10/8/2013 1:45 AM ET|
Get ready for the shutdown's end
Odds are, the mess in Washington will be resolved short of an economic collapse. And investors who play it right could even turn a profit. Here’s how to start.
Après le deluge?
It may not seem like it this week, but the current budget and debt-ceiling crisis in Washington will end -- and probably somewhat short of financial Armageddon.
First, of course, we’ll have to listen to endless self-serving statements from politicians all seeking to portray themselves as the saviors of all that is good. We’ll have to struggle though days when markets sell off on fears of a U.S. default, and days when markets rally on a belief that even U.S. politicians wouldn’t be so insane as to risk a default that could set off a financial crisis.
And we’ll go through most of this in the dark, since the folks in the U.S. government who normally pump out data on things like unemployment aren’t at work right now.
But this chaos will end. And if you’ve positioned your portfolio carefully you might even wind up making a buck or two out of this uncertainty.
Deciding what that positioning should be isn’t easy. The current uncertainty is very real, and while I believe the outcome will be something short of a U.S. default and a financial crisis, there’s no guarantee that the global financial system won’t go over a cliff.
If we wind up in another post-Lehman bankruptcy crisis, I don't know that any positioning short of a portfolio of nothing but cash and real assets (carefully hedged to minimize currency risk, of course) will wind up offering much safety. But since the positioning that I’m going to recommend here starts with a decent hunk of cash, you’ll at least have some shelter if everything starts to go south.
Let me start by outlining what I think is the most likely outcome in this budget/debt ceiling crisis and a likely schedule.
The end is not imminent
I could be wrong and we could see the resolution of the shutdown and debt-ceiling battles this week, but that’s not how I read the politics in Washington.
For example, on Sunday night I read what seemed to be hopeful headlines saying that three House Republicans with Tea Party links were showing signs of changing their positions.
Changing? Well, yes. Changing in a way that moves this crisis toward a solution? No.
Republican Reps. Blake Farenthold of Texas, Doug Lamborn of Colorado, and Dennis Ross of Florida all indicated that they would back an agreement to end the government shutdown and raise the debt ceiling even if the agreement didn’t include defunding or delaying Obamacare. Of course, the agreement would have to include major changes to Medicare and Social Security.
This isn’t movement toward the end of the crisis.
I don’t think the politics of the Republican Party allow for a solution to the budget impasse until the country has stepped over the October deadline from Treasury. And even then, I think it’s going to take something like the inability to pay the big government obligations due on Nov. 1 without some drastic juggling to push this crisis to a solution.
Not enough fear
I’ve got three reasons for thinking this.
First, the pain of a government shutdown just isn’t immediate enough to change many votes in the House of Representatives. Sure, the national parks are closed and Head Start is sending kids home, but I don’t think that has enough of an impact to change votes in the House. And in the last few days we’ve even seen civilian workers at the Defense Department and workers at some defense contractors headed back to work. This kind of shutdown does seem to justify statements by conservative politicians and voters that the shutdown is just not that big a deal.
Second, the Republican House leadership might be willing to -- eventually -- pay the political price for alienating the most conservative members of the House and the party’s political base by allowing a vote by Democrats in the House along with 20 or so Republicans to end the crisis. But it isn’t likely to allow a vote on a clean continuing resolution to fund the government and then come back in two weeks to allow a clean vote on the debt ceiling. One big package to resolve both crises, yes, but only after the debt-ceiling deadline has put so much pressure on Washington that politicians can’t not act any longer.
Third, not enough people in Washington or on Wall Street really believe in the Treasury’s Oct. 17 deadline for raising the debt ceiling. The calculations on Wall Street are that Treasury really has until Nov. 1, when there’s a big set of payments due. And a significant number of politicians in Washington aren’t convinced that the cost of not raising the debt ceiling is all that great at any point.
So far, the very measured reaction from the U.S. financial markets isn’t putting much pressure on the financial community to press Washington for a solution or on politicians to head off the problem. To get to a solution, I think we need to see more fear on Wall Street -- and in global financial markets -- and lower prices for stocks and U.S. Treasurys.
So I think we’re going to have this crisis with us for a while, and I think it is going to have to get worse -- and particularly worse in its visible effect on the financial markets -- before we’ll see an end.
VIDEO ON MSN MONEY
The media and congress and Obama all want us to believe that the government shut down is so bad. It has not affected most of us at all. This is nothing compared to what is coming. The President is already commentating and he is a commentator about how we need to borrow more money so we can pay our debt obligations. Am I the only one that has a problem with this? That statement is so profound. It is horrifying to think that this country the leader of the free world needs to borrow capital to pay its debt. Let me get this straight. I look at things from a logical point of view. If you were a holder of a note on another individual, would you loan him money so he could pay you back. Do you see the idiocy in this? At some point the holder of the US debt is going to see the same idiocy that I just explained. Then we will feel the true effect of a government shut down and a prolific financial melt down. Hay here is an idea stop spending our money so unwisely so you do not have to borrow money to pay debt obligations.
meanwhile you wanna laugh thru this nightmare of obamanomics? lets' have a laugh shall we! keep in mind these mindless drones are obama voters hehe
On the Obamacare Facebook page, numerous people posted angry comments regarding cost increases:
how bout this comment from a clueless nitwit. 'of course I want everyone to have healthcare, I just didn't realize I'd have to pay myself for others to have it' end quote!
hahaah!! what'd you expect you IDIOTS!! you've been warned and warned and you got your stupid selves deceived by a smooth talkin black muslim silver-tongued charlatan!! hehehe enjoy!!!
SCARY LIAR REID REFUSES TO VOTE ON ANYTHING AND OBAMA HAS ORDERED THE SHUT
DOWN OF VETERANS MEMORIALS AND PARKS AND GRAND CANYON AND WWII MUSEUM
IN NEW ORLEANS AND PARKS THAT AREN'T EVEN RUN BY GOVT BUT PRIVATE COMPANIES
AND TODAY HE SHUT DOWN THE ATLANTIC OCEAN! BUT THE BIAS MEDIA ISN'T REPORTING
ANY OF THIS BUT HIS GOLF COURSE IS OPEN AND HE'S NOT FUNDING THE PEOPLE WHO
PROTECT US FROM TERRORISM SO IF THERE'S A BOMBING THE MEDIA CAN BLAME THE
TEA PARTY TERRORIST AND FOX NEWS! MSN WHY NOT DO SOME REAL REPORTING?
I'M NOT EVEN A REPORTER AND I HEARD ALL THIS ON THE RADIO TODAY! MSN IS A JOKE!
OBAMA DEATH CARE WILL AND IS DOING MORE HARM TO THE ECONOMY THAN THE SHUT
DOWN! WHERE'S THE MEDIA ON THE REAL DAMAGE DEMONCRATS HAVE DONE???
This article is typical of a liberal. You'll notice EVERYTHING in the article was talking about what Republicans should do, and what Republicans aren't doing and what the Republicans could.....hey wait, don't we have "TWO parties" up there?....why yes, yes we do, and yet, in the ENTIRE article, the ONLY mentions of the "other" party was one reference to Obamacare, and one statement about allowing the house Democrats to vote. All of which shows a very far left liberal leaning bias by the writer. If you didn't know any better, you'd hardly know there was another side even involved that might be just as much at fault. To read the article, there was no attempt to hide the bias. And that's fine. I have no problem with that. Just don't try and portray yourself as objective or fair in such a case, when it is clear you're not. What is clear, however, is that the writer certainly doesn't want to assign any blame or responsibility what so ever to the other side. Yes, in fact, that was more than crystal clear.
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This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, ... More
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