The Valor Blog.
Investment News and Views, Direct from Our Team.

The Fiscal Cliff and Investing

The Fiscal Cliff is a potential problem for the US. The issue is real. Whether or not it should be up for debate is another question.

The US does need to fix its government finances, but they are not unfixable problems.

But how does the Fiscal Cliff affect long term investments?

If the US goes past its deadline, will Coke sell less cans of Coke over the next 10 years because of a deadline to agree on some tax and budget cut issues? Probably not.

Will less people “Google”something and click on the adds next to the search engine? Probably not.

Will the excess houses in the US that are being mopped up over the next few years all of a sudden not continue to reduce the supply? Probably not.

Will the shale gas revolution grind to a halt and stop the US drive toward energy independence at some stage over the next 5 to 10 years? Probably not.

Will sentiment increase the share market volatility? Likely so.

So if the Fiscal Cliff is unlikely to make a dent in the worlds best businesses, then does it provide a good opportunity to add to these businesses at reasonable prices? Likely so.

Both Jim Chanos and Warren Buffett have recently stated that the Fiscal Cliff is not changing how they approach their long term investment philosophies and I recommend that you do the same.