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‘Fiscal Cliff’ Risks, Rewards Ahead: Larry McDonald


Special dividends could benefit investors ahead of Washington budget negotiations and the so-called "fiscal cliff," but the U.S. economy could come perilously close to the deadline, Newedge Senior Director Lawrence McDonald said Tuesday on CNBC.

First, for special dividends, McDonald said that he was looking for companies that have:

  • A lot of cash
  • Heavy inside ownership
  • Massive stock outperformance

"Apple's on that list," he said, as well as Las Vegas Sands, Dell and Oracle . "There's a lot of stocks that are performing very, very well versus the S&P, and they meet those characteristics."

Karen Finerman of Metropolitan Capital Advisors said that Apple would be remiss to decline paying a special dividend.

"They have way, way, way more than enough cash to do so," she said. "I think it's actually reckless that they don't."

McDonald, author of "A Colossal Failure of Common Sense," added that one good thing about the market was that his risk indicators have been much lower. He also noted that U.S. financials were "massively underperforming."

As Washington lawmakers look to avert the so-called "fiscal cliff" that would trigger the expiration of the Bush tax cuts and automatic federal spending cuts, McDonald said he anticipated a last-minute resolution.

"I don't think the GOP caucus is really going to think they have a good deal until Dec. 20," he said, estimating that it would take two weeks of negotiation, plus another week to take it back to the House of Representatives. "It's definitely a four-week deal."

Trader disclosure: On Nov. 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS, VZ, XOM, DELL, GLW, SWN, AAPL, TJX; Weiss is long BAC; Najarian has long call spreads on AAPL, JPM, WMT, FB, DE, DDS; Najarian is long GLUU, CME, CBOE; Najarian owns short puts on GLD, SLV, AGQ; Kinahan is long BAC, C, WFC, CSCO, YHOO, SBUX, FB, MSFT.

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