Congress Meets Sunday, Fiscal Cliff's Averted? Who's Zooming Who?
My fear is when we go over the cliff, the market will ferociously tank for a period of time.
This will likely scare the "close to" and current retirees out of the market near the bottom of the down spike. Most won't be back on board when the crisis is finally - temporarily "averted" and will miss the move back upwhen everything is hunky-dory,
A lot of middle income wealth will be separated from these folks and transferred to "the winners"
of this game of chicken.
It would be a perversity, if on the higher taxation side of the house, folks dumped stocks. In theory they should be selling winners now and Monday, and keeping losers for next year for write off purposes. As long as the limitation of losses against other income remains $3000, that windfall is very limited. $3000 against other income has been the rule for eons, when $3000 bought more than a flatscreen TV
The only folks left in the market will be those still trying to write off 2001/2007 losses with some "winners" next year. They will be few and far between.
If I were a fund manager, I would be lightening by half to take advantage of the lower tax rates on cap gain. High yield would be problematic, I certainly would be selling covered calls against those babies if I owned them.
The only pressure there is on Obama is his legacy. 25 years from now nobody is going to remember who the speaker or the senate leaders were. Just that Obama oversaw 8 pathetic years economically speaking. And his ego and arrogance just cannot accept such a historic smear.