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Big mouth politician hurts stocks

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by Peter Switzer

European stock markets were up on good news that Greece has struck a better deal from lenders but a big mouth US politician started the spooking process, which is bound to hurt stock markets in coming weeks.

The fool politician was Senate Majority Leader Harry Reid — a Democrat — who told us there had been “little progress” with fiscal cliff negotiations.

The Dow dropped 89.24 points or 0.69 per cent to 12,878.13 while the S&P 500 lost 7.35 points or 0.52 per cent to finish at 1398.94.

The experts say stock markets are now exposed to “headline risk” where bad news will send stock prices down. The fear index or VIX is sneaking up and what US politicians say and do between now and Christmas will make or break stock prices.

On the good news out of the USA, home prices were up for the sixth month on a trot while November consumer confidence is at a four-and-a-half-year high!

If the US politicians can use their brains instead of their mouths and you add the improving economic picture for the American economy, then a nice big rally should follow when, or if, a fiscal cliff deal is done.

I think they will cut a deal and let me remind you what Winston Churchill said of our US buddies: “You can always count on Americans to do the right thing - after they've tried everything else.”

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, November 28, 2012

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