October 8th, 2013 1:08 PM by Nick Rapplean
In October, the goofy shenanigans of Halloween bring a trick or treat and this
year they are particularly annoying, thanks to the odd antics our politicians have in
store for us. Everyone is vying for a treat, a moment in the murky sun, an advantage
over the other guy. Their idea is apparently that they can pull policy concessions out
of the other party if they can win at a political game of chicken. Trouble is, there are
too many ways to lose and further, the game became old and boring a long time ago.
As the politicians posture dramatically and tempers seems to rise to the ceiling
the debt ceiling that is the markets seem to signal their boredom by doing very
little as if the near-term fate of the world economy was not at stake here.
It brings to my mind a maneuver tried by my little sister when she was about five
years old and feeling pretty powerless. If you don’t stop, shed yell, I’m gunna
HIT myself! This was very amusing to her slightly older brothers, who responded
by egging her on until she ran from the room in tears. Then it wasn’t amusing any
longer, but there was an instant replay in an hour or two.
The Congressional threat to trigger the impassable debt ceiling and leave the nation
unable to pay for the debts it has created is far less amusing. It doesn’t matter,
apparently, that Congress is refusing to authorize the government to pay for the
expenses Congress itself voted in. Congress, it seems, wants to be on record as an
ardent opponent of its own actions and inability to do anything positive about them.
The circus, in any event, is coming to town. And Edward Jones, among others, is
urging its clients, Don’t disrupt your financial strategy in response the stock
brokerages way of saying, Stay cool, everyone.
But were reaching the point where world investors are stopping and saying, Gee,
maybe the politicians will prove to be even bigger clowns than we thought they
were. Maybe they’ll let America fall into default. Maybe the country will face another
downward tick to its credit rating. Maybe and here’s the point we should be
paying attention to maybe they’ll let Treasury security yields go sky-high and
mortgage rates with them. Pile up enough of these maybes and the price of an
ounce of gold will rise, since its a haven of relative safety for investors and, indeed,
gold is pricier today, though only by a bit. Meanwhile, if you buy and hold on to a
6-month T-bill until maturity, you will be rewarded with a 0.04% yield, which is
struggling painfully to even keep up with a low rate of inflation.
In short, there isn’t much happening among investment yields. Everyone is holding
their breath, waiting for the show in the circus center ring, as politicians of varying
stripes seek to be seen on the tightrope walk, playing chicken with one another.
Nice time to take a vacation, I say. Even nicer time for most of our politicians to take
a permanent vacation.
Most investment advisors have suggested perhaps the best alternative. Stay cool.
To which we add, simply, Stay light on your feet. Stay cool,
but avoid extremes of cold and heat and potentially damaging nonsense.