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With much of the investing public presently focused on the doom and gloom aspects of the fiscal...

With much of the investing public presently focused on the doom and gloom aspects of the fiscal cliff, little attention is being paid to the upside if the situation actually gets resolved. BofA Merrill Lynch has a name for what will come, calling it the "Great Rotation" — a move out of bonds and into stocks triggered in part by a resolution of the crisis at some point in 2013.
Comments (23)
  • Paulo Santos
    , contributor
    Comments (18469) | Send Message
     
    The fiscal cliff has no solution - at most, what it has is a delayed reckoning.
    12 Oct 2012, 07:49 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9932) | Send Message
     
    Yes, sounds like Merrill is trying to offload some of their equities to the ever declining group of buying interest.
    12 Oct 2012, 08:04 PM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    Yes, and you might win the lottery next week and not have to worry about very much of anything, but it's more than a little silly to count on it happening. Yes, having adults back in charge in DC would help, but nothing will get fixed overnight. They've been working on making this mess for far too long for it to get fixed quickly.
    12 Oct 2012, 07:53 PM Reply Like
  • jsiebel720
    , contributor
    Comments (175) | Send Message
     
    Smokin' !!!!!! Give me some...
    12 Oct 2012, 07:54 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4011) | Send Message
     
    Unless one party achieves a filibuster proof majority in Congress, I would expect window dressing at best to provide cover for another delay of the inevitable. The powers that be want to stay that way. Sooner or later the day of reckoning will be upon us but not before all other options have been exhausted including war.
    12 Oct 2012, 07:59 PM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    Hopefully we'll have an all-Republican sweep soon so that deficits and debts won't matter again. ;)
    12 Oct 2012, 09:21 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2038) | Send Message
     
    Cliff? Come on. There is no cliff. The 'Cliff' is just a mental imagination and a political ploy, some kind of smoke and mirror.

     

    Fait accompli, the gov't juggernaut is marching onto the $20T mark, the next step.

     

    Folks,mark my word here. One year later, on October 1, 2013, the debt will be $17T. On October 1, 2013 I will come back here to claim my prediction.

     

    Easy bet, easy win!
    12 Oct 2012, 08:36 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    I am betting with you. I say we go to at least $18 Trillion and over 50% chance of hitting $20 Trillion.
    12 Oct 2012, 08:48 PM Reply Like
  • mike mohr
    , contributor
    Comments (451) | Send Message
     
    Earning has topped, people are bankrupt, wages are dropping, rent food, gas are going higher, housing is still down, market is manipulated and rigged, sharks are waiting to unload their over priced stocks. Just to give you few reasons why market will fall.
    12 Oct 2012, 10:18 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    Pfft, just look at the politics. If Obama wins, as pointed out above, he will not have a filibuster-proof majority. Neither would Romney, and if Romney wins, who really thinks the fiscal cliff will be solved during a lame duck session... over the holidays (Romney wouldn't start until Jan 20).
    12 Oct 2012, 10:42 PM Reply Like
  • bbro
    , contributor
    Comments (9552) | Send Message
     
    It is an interesting read...
    13 Oct 2012, 12:27 AM Reply Like
  • User 502794
    , contributor
    Comments (122) | Send Message
     
    good luck positioning for it
    13 Oct 2012, 12:45 AM Reply Like
  • berbno1
    , contributor
    Comments (1276) | Send Message
     
    ...you guys are real downers. And you want to go back to where W left off???? You are brain dead. Let's try going back to where Bill left off.
    13 Oct 2012, 01:06 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    If we don't turn this ship around we will go back to where Louis XVI left off.

     

    You think the Greeks can riot. What if we have every city in a riot? It's a coming if we don't get our act together.
    13 Oct 2012, 01:24 AM Reply Like
  • The Geoffster
    , contributor
    Comments (4011) | Send Message
     
    I predict riots as well. The vanguard will consist of the scooter brigade on their Hover Rounds followed by legions of Obamaphone users and food stamp participants with their 32 oz. colas. I'll be in Switzerland. Good luck.
    13 Oct 2012, 09:05 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    I think you summarized well the people who are getting the free money. Throw in a bunch of military guys out of work and wow. I might join you in Switzerland. I can still claim citizenship I believe.
    13 Oct 2012, 09:29 AM Reply Like
  • ByloSelhi
    , contributor
    Comments (177) | Send Message
     
    I vote for going back to Bill's first day in office. Tell him to: (1) keep his dxxx in his pants with regards to Monica; and (2) keep his pen in his pocket with regards to signing off on the repeal of Glass-Steagel.
    13 Oct 2012, 10:10 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Hilarious. Although what I would borrow from BC's administration is the tax revenues from the .COM bubble. They were big.

     

    Cherry picking is fun but a fantasy.
    13 Oct 2012, 01:01 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    Anyone who imagines a future rotation out of bonds has already missed the boat. Over the last 3 years, IEF is down 15% (coupons down 38%). In that same time, SPY has fallen about 15% as well (dividends down 28%). The quiet story is that investors have resoundingly rejected the dollar and are furiously selling off dollar-denominated assets. This has been happening for years; it is neither nascent nor speculative. Bond prices would be much lower still if not for large-scale noneconomic purchases by what are essentially the issuers with fabricated money.

     

    There's been a rotation, all right, and it's worked like this. The central bankers have printed trillions of fresh dollars and used them to purchase bonds, driving up their nominal (but not real) prices. Economic actors have dumped their bonds and instead chosen to own mostly gold. Stocks have not enjoyed the same sort of direct official support, but their less rapidly declining dividends have allowed them to hold their own relative to bonds just the same. So the true meaning of the rotation is clear, then: rational investors, having rejected the dollar and government debt, have moved the capital they never intended to place at risk out of bonds, where they realised that it was now very much at risk, and into gold where it is not. There is no confidence in the decaying political and financial regime, and without confidence there is little appetite for stocks or other investment. We are reduced to waiting for this tired regime to implode, at which point it will be time to load up on equities and invest in a new America. But no one can say when that moment will arrive.

     

    That's the tale of the tape. The rotation out of bonds has largely run its course already; most of them are now held by noneconomic actors who will not sell them in any case. Stocks hold promise that will someday be unlocked by regime change. You will lose less money owning stocks than bonds at this point, but unless that dramatic moment of change arrives fairly soon, at best you will pay too much for too little. Gold and wait is where we are, with modest investment in dividend-paying stocks if you feel like rolling the dice on the now-overwhelming political risks that dominate the economic landscape. It's a sad, dull place with no profits to be had and little to do but hope for a better tomorrow.
    13 Oct 2012, 01:46 AM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Yes, if everything is just OK, we should bounce off 5 year highs, from the levels everbody believed to be OK

     

    OK.
    13 Oct 2012, 02:51 AM Reply Like
  • Nicholas Pardini
    , contributor
    Comments (423) | Send Message
     
    The fiscal cliff will be "solved" by not solving long run budgetary issues. Expect all spending cuts to get removed and taxes to marginally raised if at all. All this will do is make the US government debt crisis worse when it actually does happen. 1970's style stagflation or Italy is the US five years from now.
    13 Oct 2012, 03:26 AM Reply Like
  • Russ Winter
    , contributor
    Comments (648) | Send Message
     
    Coverage of the "fiscal cliff" strikes me as another dishonest scam. All about doin' a deal, nothing about what a deal constitutes. Are taxes going to be raised? How about some actual austerity? Military-industrial complex cuts? If so is that supposed to be bullish? If not is that supposed to be bullish? So is "doin" a deal that repeats another trillion dollar deficit supposed to be noteworthy? $900 billion? What are we really talking about here?

     

    So, how dreadful is this cliff? According to the Congressional Budget Office, it would cut the budget deficit in fiscal 2013 by about $560 billion. That sounds like a lot, but during fiscal 2012, which just ended, US gross national debt jumped by $1.322 trillion—to end up at $16.159 trillion. So, if 2013 looks like 2012, the fiscal cliff would cut the deficit by 42%. But it would still leave a huge $762-billion hole. And gross national debt would break the $17 trillion mark.
    13 Oct 2012, 10:57 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Pretty soon you are talking real money.
    13 Oct 2012, 01:44 PM Reply Like
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