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We'll Tell You When It's Time to Tap Tesla

A week ago today, in a strategy story aimed at helping you survive and thrive in today’s whipsaw markets, Chief Investment Strategist Keith Fitz-Gerald told us to put Tesla Motors Inc. (Nasdaq: TSLA) on our “watch lists” for a likely future purchase.

“BP, Tesla is a definite ‘shopping list’ stock,” Keith told me back then. “We’ve been nibbling at it here, and have played it successfully several times. But it’s not yet at the point where I’m ready to jump all the way in. I think my rationale behind Tesla remains upbeat. I mean, you’ve got a real winning combination here – a disruptive sales model, a CEO who’s the most innovative guy on the planet, all the capital in the world that can be brought to bear. I don’t give a rat’s [tail] that New Jersey won’t let the company sell its cars there. There are much bigger opportunities. Wait ’til you see what the company does with China.”

  • fiscal cliff

  • Will Fiscal Cliff Trigger Muni Bond Defaults? Turns out our nation's counties and cities are in much worse financial shape than previously believed - and the impact of the fiscal cliff could drag these municipalities down even lower.

    A recent report by the New York Federal Reserve determined that while Moody's Investment Service reported only 71 defaults from 1970 to 2011, there were actually 2,521.

    That's because Moody's only reports on the defaults of rated bonds, which are safer for investors. Taking all U.S. muni bond defaults into account, the default rate is actually 4%, not 1%, according to The New York Times.

    It's not just Moody's that missed on municipal bond default statistics. The Fed's combined database indicated 2,366 defaults from 1986 to 2011, compared with Standard & Poor's 47 defaults during this same period.

    And now the looming fiscal cliff, scheduled to be reached on Jan. 2, 2013, could drive up many more city debt levels to dangerous highs.

    If Congress doesn't agree on a solution, $530 billion in tax increases and reductions in federal spending will take place at the start of next year. According to a recent study by the Congressional Budget Office (CBO), going over the fiscal cliff could take the United States -and its cities and counties - back down into the valley of another recession.

    That's when muni bond defaults could tick up.

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  • Fiscal Cliff a Far Bigger Threat Than Most Investors Think The United States may or may not go over the fiscal cliff in January, but few investors are taking the possibility seriously enough.

    That's the message Goldman Sachs (NYSE: GS) chief U.S. equity strategist David Kostin had for his clients in a recent note.

    He believes investors are not focusing enough on the potential impact of the fiscal cliff, which could set the stage for jittery markets akin to last year when the debt ceiling debates sent stocks tumbling.

    When it comes to anticipating the impact the fiscal cliff will have on markets, "portfolio managers have been swayed by hope over experience," Kostin recently said in his note.

    Kostin compared the current situation to last year's debt ceiling crisis when Congress waited until the eleventh hour to reach a deal.

    "Investors were stunned and the S&P plunged 11% in 10 trading days (and more than 17% from the level one month prior to the deadline)," Kostin said. "Eventually Congress reached a compromise on raising the debt ceiling."

    "We believe the uncertainty is greater this year than it was 12 months ago," Kostin said. "Political realities and last year's precedent suggest the potential that Congress fails to reach agreement in addressing the "fiscal cliff' is greater than what most market participants seem to believe based on our client conversations. In our opinion, equity investors seem unduly complacent on this issue."

    The market rally enjoyed this month is a markedly different from last year's showing as markets skirted past the one-year anniversary of the debt ceiling face-offs. But Kostin says the S&P 500 is headed for a fall-and a steep one at that.

    Kostin warns: "Assigning a P/E multiple to various fiscal cliff and earnings scenarios is difficult because ultimately we expect Congress will the address the situation. But investors must confront the risk they may not act until the final hour."

    His year-end target for the S&P is 1,250; quite a bit lower than the current 1,424.

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  • Fiscal Cliff 2013 Will Bury Debt-Ridden U.S. Cities With fiscal cliff 2013 approaching on January 2, it is struggling U.S. cities that stand to suffer the most if Congress fails to help.

    These U.S. municipalities are already in terrible fiscal shape due to the effects of The Great Recession. Now they're facing the effects of automatic tax increases and deep spending cuts of 9%, about $560 billion in total.

    Like Gramm-Rudman-Hollings from 1985 that imposed automatic spending cuts, these powerful one-two combinations will floor cities that have unwisely come to rely on federal aid.

    "Cities are going to be facing very rough waters for the next couple of years," predicted Michael Pagano, dean of the College and Urban Planning and Public Affairs at the University of Illinois-Chicago.

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  • Fiscal Cliff Could Cost You Your Job While Americans stash extra cash to prepare for the economic effects of the looming fiscal cliff in 2013, another more immediate concern has developed: How many people will get laid off as companies brace for spending cuts and tax hikes?

    The fiscal cliff will pack a double whammy to some businesses. Companies in certain tax brackets will be paying more to Uncle Sam, while some will see their government funding disappear.

    The substantial fiscal cliff effect has prompted firms to rein in spending, delay projects, defer bids - and cut staff.

    In fact, a study last month from Ernst & Young, the National Federation of Independent Business, the U.S. Chamber of Commerce and other business advocates revealed the fiscal cliff could slash 710,000 jobs from the already beleaguered job market.

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  • Fiscal Cliff 2013 Fears Already Stifling U.S. Economy Fiscal cliff 2013 remains poised to throw the struggling U.S. economy into recession when tax increases and spending cuts kick in Jan. 1 - which has scared companies away from spending any more money than they have to this year.

    Even worse, the country's fiscal cliff fears have increased as a bevy of fresh data has been more dismal than economists expected. Most recently, Read More...
  • No Need for Vacation When You Can Fight Over the Fiscal Cliff Republicans are not willing to let Democrats go over the fiscal cliff and take all of us with them - at least, not without a good fight.

    Just the sound of it - going off the cliff - echoes disaster. But that is where we're heading if Congress doesn't act to extend the Bush tax cuts or avoid the automatic spending cuts that will go into effect Jan. 1.

    Little can be expected to be resolved over the next month as Congress takes off for its annual five-week August recess.

    However, House Speaker John Boehner (R-Ohio) vowed Wednesday to call the House back into session to cement approval if Senate takes action to prevent fiscal cliff. The GOP has made its commitment to averting the fiscal cliff crystal clear and is encouraging the Democrats to work out some kind of agreement.

    "If the Senate follows the House in passing legislation to stop the entire tax hike-including the small business tax hike-in a manner that requires House approval before it can be sent to the president, it is our commitment that the House will reconvene immediately to ensure the measure is enacted at the earliest opportunity. But, in order to avert the threat to our economy, the Senate must join the House in acting to stop the entire tax increase," Boehner and three other House GOP leaders wrote in a letter to Senate Majority Leader Harry Reid (D-NV).

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  • Expect QE3 After Geithner's Warnings In testimony yesterday (Wednesday) before the House Financial Services Committee, U.S. Secretary of the Treasury Timothy Geithner may have inched us closer to QE3 when he warned that the U.S. economy will be slammed by two major factors: the immediate danger from the Eurozone debt crisis and fiscal cliff 2013 that is fast approaching.

    "The economic recession in Europe is hurting economic growth around the world, and the ongoing financial stress is causing a general tightening of financial conditions, exacerbating the global slowdown," Geithner said in his testimony.

    As much of the revenue for major U.S. corporations such as Ford Motor Co. (NYSE: F), DuPont (NYSE: DD) and Cisco Systems Inc. (Nasdaq: CSCO) comes from Europe, the damage is already being felt by both employees and shareholders. Cisco, down 20.52% for the quarter, recently announced the layoffs of 1,300 workers, about 2% of its global labor force.

    Geithner cited other factors harming the U.S. economy, including the rise in oil prices earlier this year, cuts to government spending and slow rates of income growth.

    Possible adverse developments in the future, particularly the fiscal cliff, led Geithner to warn that, "These potential threats underscore the need for continued progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run."


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  • Fiscal Cliff 2013: Politicians Playing Chicken with Your Money on the Line Americans are caught in the crossfire as U.S. policy makers continue to battle over "fiscal cliff 2013."

    Republican and Democratic lawmakers remain deadlocked over what to do regarding the expiring tax a nd spending cuts, but its taxpayers' money that's at stake.

    On Dec. 31, if no action is taken, Bush-era tax cuts will run out, thrusting the struggling U.S. economy back to the lofty Clinton-era tax rates. Plus, steep spending cuts will kick in, hitting a broad range of sectors from education to national defense.

    U.S. President Barack Obama and his administration want a tax extension for those making less than $250,000. They are also calling on the top 2% of earners to pa y higher rates on income exceeding $250,000, maintaining it's their duty to do so.

    Republicans, however, want the tax breaks to remain intact for all.

    So it goes, and so it has gone for months. If Democrats get their way and let some $600 billion worth of tax hikes and spending cuts go into effect in January, it will drive the nation back into a recession. But that can be avoided if Republicans back off on their opposition of higher taxes for our nation's wealthiest.

    While the two parties clash, Americans of all tax brackets are stuck in a wait- and- see mode--waiting for action and not seeing much except their nest eggs getting fried.

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  • Fiscal Cliff: Bernanke Urges Congress to Take Action U.S. Federal Reserve Chairman Ben Bernanke on Tuesday once again reiterated Congress' need to prevent the economy from succumbing to the "fiscal cliff" that as of now will hit taxpayers and the country in 2013.

    The fiscal cliff refers to the numerous tax increases and steep spending cuts slated to go into effect Jan. 1, and will throw the already struggling U.S. economy back into a recession.

    In his semi-annual monetary report to the U.S. Senate, the chief voiced his concerns. What was missing though was what Congress should actually do to hammer out a budget deal that would prevent a fiscal cliff.

    "I don't have a specific recommendation, other than to think not just about the individual policies, but of the collective impact. Congress is in charge here," Bernanke said.

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  • How the Fiscal Cliff will Deal a Blow to U.S. Defense Industry The fiscal cliff is taking down more than U.S. taxpayers - it will tear through the U.S. defense industry.

    At the end of this year, current tax policies are set to expire and new ones will go into effect at the start of 2013. What Americans can expect if the policies are not extended is a painful combo of tax increases and spending cuts that will thrust the struggling U.S. economy back into a recession.

    If U.S. lawmakers fail to act, scores of economists agree what we'll get is a $600 billion drag on the already sluggish economy. The tax implications have been widely discussed, but there has been little chatter about the impact on the defense sector, which stands to sorely suffer since it is subjected to half of the proposed spending cuts.

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  • What is the "Fiscal Cliff"? Now that we've explored the dangerous repercussions of the looming Taxmageddon, investors have another important question: What is the "fiscal cliff"?

    Fiscal cliff anxiety has increased since May 22 when the Congressional Budget Office spread some gloom and doom by citing a potential 2013 recession.

    As we reach 2012's midpoint, we still have November's presidential election and a ticking clock for Congress and the president to reach an agreement on policy issues by year's end.

    The likelihood of this doesn't look good. That's why now's the time to prepare for the potential effect from the fiscal cliff.

    What is the Fiscal Cliff?

    You can thank Federal Reserve ChairmanBen Bernankefor coining the phrase.

    Fiscal cliff refers to the coinciding action of tax increases and spending cuts that will activate on Jan. 1, 2013 unless Congress and the White House agree and take some action to either delay or change them.

    Should these two actions marry, you'll watch $7 trillion tagged onto the nation's debt over the next decade, or about $500 billion next year, according to CNN.

    How will investors be impacted?

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  • How I Learned to Stop Worrying and Love the Fiscal Cliff Taking a header off the "fiscal cliff" might be the best thing that could happen to the United States.

    It sounds crazy, given all the dire predictions economists are making about the "Taxmageddon" that will arrive on Jan. 1, 2013.

    While true, no one is talking about what would happen to the economy after the fiscal cliff crisis of 2013.

    If Congress fails to act and allows all the bad things to happen - the expiration of the Bush-era tax cuts and the payroll tax cut, as well as the enforced spending cuts (sequestration) agreed to in the budget deal last year - the federal budget deficit would start shrinking dramatically.

    And the fiscal discipline, while brutal in the short run, would jump-start the economy by early 2014.

    It's all in a recent Congressional Budget Office (CBO) report, "Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013."

    The CBO ran projections based on two scenarios.

    One looks at what would happen if Congress does nothing and lets the country go over the fiscal cliff. The other scenario looks at what would happen if Congress dodges the fiscal cliff by extending most, if not all, of the current policies.

    Choosing to take a leap off of the fiscal cliff--as has been widely reported-- would slam an already faltering U.S. economy. The CBO report says GDP would shrink by 1.3% in the first half of 2013, pushing the country back into a recession.

    On the other hand, extending current policies would push GDP up 5.3% in the first half of 2013.

    That may sound great, but a funny thing happens after those first six months.

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