One week into the "shutdown" of the U.S. government. More than 80 percent of the government continues to operate. But, perception is reality. The perception is that Harry Reid and Nancy Pelosi hate John Boehner and every previous generation of his family. Boehner feels likewise.
The rest of the world has taken notice. Worrisome.
This impasse appears no closer to being resolved than would the first page of a Herman Wouk novel. No end in sight.
Funny thing, diplomacy.
Just recently, Secretary of State John Kerry was in Israel, attempting to reignite the Middle East peace process. Shuttling to and fro between the Israelis and Palestinians.
Today, the Federal government can't agree to disagree. Can't even keep its doors open. Diplomacy? That's hypocrisy.
There's reason for optimism, as laid out in a piece I wrote for the Cincinnati Enquirer (here). Still, there will be volatility ahead.
While down, the market has remained resilient, thus underscoring that much progress happens in spite of, as opposed to because of, the Federal government.
Consumers have been buoyed by lower gas prices, priced 10 percent lower than one year ago. Add that to the gas money currently being saved by Federal employees, and you might detect a positive trend in net savings.
Global growth reached an 18-month high, as bounces in Europe and Asia have portended positive economic trends.
F-Series pickup trucks, that staple of American highway hardware, showed continuing positive sales trends. This is notable, as sales of these vehicles serve as benchmarks for strength in the small business and construction sectors. September saw 60,456 F-Series trucks sold, a 10-percent jump from last year's levels.
Jobless claims continued at ultra-low levels. In fact, they've been the best since 2007. Though, the government shutdown could hurt.
Manufacturing continues to show strength, with the ISM Manufacturing number at 56.2.
Finally, this year's Noble Prize in Physics was awarded to two physicists who helped track down and discover the Higgs boson, a theoretical particle that explains from where physical mass is derived, and how the universe is constructed. More here.
The Reds were ousted from the playoffs. The government shut down. The Bengals lost to the Browns. By week's end, I'd declared a neighborhood moratorium on driving when my dogs were outside.
China's expansion seemed to pause, with the PMI numbers coming in just above expansion levels.
ADP private payroll gains came in at 166k, and the August numbers were revised down by 17k. All of which points to continuing labor weakness.
Trade talks with Europe were halted because of the government shut down. Understandable. How can we negotiate with them if we can't amongst ourselves?
Finally, readers have long heard us rant about the idea that the large brokerage firms have evolved into glorified sales and marketing machines. We've also discussed the idea that, in outsourcing so much of the heavy lifting to third-party managers, the salesmen/advisors/firms are forced to raise their fees to a level that heavily derides from client's returns. More evidence of that assertion here.
Confused investors bought shares in the penny stock "Tweeter" (TWTRQ) as opposed to "Twitter" (TWTR), which will IPO shortly. All the misguided enthusiasm pushed the bankrupt penny stock up 1800 percent to a high of 13 cents before it came crashing down.
Senator Reid referred to Tea Party members as "anarchists." So, President Obama appointed him as his point person on government funding. Congressman Boehner has not revealed his cards. Or, he's simply not holding any. And freshman Senator Ted Cruz has delivered more lectures than he has served months in congress.
Just another Goat Rodeo in the nation's capital.
Curious as to what founder James Madison might say to Speaker Boehner about the current mess? Click here...
How could Washington take a page in productivity from Yale's Political Union? Click here...
The Bottom Line
Both sides of this Goat Rodeo are right, wrong and pathetic.
The GOP has no business believing that the president would abandon his signature piece of legislation to garner a continuing budget resolution. Democrats are wrong for wanting nothing to do with immediate entitlement reform. Our biggest creditor, the Chinese, are openly demanding that the U.S. get its fiscal house in order, or else (here). Only among our politicians does our debt problem not seem a priority.
We maintain that, once the government shutdown and debt ceiling issues are resolved, and they will be, the market will likely continue its upward trajectory.
Intrinsic valuation metrics we follow continue to show the markets as being more than 10 percent undervalued. Even as analysts continue to crow about the duration of the current bull market. We emphasize the need to look at recent results from a historical context. Consider the depth and veracity of the 2008 correction, and the opportunities created at that time.
The trend, in our opinion, points higher until proven otherwise.
Major markets finished mixed last week. The DJIA fell 1.22%, the S&P 500 lost 0.07%, and the Nasdaq added 0.69%. Small cap stocks climbed 0.38%. And the 10-year Treasury bond yield rose 1 basis point to 2.64%. Gold fell $26.26 per ounce, down 1.96%.