Thursday, 8 November 2012

US Congress has a chance to come up with a plan

Dear Friends,

This is really what market is about. A new episode of fiscal cliff drama cropped up to replace that of euro crisis. I would like to point out to something that always governs the market. We probably need to Buy Low Sell High to make $.

As I have been conducting a few investment classes every week, the first question I always try to find out is how many people have bought stocks this few months. To my amazement, an average of less than 1/3 of the class bought stocks in the last quarter from June to September, where the DOW went from 12000 points to 13660. That means something.

Most of us have not been in the market yet.

For those that have not been in the market, this provides a good opportunity again. This fiscal cliff episode will again end in a consensus or peace. America will find its way out. They got 53 days left to do something.

An explanation of Fiscal Cliff and why the problem:

1) During George Bush era, he implemented some tax cuts to stimulate the economy. And this tax cuts will expire end of this year which means if congress/ government does not do something to extend this cuts, the tax would be raised automatically.

2) Last year in the debt ceiling issue, a consensus was made to raise the debt, but government spending would be cut. The date where the cut would kick in is end of this year too. If the spending cuts do take place and government does not remove the cuts, quite a few people would be out of jobs.

3) Both this issues dateline are at the end of the year 2012. If these 2 issues are not resolved, Wallstreet thinks that it will lead to a sudden halt in the economy as consumers would probably not spend with  higher taxes and less jobs.

4) This problem can actually be solved if government lengthen the tax cuts and remove the government spending cut. BUT the problem with America is that it is too democratic! The US Democrats and the Republicans are as bad as Taiwan!

My view is that, yes there may be some volatility in Wallstreet now concerned about this problem. But to those that have not entered the market, this is a wonderful chance for you to buy stocks at a DISCOUNT. This issue does not seem that tough to resolve. This isn't a EURO Crisis or a Subprime mortgage issue where trillions of dollars are involved and companies earnings are seriously in jeopardy. This issue is not something that is so sudden that catch enterprises off guard!

A real crisis only occurs when it is caught off guard. The enterprises and businesses in America has already prepared itself for the fiscal cliff. JP Morgan and Visa CEO told us they already did something. The impact seriously is minimal because of the preparation!

Like what Investment Guru Hu Li Yang said, "Take this as a terrific opportunity to jump into the bus full of people. Everyone wants to be on the bus making money. Nobody wants to alight when times are good. With this uncertainty, some will alight in a panic. GET in when they courteously give up the seat to you."

I am sure, at the end of the day, US congress will come up with a consensus, just like last year debt ceiling issue. And when the time comes and the good news released, a lot of us will have no chance to get on the bus again!

You may not want to go in now, but try to monitor the progress of the congress, and take note of the dates they are going to release any news.

Rgds
Daniel
www.danielloh.com




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