Overview and Observation;
Just when you think the worst is over concerns re-emerge. Once again Greece is in the spotlight being discussed along with the ramifications of their withdrawal from the euro. Greece recently received another bailout of €130 billion tied to additional austerity guidelines. Whether the public will put up with additional austerity programs will be determined in the near term. My feeling is they will be back in the streets protesting. Without the ability for Greece to pay down it interest obligations on current debt, we view any bailouts as "throwing money down a well." Italy and Spain remain problematic to the International Financial markets.
While Americans are concentrating on the current "shutdown" and its impact on the economy we can only wonder why both houses of Congress and the President cannot come to an agreement. I suggest the Republicans offer to allow full Obamacare implementation but for ALL with no exemptions for special interests. Since it is the "law of the land" as emphasized by the Democrats, why are there "exemptions?" A "law" is for all and not open to selective exemptions. I think that might work since neither party wants to further alienate the public now being severely inconvenienced. Now for some actual information to hopefully guide my readers through this maze...
The December U.S. Treasury bond (CBOT:ZBZ13) closed Friday at 133 02/32nds, down 12/32nds in front of this week’s auction of $64 billion of bonds and notes and the current government shutdown. As mentioned in the overview, my suggestion for the Republicans to offer to pass the CR with the only stipulation being the application of Obamacare to "ALL" with no special interest exemptions. Whether the Democrats agree to that is the question, but I feel it is the only way to move this problem along to a final conclusion. The debt ceiling debate is much more important in my mind than this quibbling over Obamacare. Whether or not it succeeds over time is yet unknown, but Congress must get off the "fence-post" before the Oct. 17 deadline for the budget. For now we remain neutral for bonds.
The Dow Jones industrials closed Friday at 15,072.58, up 76.10 but for the week lost 1.67% tied to the continuing U.S. government shutdown with no relief in sight. The S&P 500 (CME:SPZ13) closed at 1,690.50, up 11.84 but for the week lost 0.48%. The tech heavy Nasdaq closed at 3,807.75, up 33.41 and gained 0.34% for the week. The Nasdaq has posted five consecutive weekly gains tied to advancements in the tech sector. We remain convinced that the current price/earnings ratios for many of the companies will deteriorate and prompt another 2008 style decline. We continue to implore holders of large equity positions to implement strategic hedging programs before the decline we see as imminent unfolds.