Will Stocks Fall off the Fiscal Cliff?

As minutes tick away before the end of 2012 we wonder if the juvenile behavior on Capitol Hill will give way to reason. Or will the economy falter? Will stocks fall off the fiscal cliff? Will the US be plunged back into a recession? In the last year we have written, hopefully, about the slow but sure recovery of the American economy. We have wondered out loud if it is indeed time to invest in manufacturing stocks after nearly three years of steady expansion. As new housing starts tick upward it may be time to investing in home builders in the USA after a long drought. But, if taxes go up across the board on all tax payers, programmed military reductions begin, and social programs are gutted, were will the US economy head? Will stocks fall off the fiscal cliff as well? We think so and so it is time for congress to get its collective house in order and fix the mess that they along have created.

What Is the Point of Being in Office?

It used to be assumed that when one was elected to high office that he or she came to Washington to serve the interests of the American people. However, it has become more and more the case that special interests forklift individuals into office to do their bidding and not that of the electorate. There are a lot of valid arguments floating around regarding the fiscal mess that the nation finds itself in. There certainly needs to be a social safety net and their certainly needs to be fiscal responsibility. Going back as far as 19th century Germany Chancellor Bismarck championed a social security system. The “iron chancellor” was not a touchy feely guy who felt sorry for anyone. He knew that a viable social security system added to the stability of the nation. The same is true of social programs in the USA. They should be held in check so as not to bankrupt us but it is not a smart idea to threaten people with the loss of Social Security, Medicare, etc. due to inept legislating and political posturing.

The flip side of all this is that America has gradually become and “I need” or “we need” or “they need” nation. Lawmakers gain office by making promises and stay in office by being seen as the gatekeeper to the riches of the American people. There needs to be a logical and fair means of keeping costs in check.

Today’s Needs Today

The perpetual games of “chicken,” political posturing, and finger pointing that substitute for sound governance are about to create real mess. Will stocks fall off the fiscal cliff? They probably will. We wrote recently about the Fiscal Cliff Fear Factor, the likelihood that investors will sell in a panic and suggested that smart investors will expect an eventual budget solution and buy stocks when prices drop. Given that perpetual uncertainty is not good for anyone and especially the American people it is time for the leaders on Capitol Hill to act like leaders and not politicians looking over their shoulders in fear that their handlers will be displeased. It is time for the marionettes in Washington to cut the strings of their handlers and come to a sensible agreement that allows people, and investors, to get on with their lives. It is time for the American people to have a chance to plan their lives in the firm belief that the rules of today will the rules of tomorrow and that lawmakers will return to serving the needs of the people.

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