Shaking the Decision Tree
One of the joys of the long Thanksgiving weekend is the beautiful fall weather. Cool crisp air, the smell of smoke drifting out from fireplaces and the last leaves falling from the trees. Among the maples and other hardwoods that have been lit up with color for the last month, one of my favorite trees is the decision tree. As all of us pundits debate the fiscal cliff, I have been studying the decision tree of outcomes, looking for insight into how to position my portfolio for protection against most of the projections.
Outcome 1: President Obama and Congress at an impasse, and the Budget Control Act measures go into effect. This is the best outcome for the country long-term, although of course it will cause a recession in 2013. Many say "we can't let this happen" – but neither could we let the fed funds rate go to 20% in 1981. After that economic shock stopped inflation dead in its tracks, the U.S. economy went on a 20-year boom that rivaled any of our best expansions. Right now, I am carrying a high cash balance and avoiding cyclicals to position for this outcome....249 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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