Anyone selling stocks in advance of the fiscal cliff?

[humandraydel]

in the short term, if a deal isn't reached by 12/31 and the tax hikes all go into effect on 1/1, the market will react badly and we could see a serious drop at the start of the year.

There might be a drop. But what happens if a deal DOES pass - is the stock market going to shoot up 10%? Then what are you going to do? Personally, I'm not convinced that predicting what politicians will do is any easier than predicting the stock market.

I am not selling. A little over a year ago (~Aug 2011) the U.S. credit rating was downgraded and discussions over the debt ceiling sent the S&P 500 down 16% from 1345 to 1123. And yet we are 6% above 1345 now. But then again, I was never convinced this Fiscal Cliff was much more than a hill anyway.

[disneysteve]

There might be a drop. But what happens if a deal DOES pass - is the stock market going to shoot up 10%? Then what are you going to do? Personally, I'm not convinced that predicting what politicians will do is any easier than predicting the stock market.

I am not selling. A little over a year ago (~Aug 2011) the U.S. credit rating was downgraded and discussions over the debt ceiling sent the S&P 500 down 16% from 1345 to 1123. And yet we are 6% above 1345 now. But then again, I was never convinced this Fiscal Cliff was much more than a hill anyway.

Good point. I'm sure a deal will be reached. It's just a question of when - before 12/31 or after? And will everything be maintained (or restored)? Who knows?

[humandraydel]

Good point. I'm sure a deal will be reached. It's just a question of when - before 12/31 or after? And will everything be maintained (or restored)? Who knows?

Exactly. So, I checked what the S&P500 did today and this appropriate "article" was listed at the top. It's Motley Fool, so take it with a bucket of salt, but I thought it was kind of funny.

"Surprise -- the stock market is roaring higher on speculation that a fiscal deal compromise may be reached. The markets staged their biggest rally so far this month as House Speaker John Boehner and President Barack Obama met behind closed doors to discuss a potential fiscal cliff compromise. On the day, the broad-based S&P 500 (SNPINDEX: ^GSPC ) jumped 16.78 points (1.19%) to finish at 1,430.36."

This is the Reason the S&P500 Roared Higher

[BuckyBadger]

Good point. I'm sure a deal will be reached. It's just a question of when - before 12/31 or after? And will everything be maintained (or restored)? Who knows?

Exactly! No one knows, and that uncertainty is priced into the market already.

So are you sure you wanna sell those stocks now after all?

[disneysteve]

Exactly! No one knows, and that uncertainty is priced into the market already.

So are you sure you wanna sell those stocks now after all?

I might still lessen my holdings of FXCB not because of the fiscal cliff but because they are at a 52-week high and I think taking some profit isn't a bad idea.

[future35]

Hold

I think the whole fiscal cliff argument for selling is a very bad idea unless you need to have/cannot take the loss of your initial investment. Profit taking at year end is one thing, but to tie it to a politicized event that will eventually be dealt with is another. I for one believe that if the worst does come out of it two things will happen, equities will be on sale for a portion of the first half of 2013 and then the markets will recover to the plus side for the year.

So sell if you need the money, but be ready to jump back in right away if the dreaded fiscal cliff really does spur a total sell off. I'm staying put and adding to the fold if this does actually really happen!

[GrimJack]

What I just love about 'the market' is that it can come up with all sorts of BS reason why that just happened but ALWAYS say "past performance is no predictor of future performance". Eventually, we should all realize that they are pulling this stuff out of nether regions - they don't know what they are talking about, but they have all these 'stock phrases' to explain why they were wrong (or right). There is no invisible hand; chasing returns only works if you use other people's money; slow, plodding dollar cost averaging still rules.

(/rant)

[kork13]

What I just love about 'the market' is that it can come up with all sorts of BS reason why that just happened but ALWAYS say "past performance is no predictor of future performance". Eventually, we should all realize that they are pulling this stuff out of nether regions - they don't know what they are talking about, but they have all these 'stock phrases' to explain why they were wrong (or right). There is no invisible hand; chasing returns only works if you use other people's money; slow, plodding dollar cost averaging still rules.

(/rant)

^^ THIS.

No, I'm not going to do anything different from normal. I'm still going to continue my DCA every month, and yet by some miracle of the cosmos, everything will still be alright. If my budget weren't as strained as it is at present (holiday travel has been expensive for me this year), I would set aside a few hundred dollars ready to make some extra buys if the opportunity arose, but honestly even that wouldn't be very significant.

As far as trying to lead-turn the "fiscal cliff", I can see some valid reasoning for people who are in high tax brackets, or who are working with tens or hundreds of thousands of dollars (or more), but for the average Joe investor who's talking about moves with fewer than about 4 zero's or so, it's probably not going to make a significant difference one way or the other (in the absence of any spectacular stupidity or unprecedented luck). The market gyrates, and over the long run, it all evens out. I'm not inclined to freak out about the unknowable.

[snafu]

For individual stocks, I sell part of my position when I get nervous, to get my initial/original investment back but ready to buy again if it falls to a pre determined 'buy' number. Last week I had to sell a loser & balanced it by taking a profit on another stock. I've also had to re-balance my holdings as Bonds ramped up higher than expected. I'll hold off buying until the New Year mostly because I'm still running numbers and trying to make intelligent decisions. Holiday visiting is so much more fun.

I'm so disgusted with politicians and their bumpf...words fail me.

[disneysteve]

For individual stocks, I sell part of my position when I get nervous, to get my initial/original investment back but ready to buy again if it falls to a pre determined 'buy' number.

Exactly. I don't do a lot of trading. Very, very little actually, but when I do, this is pretty much my theory, and that's where I am right now. Sitting on a couple of nice profits and thinking it might be time to at least partly cash out.

[BudgetSurgeon]

Yes, I am. More cash and more gold in my portfolio, although moving into cash is a tough pill to swallow. We may see a short pop upward in the market, if the "fiscal cliff" issue gets some sort of attention before the New Year. But, I think it will be short-lived, as the "compromise" will inevitably include such things as:

- Home Mortgage Deduction reduction
- Capital Gains Tax Increase
- Dividend Tax Increase
- Charitable Deduction Elimination or Scaleback

Additionally, look at the Shiller PE Index. This has been a very accurate longer-term (10 year horizon) predictor of stock prices. It is extremely top heavy right now. Those who follow Shiller advise to lighten up on domestic stocks and look for International stock plays. Here are a couple of links that support that:

Brace yourself for meager U.S. stock returns - Outside the Box - MarketWatch

Blood in the Streets – World Beta – Stock Market and Investing Blog of Mebane Faber

Please do your own due diligence here.

[Slug]

Exactly. I don't do a lot of trading. Very, very little actually, but when I do, this is pretty much my theory, and that's where I am right now. Sitting on a couple of nice profits and thinking it might be time to at least partly cash out.

I can't believe we are this far into this thread with no one mentioning stop limit orders. I use these all the time to rein in volatility. I hold individual stocks and much more in ETF's. I just set stop limits at around 4-5%. This insures my downside risk is accounted for. I made some good cash on AAPL this year riding the upwaves and getting out early on the downside before buying back in.

Stop limits are an easy way to make sure your personal fiscal cliff has a ledge a short way down where you land then watch everyone crash to the bottom.

[disneysteve]

I can't believe we are this far into this thread with no one mentioning stop limit orders.

I have used these at times. I just hate the idea of selling a stock because of a quick drop only to have it recover within a day or two, which happens a lot when the market is as volatile as it has been in recent months.

[kork13]

I have used these at times. I just hate the idea of selling a stock because of a quick drop only to have it recover within a day or two, which happens a lot when the market is as volatile as it has been in recent months.

I'm not totally familiar with these, but can't you also use them to cash in on gains, by setting shares to sell if the price reaches a certain point?

A similar order type I've heard of (though haven't found it to be an option, at least at the brokerages I've used) is a trailing stop order, where the order price floats upward to follow the share price, then if the price starts to fall, the order executes at a definable interval below the maximum share price.

It would be interesting to try these out on purely speculative holdings (aka "play money"), but not sure if I would use them for any of my long-term investments...

[kv968]

I'm not totally familiar with these, but can't you also use them to cash in on gains, by setting shares to sell if the price reaches a certain point?

Yes, that's setting a limit order. You set the price you want to sell at and if it reaches it it'll trigger.

A similar order type I've heard of (though haven't found it to be an option, at least at the brokerages I've used) is a trailing stop order, where the order price floats upward to follow the share price, then if the price starts to fall, the order executes at a definable interval below the maximum share price.

I'd think most brokerages offer a trailing stop order. In order to set it you have to click where you want to sell a stock you own and a menu will pop up asking how many shares, etc... In that menu it should be under "order type".

I notice that Vanguard doesn't have a trailing stop but I'd be surprised if most discount brokers didn't offer it.