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Four Ways the Fiscal Cliff Could Play Out


Your investor guide to the financial opportunity presented.

No. 4: Financials may be a buying opportunity.

Financial reform is not part of the fiscal cliff. But the day after Obama won, financials took the hardest hits. The expectation is that taxing the wealthy will hurt the sector and that reform is coming.

I think this is a buying opportunity. The sector is already showing healthier balance sheets and improved earnings. I think that trend continues. However, I think the negotiation in Washington on bigger issues will distract Washington from financial industry reform.

In addition, I think a lot of the financial industry attacks on the campaign trail were meant to get Obama elected because they are consistent with the populist outrage. But in reality, it was mostly talk and there won't be much follow-up.

Market Impact: I think financials look good here on the 'misplaced' dip.

(See also: Fun With the Fiscal Cliff.)
No positions in stocks mentioned.
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