For you ETF muni holders out there, be careful of premiums to NAV.  MHN which is one of my core holdings is trading at over 5% premium and that has historically been untenable.  Perhaops the market is focused on taxes going up and believing that muni income will remain shielded.  I believe that in the end it will be protected because it is an important mechanism to help states fund projects.  However, that does not mean there will be no "scares" and if that happens the premiums will disappear.  That will be a buying opportunity, but for now given the high level, I am trimming my position by 10-20%.  I would do more, but the fund is not super-liquid.

As for the fiscal cliff and it's repercussions, I think it is a complex problem and overall the market does a good job of finding value.  Volatility is not very elevated which indicates there is no tremendous concern with surprises.  For my own part, I still believe stocks, in particular dividend paying stocks, are a good value and if it is any indication, my allocation is around 25% which is as high as it has been in a long while.  If we see drops, I will add more, perhaps getting as high as 35%.

The holiday season is giving us an opportunity to buy into what are essentially options.  BBY, JCP are two that I have bought in the last few days with the idea that they are beaten down and could pop 10-20%.  BBY is already there.   CHK is another name I like but this one is a longer term spec.

I continue to buy S on any weakness.

My base case is a slow growth scenario where bonds of all types will be a good hold.  Dividend paying stocks will be good and growth stocks will be hit or miss.  Companies will continue to become more efficient and unemployment will doggedly stay high.  Not a particularly sunny outlook, but it seems to me most likely.

Last note, I just read that stock outflows from funds was 9 billion last week which is the largest in a while.  That combined with the market staying solid indicates that the buying pressure is quite strong.  Politicians can screw this up, but I think we will be ok over time.  Remember that even if we "go over the cliff" it could turn out to be a good, if painful, discipline.