Overview and Observation;
Once again the markets were held hostage by the U.S. Congress and the threat of a government shut-down on Monday night. Based on the rhetoric late last week and on Saturday, I do not see a resolution at this time. The Democrats want their version including funding for Obamacare included and the Republicans want an extension of one year before implementation and revision. The main concern should be the increase of the debt ceiling, which will allow the country to pay debts already incurred. My feeling of course is that the spending, over and above the budget current ceiling, should never have occurred. Spending more money than you have is never a good idea, not for me, not for you, not for the American taxpayer. However, those bills must be paid with or without the "pork" of the funding for Obamacare. Extending that implementation for one year does not seem to me to be an insurmountable concession but we will have to wait and see. Meanwhile the impact on the economy and on working Americans is "on the table" and the markets are anxiously awaiting the Monday congressional sessions. Now for some actual information…
The December U.S. Treasury bond (CBOT:ZBZ13) closed Friday at 133 09/32nds, up 5/32nds with the gain attributable to the "flight to safety" associated with economic and geopolitical concerns. The U.S. Congress, in failing to come to an agreement as yet to "pay its debts" by raising the debt ceiling with the inclusion of additional funding for Obamacare could cause a government "shutdown" and the ramifications of such an event are questionable. In U.S. economic news, the U.S. Commerce Department reported consumer spending rose by 0.3% in August but the final reading of the Thomson Reuters/University of Michigan consumer sentiment index for September was 77.5 against economists forecast of a reading of 78. The markets do not like questions. For now we remain committed to a neutral bias for treasuries.
The Dow Jones Industrial average closed Friday at 15,258.24, down 70.06 points and for the week lost 1.25%. The S&P 500 closed at 1,691.75, down 6.92 and for the week lost 1.06%. The Tech heavy Nasdaq closed at 3,781.60, down 5.84 but for the week managed a slight gain of 0.18%. Concern that the Congressional "debate" will not succeed in staving off a "Government shutdown" due to the "determination" of each political party to "win concession" from the other is playing havoc with the marketplace. While we remain convinced that the markets have exceeded their “intrinsic" valuations, we could see dramatic price movement in either direction and would therefore once again urge strongly the implementation of strategic hedging programs for holders of large equity positions. We can tailor such positions to suit those investors given the opportunity. Our programs are specifically designed to each individual investor’s needs.