Investment Advice

The $600 billion fiscal cliff we've warned you about has never gone away. It's been marginalized by the campaign, but it has never disappeared. It is, bar none, the single- biggest issue facing our country at the moment.

But President Obama's re-election means a lame duck president and a lame duck Congress. Rather than a grand solution, expect more grandstanding and another game of kick the can down the road.

Generally speaking, the markets are going to be very choppy in the near term. Fully half the traders on Wall Street woke up on the wrong side of the proverbial bed the day after the election and they're going to have to adjust their bets accordingly.

The most stable, defensive and, ironically, opportunistic choices will remain large, super cap stocks. I call them "glocals." These are companies like MCD, Procter and Gamble, General Electric, ABB, Raytheon and Vodaphone. All of them are global brands and have the experience needed to manage real growth despite challenging economic conditions around the world. Most typically pay high income that offsets the risk of ownership and are therefore far more stable than non-dividend paying alternatives.

Small cap stocks are just the opposite. Unless there is something especially compelling about them, like a truly unique patent or a new long- term government contract, the volatility will be more than most investors are prepared to accept. Most pay no income whatsoever so they're a crap shoot in today's environment.

And don't forget to hedge your bets while you're at it. Inverse funds that offset market volatility are a viable alternative to simply hanging on and hoping for the best. Not only can you protect the value of your income and dividends by smoothing out the volatility, but specialized choices like the Rydex Inverse S&P 500 Fund (RYURX) can help investors stay in the game and generate gains that take the sting out of otherwise problematic losses.

I believe bonds will play out for just a bit longer. When this crisis started, I predicted yields would drop all the way to 1.5% on the 10-year note and people thought I was the exorcist. Now that Obama's reelected, I think we could see yields drop all the way to 1%. This means there is still, as hard as it is to believe, additional upside in bonds.

Obviously, this is going to be challenging in its own right given that interest rates are hovering at the extreme low end of the spectrum. The best advice here is to keep duration short. My research suggests that 3-5 years is best because that will help investors avoid much of the volatility associated with rising rates in longer dated instruments when they do ultimately come into the picture. Anything longer simply adds unnecessary risk .

Don't forget muni bonds. The same duration concept applies here. Keep things short. Every state in the union has budgetary problems and I think we're going to see a well-intentioned but completely flawed
national policy level response no later than 24 months from now as many states begin to run out of money.

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 recent study 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.

It's already starting…

According to a Bloomberg News, companies in North America cut more than 62,000 jobs from Sept 1 through the end of October… the biggest two-month slashing of jobs since the beginning of 2010.

Further in the same time period, the computer industry cut more than 40,000 jobs… the transportation industry more than 33,000 jobs… and the insurance more than 7,000 jobs – all tremendous job loss increases over the same period in those industries last year, according to the USA Today.

• QE3 could be $1.2 to $2.0 Trillion
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• Use Gold Futures & Options to Send Your Profits Soaring!

The latest round of quantitative easing by Fed Chairman Ben Bernanke was anticipated by Wall Street-but it's also a game changer.

That's because

the sheer size and scope of QE3, as it is called, will have tremendous and long-lasting effects from Wall Street to Washington and across America.
We saw a game-changer in the Federal Reserve's decision to proceed with a new round of quantitative easing (this one is focused on mortgage backed securities), an extension of Operation Twist through the end of the year, and keep interest rates low "at least through mid-2015."

This
amounts to a flood of money, and that rising tide should lift asset prices, including both commodities and stocks.

For many investors, the biggest question is "what should I do with my money now?" In this special report, we'll show you what history tells us about quantitative easing … why this QE is so different … how this could send ripples through the market for years to come…and what your best bets are to protect your money and invest for potentially big, fat profits.