We can't control the arguments in Washington, but we can control our money. That means it's time to learn how to profit from the fiscal cliff.
If the U.S. economy "falls off" the fiscal cliff, the stock market will be volatile. The Dow Jones Industrial Average is down about 500 points since the Nov. 6 election, the lowest level in over four months.
Fitch Ratings has already threatened to downgrade the United States if substantial progress is not made on addressing its economic woes, starting with the fiscal cliff. That is not an idle threat as Standard & Poor's did reduce thecreditrating of the United States in August 2011.
"It's not hard to make the case we are headed for a recession," warned Hugh Johnson, head of Hugh Johnson Advisors, a financial and economic advising firm.
But that doesn't mean you should shun all stocks, you just have to know which investments are prepared to weather the fiscal cliff storm.
Here are two of the best ways to profit from falling off the fiscal cliff.
Profit from the Fiscal Cliff
First, investors should consider gold and gold-related investments. Gold will soar as a result of the fiscal cliff.
Barrick Gold pays a dividend of 2.36%. For Gold Fields, the income stream flows at a 4.18% rate. Newmont Mining pays its shareholders a dividend of 3.06%.
Investors: Want to know more about buying gold?
The fiscal cliff will also make oil a profitable long-term buy.
Unlike gold, which is mostly an investment vehicle, oil is utilized for industrial purposes.
Overall, oil stocks are down due to declining economic growth around the world. If the fiscal cliff is crossed, these stocks could drop further.
This will be an ideal time for long-term investors to pay lower prices for oil companies with high dividends.
Like the dividend-paying gold stocks, oil companies are positioned well to profit from the growth in emerging market nations.
Over the last month, Big Oil stocks have fallen.Exxon Mobil Corp. (NYSE: XOM) is down 5% and Chevron Corp. (NYSE: CVX) is off by 9%.For the same period, Occidental Petroleum (NYSE: OXY) has plunged about 10%.
That fall has served to make them more attractive, jacking up the dividend yield of each.
At present, ExxonMobil has a dividend yield of 2.65%, Chevron offers 3.5%, and Occidental 2.92%. In addition, oil companies have a history of increasing the dividend. That makes stocks in the oil industry even more attractive as long-term holdings.
Robert Scherer of Graystone Consulting offered this about long-term investments and the fiscal cliff: "It's like trying to focus on driving, but looking two feet ahead of you instead of way ahead of you."
Even if Congress and the White House do work out a deal to avert the fiscal cliff, oil and gold stocks are good "Buys" already due to stock prices falling in anticipation of an unhappy ending.
This is how investors who want to prepare, not worry, can profit from the fiscal cliff.
For another look at how next year's economy is headed for a recession regardless of the fiscal cliff action, check out today's analysis by Money Morning Global Investing Strategist Martin Hutchinson.
Related Articles and News:
- Money Morning:
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- The Washington Times:
Investors cope with fear of falling off the "fiscal cliff'
- USA Today:
Stocks at 4-month lows as fiscal cliff looms