Fiscal Cliffhanger

So will we go over or won’t we?  Every day, it seems the answer is different.  Economic brinkmanship.  Today is the first time I heard serious talk of strategically going over the cliff to strengthen a negotiating position, reminding me of Henry Kissenger’s MAD Strategy (Mutually Assured Destruction) during the Cold War.  Today is also the last day for negotiations or voting before the Christmas break, making it look more and more likely that things will get worse before they get better.

There have been lots of commentaries about how ‘ordinary citizens’ should prepare for possible outcomes: higher taxes on some (maybe all?) of us and fewer government programs, but I haven’t seen much on how this might effect markets and portfolios.  How might a good risk manager go about analyzing this situation?

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