be on SAFETY.
I recommend the Strategy of, Dividend Appreciation at a Reasonable Price (DARP) with large capitalization Stocks.
CAT, TGT, SE, NFG, ADM, EXC, PNR, XYL, RSG, WM, XOM
Congress may do the right thing. (Ha Ha)
- If you missed it, you can find it here: