Buisness Insider

Here's Goldman's Worst-Possible, Black-Sky Scenario For The Fiscal Cliff

What's the worst possible thing that could happen when we hit the fiscal cliff?

Here's Goldman's Alec Phillips and Jan Hatzius going through some of the possibilities:

Under the baseline “not so good” scenario, fiscal policy would shave nearly 1½ percentage points from real GDP growth in early 2013, compared with ¾ points in 2012. In this case, we expect a renewed moderate GDP growth slowdown to a 1½% pace in early 2013.

Under the alternative “bad” scenario, the fiscal drag would rise to nearly 2 percentage points in early 2013. This bigger hit, combined with the possible greater uncertainty if an agreement proves elusive for a few weeks in early 2013, would probably cause a sharper slowdown in GDP growth to 1% or less.

Finally, there is the tail risk scenario that Congress fails to agree on any type of resolution for a more extended period, and the economy is hit with both the sequester and much bigger tax increases. While the impact of such a failure—especially those related to confidence and financial conditions—are harder to quantify, just the direct fiscal impact would imply a GDP growth hit of around 4 percentage points in early 2013, and likely a recession.

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One other thing to note in regards to the fiscal cliff. There is a sense on Wall Street that the race for The White House has truly been reset after last week's debate. Romney is unquestionably back in this.

Any assumption about what DC will look like after November 6 is now called into question, and trying to wargame out the fiscal cliff has gotten a lot harder.

For more on Obama's collapsing poll numbers, see here >

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SALLIE KRAWCHECK: Here's What's Wrong With How We Pay Bank Execs

These days, it's commonplace for bank executives to receive much more stock-based compensation. That needs to change, says Sallie Krawcheck.

The former Citigroup and Bank of America Merrill Lynch exec tells us that people who are compensated mostly in stock are encouraged to take more risk.

Watch Krawcheck explain what needs to change with executive compensation below:

 
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And Don't Miss...

• Big Banks Should Stop Paying Execs Mostly In Stock, Says Sallie Krawcheck

• Sallie Krawcheck: There's One Thing We Need To Outlaw On Wall Street

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Here's The Gigantic Whitney Tilson Presentation On Stocks And The Economy That He Delivered At This Week's Conference

Whitney Tilson

Hedge fund guru Whitney Tilson, managing partner of T2 Partners, presented three stock picks at the Value Investing Congress this week. 

Tilson kicked off his presentation at the VIC by giving a general overview of the U.S. economy touching upon topics such as GDP, consumer confidence, jobs reports, etc.

He said that the U.S. economy's recovery has been "quite strong"  and that he's cautiously optimistic that a tepid recovery will continue in the U.S.   

However, he doesn't see much upside in the markets unless the economy really takes off.  

That being said, he thinks it's absolute madness for investors with a ten year time horizon to favor Treasuries over dividend paying blue-chip stocks purchased at moderate multiples.  

Tilson's three stock picks at the VIC were Netflix, which he said is a "better business than Amazon," Berkshire Hathaway and Howard Hughes.  

The hedge fund manager said that T2 Partners is "about flat" year-to-date acknowledging that it's been "a rough couple of years." 

We've included his massive presentation in the slides that follow laying out his investment thesis. 

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