Tag: US Government Shut Down

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Buffett Agrees…..How US Politicians Just Destroyed America

Reuters Writes: Buffett calls threat to not raise U.S. debt limit a ‘political weapon of mass destruction

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NEW YORK (Reuters) – Warren Buffett, chairman and chief executive of Berkshire Hathaway (NYS:BRK-A – News), said Wednesday that the threat of not raising the U.S. debt ceiling is a political weapon.

The idea that Congress could fail to raise the $16.7 trillion U.S. borrowing limit is a “political weapon of mass destruction,” Buffett told cable television network CNBC.

Buffett said Berkshire Hathaway owns short-term Treasury bills and is “not worried” about the bills being paid, despite concerns about the U.S. debt ceiling.

Of course Mr. Buffett is correct. What happened in Washington over the last couple of weeks is nothing short of a disaster. An absolute disaster. What Mr. Buffett forgot to mention is that this “political weapon of mass destruction” has already gone off.

Surely, the US will not default on its debt. In my previous posts I have clearly stated that neither the market nor should you care about that. The damage has already been done and will be eventually felt on a different front.  This front has to do with our creditors.  I bet you my left leg that this situation was very closely watched and analyzed by both Japan and China (two of our biggest creditors). 

Their conclusion will be very simple. Washington is being run by idiots who have no problem putting the wealth and the future of our countries at risk. Therefore, we should diversify.  I bet you my right leg that these countries will start to lessen their US Debt exposure (if they haven’t started already) as soon as possible. Interest rates will go up and that will cause a significant slow down in the US Economy and a substantial DROP in the financial markets.

BOOM. Thank you Washington.  

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Little Known Way To Profit From The US Government Default Scare

BusinessWeek Writes: Go To Cash

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I speculate there can’t be a better time to sell than now.

We are linked in our shattered hopes and dreams of wealth creation, the emotional baggage of sequential and frequent black swans.

I further speculate there can’t be a better time to sell than now.

Boehner is not speaking with Obama, who is not speaking to McConnell, who is not speaking to Reid, and around we go. None of them are speaking to Hillary.

I speculate that this moment is surreal and deeply disturbing.

Read The Rest Of The Article Here

As the article above shows, people are starting to freak out about the whole Government Default thing.  It is clear by now that most of our politicians are somehow retarded (no offense to the mentally challenged community) and we just have to live with it now.

Even the stock market and the bond market are starting to show the signs of worry. Should you worry as well?

As I have mentioned in a few previous posts, I don’t believe so.  Even thought our politicians are irresponsible, I don’t think they are irresponsible enough to plunge the country into abyss of economic chaos. I guarantee you there is a lot of movement behind the scenes that I believe will put this issue behind us at any moment now.  Further, I believe the existing setup gives speculators a perfect opportunity to profit. Here is how.

As I have mentioned before, the stock market has opened up a lot of gaps on the way down from the previous top. Before any sustained bear market move can take place, the market must go back up in order to close them.  That should put us into a mid 15,500 range or about an 800 point move from where we are today.

Further, I believe the resolution of the Debt Crisis  would be a clear catalyst for such a move.  As such, traders should be setting themselves up for an upswing to benefit from an eventual resolution of an existing crisis. Who said I was always a bear?

*** Don’t Forget To Do Your Own Research Before You Follow This Advice. 

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The Secret Of Upcoming Government Default

Bloomberg Writes: A U.S. Default Seen as Catastrophe 

 Oct 7, 2013 chart

Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.

Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.

Read The Rest Of The Article Here

The media is in overdrive talking up fiscal disaster or catastrophe associated with the “FIRST EVER DEFAULT” over the next few days,  the American people are freaking out, the stock market doesn’t care, the largest bond fund (Bill Gross) is buying bonds while claiming no default…..hysteria and confusion everywhere.

So, what is going on here? What will happen?

To gain clarity all you need to do is step away from all this mess for a second and keep a close eye on only one indicator. The stock market.

Let me put it this way,  if there is a real default, it would indeed be catastrophic. So much so, that I wouldn’t be surprised to see the stock market drop 20-50% within a very short period of time. A crash so to speak. Yet, crashes do not happen when everyone is expecting them (as in this case).

As such and for now, the stock market is predicting that the US Government Fiscal Crisis will be over shortly. In fact, technically speaking the market is setup for a very strong rally here.

Will it be associated with the end of the crisis? I believe so. Take a look at the stock market, everything else is simply noise. I would anticipate the issue to be resolved at any minute now with the stock market surging higher from this point on because of that.  

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Obama Is Freaking Out, Should You?

Obama to Wall Street: This time be worried

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Wall Street needs to be genuinely worried about what is going on in Washington, President Barack Obama told CNBC in a White House interview Wednesday.

While gridlock in D.C. is nothing new, “this time I think Wall Street should be concerned,” Obama said.

“When you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble,” Obama said

“I am exasperated with the idea that unless I say that 20 million people, ‘you can’t have health insurance, they will not reopen the government.’ That is irresponsible,” he said.

“It is important for [Wall Street] to recognize that this is going to have a profound impact on our economy and their bottom lines, their employees and their shareholders,” Obama said.

Read The Rest Of The Article Here

By now it is clear that President Obama will not negotiate with the Republicans, nor should he. Whether you agree or disagree with the new healthcare law, it was passed, signed and confirmed by the supreme court.  It’s called democracy.

Now, President Obama is basically freaking out about the stock market and the impact of the shutdown on the overall US Economy. Should he be and more importantly should you be?

As of right now my answer is NO. Here is why….

  1. The existing shutdown is inconsequential. The debt ceiling is a much more important one and that one is coming up on Oct 17/22.  Yet, one way or another, the US will not default.
  2. As of right now the stock market is not even concerned about this issue.  
  3. There is just way too much drama. The politicians and the media love it.  
  4. When it is all said and done, there are very powerful financial interest in the US who control the politicians. If they want to maintain the US Economy and say enough, all Republican issues will disappear overnight.

In conclusion,  as of right now this is an entertaining issue that I believe will resolve itself within a short period of time. The stock market thinks so and so do I. 

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Why The Stock Market Doesn’t Give A Flying F*$# About The Shutdown

Daily chart Oct1

 

After an official US Government Shutdown on Monday night, most Americans braced themselves for a stock market bloodbath on Tuesday. Instead, the market surged higher with the DOW +0.4%, S&P +0.8% and NASDAQ +1.23%. 

Why? 

As I have told you many times before, the market doesn’t follow the news. It is a leading indicator, not a reactionary one. It could care less because it is a future predicting machine and it is predicting the following things.

  1. The US Government showdown will not last very long and even if it does, it is a non event. 
  2. The US will not default on its debt, which is a more significant issue here. 

Can it be wrong? Sure and many times it is, but that is not the point here. The point that I am trying to make is that news and events do not have an impact on the overall market. The market is a much more complex discounting and future predicting mechanism that sees weeks, months and sometimes years into the future. 

As such, many people have the tendency to label the stock market as random and volatile. It is not. It is simply doing exactly what it is supposed to do. It is predicting the future and in the majority of the cases it is many steps ahead of today’s news cycle.

Now, I know that for many of you it doesn’t make any sense. That is why I invite you to read TIMED VALUE in order to gain further understanding. 

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US Politicians Are Playing With Fire

Forbes Writes: Shutdown And Debt Ceiling Debate Prove U.S. Not Worthy Of AAA Credit Rating: S&P

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With the U.S. government on the verge of a shutdown, credit rating agency Standard & Poor’s made it clear this level of brinksmanship in Washington is precisely why the U.S. isn’t triple-A rated anymore.  While S&P’s ratings services team indicated they don’t expect to downgrade the U.S.’ sovereign credit rating this time around, they warned that failing to reach an agreement by mid-October would most probably lead to the Treasury missing debt payments, and therefore the first-ever U.S. debt default.

 “The current impasse over the continuing resolution and the debt ceiling creates an atmosphere of uncertainty that could affect confidence, investment, and hiring in the U.S.,” explained S&P’s research team, indicating it expects a short-lived shutdown that won’t result in a new downgrade.  “This sort of political brinkmanship is the dominant reason the rating is no longer ‘AAA,’” they added.

Read The Rest Of The Article Here 

This is almost identical to the point I have argued in my blog post yesterday.  It took me a while but I finally came to a realization that most US Politicians are basically morons who do not understand the financial issues (or perhaps most issues) at hand.

It is not so much the shutdown of the Government or any perceived default that matter. As I have mentioned before, the US will not default.  It is an issue of confidence.  Standards & Poor’s is absolutely correct in that sense.  It is not about downgrading US Debt further, but shaking the confidence of foreign debt holders (US owes close to $17 Trillion).

Will this be the catalyst for the US Economy and the financial markets to start going down? Perhaps.  As of right now we do not yet have a confirmation that a bear market has resumed.  As far as I am concerned the damage has already been done. Now it is a simple matter of timing.

The outcome is clear. Higher interest rates, significant economic slowdown and much lower financial markets. Thanks a lot Washington.

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