Tags: fiscal-cliff | investors | gold | shelters

Fiscal Cliff: A Parachute for Investors Made of Gold, Other Shelters

By    |   Monday, 19 November 2012 11:27 AM

Even if hard-line Democrats get their wish and the country does take the fiscal-cliff plunge, there are things investors need to think about before pulling up stakes — like gold and other havens suggested by experts.

Very few believe President Barack Obama and Congress won't negotiate changes in the Budget Control Act that passed in August 2011, but if worse comes to worst then the plunge drastically affects the U.S. economy: An estimated $2,000 evaporates from average American incomes, jobless benefits for the unemployed whither, and another recession looms.

Will there be opportunities for investors with the stomach to dive into muddy waters?
Some savvy investors make as much or more money in a bear market as they do in a bullish one. So in a word, yes, some people might do quite well if things turn south.

What are experts advising?
Most are preaching patience and staying on top of developments. "Almost all forms of  'risk assets' are likely to fall in price as the market would discount a greater degree of political and economic uncertainty," said Alan Zafran, partner at Luminous Capital in Menlo Park, Calif.

What are the pros doing?
Graystone Consulting’s Robert Scherer has been fielding dozens of questions from concerned clients about the fiscal cliff. While some investors are tempted to pull out of the markets, he counsels his clients to take a long view rather than just look at the short term. In other words, don’t overreact.

OK, let’s say I agree and don’t liquidate my assets so I can hide them under my mattress. Where might I put my money?
In a word, gold. The worldwide monetary standard is usually a safe port in rough waters. Since Fed Chair Ben Bernanke signaled interest rates might drop again, inflation might very well rear up and gold is a good hedge. That would weaken the dollar and make dollar-linked commodities like gold more expensive.

"The break in commodity prices is likely an overreaction because I am looking for inflation due to the money printing and the fact I see them kicking the can down the road by extending the deadline for the fiscal cliff," said George Kleinman, president of Commodity Resource Corp. in Incline Village, Nev., who recently bought gold.

Besides gold, what else do the experts think would be good choices?
Master limited partnerships (MLP), real estate investment trusts (REIT) bonds and foreign government bonds are investments many experts mention.

What else are the experts saying?
That the government ought to pull us back from the fiscal cliff and come up with a policy that works for individuals and businesses, Republicans and Democrats.

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If the country does take the fiscal-cliff plunge, there are things investors need to think about before pulling up stakes — like gold and other shelters suggested by experts.
Monday, 19 November 2012 11:27 AM
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