Selling the Fiscal Cliff Drama

Roll up, roll up for the mystery tour
--The Beatles

Made a far amount of sales today, particularly on the taxable side of my sheets. Technicals suggest indexes are getting stretched on a daily basis.

Although my view is that the drama surrounding the 'fiscal cliff' is mostly media hype, and that a miserable compromise is likely to be obtained, I think that markets are betting on same. A compromise would constitute more extend-and-pretend, which markets would like--at least for now. I may be wrong, but seems to me that markets are assigning a high probablity to this outcome. "We've always compromised in the past," markets are reasoning.

If true, then huge sustainable advances following any kind of agreement would be unlikely since markets have already anticipated this outcome and have priced it in. In fact, it could be a sell-the-news event. Am reminded of the action following the summer 2011 compromise.

My sense is that markets are not discounting the opposite--that no compromise is reached and we head over the 'cliff.' Should that scenario occur, as unlikely as it seems to me, then a nasty sell-off may commence.

It is also end-of-year time, and tax loss selling might intensify--particularly in dividend paying names that will be hit by tax increases related to end of year developments and the Obamacare 'surtax' on investment income. I own a few of these names any many of them appear extended--so I'm viewing this as an opportunity to lighten up on the taxable side.

More cash in current accounts feels good moving into year end.

position in SPX