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The following was sent to our clients and subscribers this weekend. We have positioned accordingly …

What do the next few months hold? Six weeks ago today the Dow was over 1000 points higher and our firm was being castigated for urging caution and buying some short options for protection. The media, as always a trailing indicator of the true state of the union, was ebullient and raved about each day's new high.

Here we are, in just 6 weeks, down 1000 points and now all I hear is that the fiscal cliff is going to destroy us, the country has gone to hell in a hand-basket, and America is a second-rate power about to lose its military edge and AA-rating.

Baloney.

We've survived the administrations of James Buchanan, Andrew Johnson, Herbert Hoover, and Jimmy Carter. We've survived countless gridlocked and do-nothing Congresses. We'll muddle through this as well.

The American immigration policy for legal arrivals (which should be much expanded,) an entrepreneurial bent that even government bureaucracy can't crush, and a populace that ensures the pendulum always returns from over-arching are our safeguards and salvation, not some demagogue on either side of the aisle.

I don't believe there will be a fiscal cliff. All the bombast and sophistry that plays so well on sound-bite TV news will wither away as politicians re-discover the art of compromise. There will be an agreement that neither side endorses wholeheartedly but both will grudgingly accept. That's the way this country works. The American Dialectic depends upon a Thesis advanced by one side, a virulent Antithetical response from the other side, much finger-pointing, sound-bite interviews, and backroom wrangling, all resulting in an eventual Synthesis - a compromise and a way forward.

I don't believe the United States armed forces will become a paper tiger.

I don't believe our nation will lose its leadership position or descend into a socialist trap from which there is no escape. The United States accounts for less than 5% of the world's population - but 25% of global GDP. The USA remains the Big Kahuna.

The U.S. dollar, much maligned, and justifiably so given the reckless non-stop printing of new dollars, is yet rising. What does the smart money know? They know that there is no other nation or consortium of nations with a currency that can become the reserve currency of the world. 25% of GDP, #1 among the 196 nations of the world, means there is no peer competitor for the dollar on the immediate horizon.

Yet many clients and subscribers have called telling me they want to "get out of the market while they can," that "the U.S. dollar is toast," and that they need to move their funds "into something safe like CDs." The last time I got this many calls was in March 2009 - at the exact bottom. Sometimes it really is always darkest before the dawn.

I expect a decent rally between now and the end of the year that will spill over until at least the first few weeks of 2013. I believe continuing to move from cash into quality beaten-down stocks is the smart move. Everything that went up on fundamentals has come down because people want to take their profits in 2012, not 2013. But the end of that maneuver is fast approaching as prices tumble below what was paid.

I stated in our November issue of Investors Edge, later reprinted here, what we would do the Wednesday after the election, no matter who won. This decline has given us the opportunity to execute that strategy.

I said we would and we have retained most of our long/short funds like MFLDX, GLRBX, and BPRRX. These are core holdings, as are our fixed-income ETFs in emerging market and strong currency regions - like PCY, ALD, and ELD.

I said we would and we have increased our precious metals and special situations in key sectors. Regrettably, this past week, stunning declines hit our positions in Iamgold (NYSE:IAG) and Sandstorm Gold (NYSEMKT:SAND). We have purchased more on these declines.

I said we would and we have begun to buy the big diversified energy companies. Many clients now own Statoil (NYSE:STO) and Boardwalk Partners LP (NYSE:BWP) and we are positioning to add others.

I said we would and we have purchased some up-market foundation ETFs for our portfolios: Vanguard Total Stock Market (NYSEARCA:VTI) for U.S. markets, Powershares DB Commodity Index (NYSEARCA:DBC) for oil, metals, and agriculture, Vanguard FTSE All-World ex U.S. (NYSEARCA:VEU) for international exposure, Powershares S&P 500 Low Volatility (NYSEARCA:SPLV) for blue chips and (closed-end) Petroleum & Resources (NYSE:PEO) for energy.

I said we would and we have begun to buy some financials, as well, including WFC warrants, AIG warrants and 500 JPM warrants as well as AFL.

Bottom line: I believe the fears of a stock market cliff are overdone. I think we'll see a nice rally between now and year-end. If it doesn't happen, we are mostly in safe issues as we begin to position on the long side. If it happens immediately and explosively, we'll step up the pace.

The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.

Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund only to watch it plummet next month.

We encourage you to do your own research on individual issues we recommend for your analysis to see if they might be of value in your own investing. We take our responsibility to proffer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we "eat our own cooking," but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.

Source: The Fiscal 'Cliff' Is A Speed Bump