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Mon Dec 24, 2012, 03:47 PM

US stock markets fall again as prospect of fiscal cliff deal recedes

Source: the guardian

US stock markets slid again on Monday, as lawmakers on Capitol Hill grew increasingly skeptical that a deal can be reached on the fiscal cliff budget crisis ahead of a year-end deadline. All the major US stock markets closed down slightly after a half-day of trading.

Investors were reacting to comments from senior politicians over the weekend that time had run out and the best available option was an interim patch to mitigate the 1 January imposition of mass tax hikes and spending cuts.

All eyes are on the Senate after President Barack Obama urged senators to pass a stop-gap measure that would extend Bush-era tax cuts for those earning less than $250,000, extend unemployment benefits and delay spending cuts until a full agreement can be reached.

Talks between Obama and the Republican speaker of the House of Representatives, John Boehner, broke down last week. Boehner's attempt to launch his own "plan B" also failed, when right-wing Republicans balked at a compromise on tax hikes. Obama is now on vacation in Hawaii and will not return to Washington DC until after Christmas.

Read more: http://www.guardian.co.uk/world/2012/dec/24/us-stock-markets-fall-fiscal-cliff

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Response to alp227 (Original post)

Mon Dec 24, 2012, 04:07 PM

1. I refuse to take seriously something that doesn't exist

Don't give the so-called "fiscal cliff" an attention it does not deserve. It is Washington DC's imaginary friend.

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Response to bluestateguy (Reply #1)

Mon Dec 24, 2012, 04:14 PM

3. Exactly. It is just the latest shock dictrine game

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Response to alp227 (Original post)

Mon Dec 24, 2012, 04:12 PM

2. Nonsense. The markets have been mostly up since the election and are currently trading

in a mostly flat range. The markets have already anticipated this "cliff" nonsense and have already factored that into the pricing.

"Going over the cliff" is mostly a neutral proposition fo the market. If we let all the laws expire and did absolutely nothing, there is definitely an upside to the market in that we would essentially eliminate the deficit with EVERYBODY paying the Clinton rates. That would be a strong upside for the market. The downside pressure would come if the wisdom of the market was that we would plunge into recession, soon followed by another hostage-taking event over the debt ceiling. (However, is EVERYBODY is paying the Clinton rates, then we probably don't need to increase the debt limit anyway.)

But we aren't going to do "nothing". There will be some deals made in January and the market will carry on just fine.

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Response to BlueStreak (Reply #2)

Tue Dec 25, 2012, 12:42 AM

4. I disagree. I think what is "already factored in" is the belief that an agreement will be reached

 

and 98% of the public will still be taxed at the lower rates. If taxes go up on everyone the markets will tumble. I don't know how you conclude that raising taxes on everyone "is definitely an upside to the market". The stockholders know that reducing the purchasing power of 98% of the public is not good for business.

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Response to xtraxritical (Reply #4)

Tue Dec 25, 2012, 09:20 AM

5. If the market were really concerned, the dow would have dropped 1500 points or more

It hasn't dropped at all.



Since the election, it has gone UP!!!!!! The premise of that article is bullshit. It is just a case of a person with an agenda trying to force fit the data to meet the story line he wanted to put out. Investors knew that "going over the cliff" was a likely scenario. That won't bother the markets too much What will bother them is if this drags out for weeks without a resolution, giving the market a good reason to believe that a recessions might be inevitable. Nobody believes that today. The market understands this is just some routine gamesmanship.

Trust me. If/when the market gets irritated with "the cliff" you will know it. It won't be some meaningless 50-point move.

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Response to BlueStreak (Reply #5)

Tue Dec 25, 2012, 10:07 PM

6. I made some GOOD money on DIA 12/31 calls I bought in mid November.

 

I'm thinking bullish now too.

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Response to xtraxritical (Reply #6)

Tue Dec 25, 2012, 10:19 PM

7. I don't know about bullish, but we should see a wider trading range

A straddle play might make sense in the next several weeks.

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Response to BlueStreak (Reply #7)

Wed Dec 26, 2012, 12:54 AM

8. I'm more of a gambler, oh speculator.

 

Anyhow picking individual companies is hard, placing the DIA is easier.

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Response to xtraxritical (Reply #8)

Wed Dec 26, 2012, 09:12 AM

9. You can straddle DIA

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Response to BlueStreak (Reply #9)

Wed Dec 26, 2012, 01:54 PM

10. You are correct but it limits your profit and is twice as expensive. Insurance is expensive.

 

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Response to xtraxritical (Reply #10)

Wed Dec 26, 2012, 02:46 PM

11. In theory, all plays are on the same risk-reward scale

because the market knows all.

A straddle is a much lower risk than betting on a move in one direction. And it costs more (ergo yields less).

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Response to BlueStreak (Reply #11)

Wed Dec 26, 2012, 03:20 PM

12. I said you were correct in the last post. Yes, you're "street" wise, now let's just have

 

a happy new year and let it go. HAPPY NEW YEAR!

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