January 01, 2013
The Stock Market and the Fiscal Cliff
Posted by Gordon Smith

Last summer, I decided to scorn market efficiency and invest in a portfolio of individual stocks. Not a lot of money, but enough that I cared. I did some research and picked 18 stocks. Here are the results (blue line) compared to the Dow Jones, S&P 500, and Nasdaq:

July Stocks

As you can see, I am beating the market by a large margin. Feeling pretty confident about my success and believing that I could take advantage of the uncertainty created by the impending fiscal cliff, I purchased another small portfolio of stocks in September:

Sept Stocks

While this new portfolio has been rallying in late December as prospects for a cliff deal waxed and waned, I am still in the hole. The WSJ tells me that tonight's fiscal cliff deal will bolster my returns, but why? With all of the other uncertainties about the debt ceiling, spending cuts, and tax increases looming, the optimistic story seems to be that neither President Obama nor the Republicans in Congress are as extreme as their public positions, which are irreconcilable. 

What a mess. We need a leader, and none is in sight.

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