Fiscal Cliff is a Window of Opportunity

Last night the market fell again, reaching new lows after President Obama gave his first post-election press conference, and repeated that he wants to raise taxes on wealthy Americans. The obvious conclusion here is that the two US political parties are on the same collision course they were on last year, and that for this reason equities are are the wrong place to be invested. In my opinion, this is a mistake interpretation.

The first speeches about the fiscal cliff after the election were very gentle, but it should be openly accepted that a hardening of public posture is essential before moving toward agreement. It is a great shame that the market seems unwilling to project more confidence in political process.

Both the Democrats and the Republicans have move since the election. Particularly the latter who are now conceding that de facto tax hikes are possible. Today Obama hinted that those tax hikes should be explicit, not simply closed loopholes. The truth is that such a step is now on the table, but only in the case of a “grand bargain” resolving the whole issue for the longer term.

In short, the negotiating process is proceeding well, and arguably quicker than might be expected. Of course there are many possible missteps, but we should not doubt that there is a negotiated solution ahead. In this vein, it remains my conviction that the sell-off is an opportunity to get into an accelerating global cycle, rather than a last chance to get out of risky assets before a cataclysmic crash (as any crash at this stage presumably would be).

We stand ready to present carefully selected conviction investment ideas targeted to your risk profile and personal preferences.

Best regards,

James