The Fiscal Cliff…And How You Can Profit From It.

by Shah Gilani.

For starters, the problem with going over the fiscal cliff isn’t what you think it is.

It’s worse.

Because if we go over the cliff and there are meaningful (which means it’s about time) spending cuts and across-the-board tax hikes (which wouldn’t be so bad, except for this…), what do you think politicians are going to do with new revenues?

They’re going to spend them to offset the “sequestered” spending cuts that they’ll say are coming at the wrong time!

What are they going to do with all that revenue?

They’re going to come up with new spending schemes to redistribute their new revenues.

The Keynesians and the Socialists, who long ago infiltrated the Fed, are starting to make telling Democrats and Republicans apart virtually impossible. Why? Because they’re all Keynesians and Socialists now.

They’ve all become citizen saviors waving our money back in our faces promising to do stuff for us – with our money!

You should be laughing at yourself if you just realized that this was the game all along.

If you didn’t get that our government hacks – all of them – want higher taxes so they can pay off their masters with “special programs” (that means giveaways) to better this crony’s lot, or that crony’s plot, or this industry, or further some government agenda, then you didn’t get how corrupt and greedy American politicians really are.

Cutting spending and cutting taxes amounts to cutting off the hands of politicians. So, really, what’s the likelihood of those two things happening?

That’s the problem with going over the fiscal cliff, and markets are beginning to see it.

Let’s say we don’t get a miracle by Monday and there’s no meaningful address of the fiscal cliff issues; I think there’s a small chance we might get another “Lehman moment.”

Dow futures were down 200 points after the market closed on Friday. That’s after it closed. That means the hedgers and speculators were selling futures ahead of what they expect to be a very ugly Monday.

Of course, I could be wrong. There could be a relief rally if something – anything – that makes sense for our economic future comes out of Washington before markets open around the world early on Monday morning.

I said I could be wrong. But I don’t bet on woulda, coulda, shouldas.

Make sure you have stop-loss orders down on your investment and trading positions, unless you want to be adding to core positions at lower levels.

If markets tank next week get out and get to the sidelines.

There will be plenty of time to get back in, If you’ve got plenty of capital at the ready and we do get a major sell-off, which could – according to some of my metrics – last a couple of quarters, there will be lots of possible generational buys to be had when the dust settles.

I’m not saying that’s what’s going to happen. What I am saying is, it’s a possibility.

Good luck to us all,

Shah