Today's RTI was supposed to be on the employment report, but
with the government shutdown the release has been delayed.
After studying the stock market's reaction to employment
report surprises, the report is probably an overrated indicator of
market direction anyway, but employment is a key factor driving
monetary policy and labor trends are a marker of economic health.
Watching stock price action over the past few days, it seems like
the stock market is more concerned about the lifting of the debt
ceiling and the payment of interest to debt holders than the
shutdown of government operations.
The lack of government activity is a headwind to economic growth,
but the dooms day scenarios projected by those inside the beltway
are probably overstated. The shutdown won't last forever.
Default is more meaningful as it would permanently change the
landscape of government spending (require almost immediate budget
balance) and cast a cloud over the collateral value of treasuries.
Talk about a way to downsize government quickly. Some reports
suggest banks are raising cash to prepare for default which
underscores the impact on collateral value.
Part of trading and investing is being wrong. Nobody is right
on their stock picks 100% of the time. Trying to figure out the
events in Washington may be even harder than finding a good stock.
In this spirit, I thought it would be interesting to
get your view on the outcome of the current stalemate in
Don't be bashful. Let me know how you think the saga will play
out. I'm tired of listening to the talking heads on TV and
want to hear from real people who are passionate about investing
and have money on the line. Here are some choices:
1) The Republicans in Congress "cave" with the government funded
and the debt ceiling increased with clean bills (no attachments) by
October 17. It was all a political statement.
2) The Democrats provide a concession or two (not on ObamaCare),
and the government is funded and the debt ceiling is raised by the
October 17. The two sides eventually negotiate a deal.
3) The debt ceiling is raised cleanly, but the government continues
in shutdown mode. The sides agree that default is bad, but on
4) The debt ceiling is raised cleanly, and the government sees
targeted funding. The House continues to pass funding that is
targeted by program or operation i.e. Social Security, military,
Medicare, etc. The Senate tires and goes along.
The media and conventional wisdom favor the Democrat
position, but for how long? One could objectively argue that
Senator Reid is an obstructionist and no better than a Tea Party
member - its perspective and linked to political ideology.
5) Other, name your scenario. I'm interested.
Let me know your thoughts below:
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