There really is very little reason why this "government shutdown" cannot continue indefinitely because almost everything is still running. 63 percent of all federal workers are still working, and 85 percent of all government activities are still being funded during this "shutdown". It turns out that the definition of "essential personnel" has expanded so much over the years that almost everyone is considered "essential" at this point. In fact, this shutdown is such a non-event that even referring to it as a "partial government shutdown" would really be overstating what is actually happening. In the end, this shutdown could turn out to be very good for America. We have a government that is wildly out of control and that desperately needs to be reigned in.
The situation in DC is fluid, but here is the most coherent narrative so far from NBC Washington DC: "A woman opened fire near the U.S. Capitol after trying to ram her car into the White House gates Thursday afternoon; she was then shot. A U.S. Capitol Police officer was injured in the event, though it is not clear that the officer was shot. The incident began at about 2:30 p.m. at the White House gates at 15th and E streets, NBC News confirmed. The driver tried to ram the gates but failed, and then was pursued by Secret Service. She bailed out of her car near the Capitol building and began shooting, NBC News' Pete Williams reported. Some reports said that as many as 10 to 15 rounds were fired. The injured officer was airlifted to an area hospital. The U.S. Capitol building was on lockdown after the shooting, though that lockdown has now been lifted. Parts of Pennsylvania Avenue are still closed." According to Fox reports the woman was 18 years old and there also a child in the car. The child is said to be unhurt.
While the recent Federal Reserve inaction is bullish for stocks in the short term there are plenty of reasons to remain somewhat cautious. Stocks are overvalued, rates are rising, earnings are deteriorating and despite signs of short term economic improvements the data trends remain within negative downtrends. Investors, however, have disregarded fundamentals as irrelevant as long as the Federal Reserve remains committed to its accommodative policies. The problem is that no one really knows how this will turn out and the current assumptions are based upon past performance. Complacency is not an option; it is critically important to understand that market reversions do not occur without a catalyst. Whether it is the onset of an economic recession, a natural disaster or a financial crisis - there is always something that sparks the initial selloff that leads to a full blown market panic. With this idea in mind here are 3 rising risks that investors should be paying attention to.
Nancy Pelosi tried hard this evening (in the post WH meeting presser) to position the Democrats in order to disavow the inevitable but now Bloomberg is reporting that:
*HOUSE REPUBLICAN PLAN WOULD LINK SHUTDOWN, DEBT-LIMIT FIGHTS
House Republican leaders plan to bring up a measure to raise the U.S. debt-limit as soon as next week as part of a new attempt to force President Barack Obama to negotiate on the budget by merging the disputes over ending the government shutdown and raising the debt ceiling into one fiscal fight. This is not what most sell-side strategists expected as a base-case; in fact it is close to a worst-case for many - especially given Obama's apparent unwillingness to negotiate.
Earlier, on CNBC, Obama said he is "prepared to negotiate." As it turns out, he may have been confused about the meaning of the bolded word because less than four hours later, the White House issued a statement in which "The President made clear to the Leaders that he is not going to negotiate over the need for Congress to act to reopen the government."
Still three-plus years left in Obama’s presidency, where mediocrity has been elevated to a highly acceptable status. A good and intelligent man has proven to be an incapable leader, often by making poor choices in the advice received... However, not all has to be lost for Obama; he still has time to reweave a legacy that now appears grey and bleak. And that reweaving will not be on the domestic front; for the economic future of 80 percent of Americans has already been cast... the slope pointing downward no matter what hopeful lies are manufactured in Washington. Reweaving, for Obama, should take place at the international front; a great opening has appeared before him partly by chance and partly by what other world leaders have to gain as well.
Mass Surveillance Destroys Innovation, Trust, the U.S. Internet Market and Other Foundations of Prosperity
Perhaps investors are becoming inured to the United States’ annual debt-ceiling debacle, now playing out for the third year in a row. But, as the short-term antics become more routine, the risks of long-term dysfunction become more apparent. At least for now, the rest of the world has seemingly unbounded confidence – reflected in very low borrowing rates – in America’s capacity to put its house (of representatives) in order. No one can imagine that a country with so many unique economic advantages would risk such a damaging self-inflicted wound as default would cause. But this time could be different. Obama needs to force his Republican opponents to blink, and there is no guarantee that they will.
- Government Shuts Down as Congress Misses Deadline (WSJ); Shutdown starts, 1 million workers on unpaid leave (Reuters); Government Shutdown Begins as Deadlocked Congress Flails (BBG)
- This is not The Onion: Stocks Rise on U.S. Government Shutdown (BBG)
- Pentagon chief says shutdown hurts U.S. credibility with allies (Reuters)
- In historic step, Japan PM hikes tax; will cushion blow to economy (Reuters)
- Obama Says He Won’t Give Into ‘Ideological’ Budget Demand (BBG)
- More part-time warehouse workers: Amazon to Hire 70,000 Workers for the Holidays (WSJ)
- Less full-time legitimate workers: Merck to fire 8,500 workers (BBG)
- Education cuts hit America’s poor (FT)
- Euro-Zone Factory Growth Slows (WSJ)
- Watchdog Warns EU Not to Water Down Insurance Rules (Reuters)
It's 12:01am, do you know where your government is?
*WHITE HOUSE BUDGET OFFICE DIRECTS AGENCIES TO BEGIN SHUTDOWN
*U.S. GOVERNMENT SHUTS DOWN FOR FIRST TIME IN 17 YEARS
The last government shutdown lasted 21 days, from December 1996 to January 1997, and cost the administration of US President Bill Clinton cost an estimated $2 billion, according to the White House’s Office of Management and Budget.
S&P Futures are 1677, 10Y yield 2.65%, WTI $101.96, Gold $1329.00 - let's see where we open tomorrow...
Full White House Statement below... and 10 ways the government shutdown could hurt America
There is a considerable amount of debate in alternative economic circles as to whether a federal government shutdown would be a “good thing” or a “bad thing”. Sadly, a government shutdown is sizable threat to the American financial system, and few people seem to get it. Perhaps because the expectation is that any shutdown would only be a short term concern. And, this assumption might be correct. But, if a shutdown takes place, and, if “gridlock” continues for an extended period of time, We have little doubt that the U.S economy will experience renewed crisis. Here's why...
Barack Obama promised to fundamentally transform America, and when it comes to health care he has definitely kept his promise. As a result of Obamacare, health care spending is up, health insurance premiums are up, the number of hours Americans are working is down and employer-based health insurance is becoming an endangered species. Of course employer-based health insurance will not disappear completely any time soon, but it has been steadily shrinking for over a decade, and Obamacare will greatly accelerate that decline. So Americans are going to pay more, get worse care, have more paperwork and a more complicated system, and they are likely to die younger too? Wow, that sounds like a great deal.
With President Obama now on closer talking terms with Iran's President Rouhani than the Republicans, we thought the "major geopolitical shift," that this is supposed to be should be offset with a glance at the 'known' nuclear facilities that Iran possesses as the White House proceeds along its "difficult" path to "resolution" - not not regime change...
‘Tapering’ may be put off indefinitely due to the very fragile state of the massively indebted U.S. economy. This means that interest rates must be kept low for as long as possible, leading to money printing and electronic money creation on a scale never before seen in history.
This will inevitably lead to higher gold prices - the question is when rather than if.