Your mother and the “fiscal cliff”

Talk to your mother before you use financial vocabulary in your communications. That’s one message I took away from “Guide to the Markets” presented by Andres Garcia-Amaya, a vice president with J.P. Morgan Funds, on September 29, 2012 at FPA Experience 2012 in San Antonio, Texas.

Revealing talk with mom

Garcia-Amaya recalled discussing the “fiscal cliff” with his mother. My paraphrase of his comments follows below.

G-A: Mom, what do you think about the fiscal cliff?

Mom: Oh, it’s so scary.

G-A: Mom, do you know what the fiscal cliff is?

Mom: I have no idea.

Bottom line? Don’t assume your clients and prospects are familiar with financial vocabulary. Test your communications on members of your target audience. Avoid technical terms or explain them briefly.

Market outlook: Risks create opportunities

Garcia-Amaya’s presentation focused on markets, not his mom or communications. He made the point that financial risks and bad news create opportunities for long-term investors because they depress valuations. Also, as Garcia-Amaya noted, $10 trillion is sitting on the sidelines. That’s bigger than the $9.7 trillion size of the entire U.S. mortgage market. When those funds flow back into the market, they should boost prices.

Garcia-Amaya’s current investment preferences include the following:

  • U.S. rather than non-U.S. stocks–“The U.S. is the nicest house in a crummy neighborhood.”
  • Emerging market debt–The emerging markets’ real gross domestic product (GDP) is growing and they have low net debt-to-GDP ratios.

Oct. 7 update: I thought Conrad de Aenlle’s article, “Investors Are Nearing the Edge, Too,” gave a good short explanation of the fiscal cliff: “tax increases and federal spending cuts scheduled for the end of 2012.”

Oct. 10 update: Here’s another plain English explanation. This one is from “The Today Show” with Jean Chatzky. The video clip description refers to “the ‘fiscal cliff,’ a combination of automatic tax increases and spending cuts that could devastate the U.S. economy.”

What about YOU? Do you have a brief explanation that you prefer?

Image courtesy of Sura Nualpradid /

8 replies
  1. Susan K Becker
    Susan K Becker says:

    Thanks for providing key points from his talk as well as the sound advice re “financial vocabulary.”

    I recall having a problem finding the “cliff” in illustrative charts accompanying some discussions.

    Did anyone else have that problem?

  2. Jon Jacobs
    Jon Jacobs says:

    Instead of saying it more simply, some in the profession have lately gravitated toward a still less comprehensible (albeit briefer) catch-phrase than “fiscal cliff”: “Sequestration.”

    I’m not joking. When a colleague insisted on including that word in a guest article under his byline, even I had to double-check the meaning. (yes, it is synonymous with fiscal cliff… with the spending part, anyway)

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