Will the shutdown happen?

The House passed a bill to keep the government operating last week, but also stripped out funding for Obamacare.  A couple days ago, the Senate passed their own version of the bill that kept the government running, but kept Obamacare intact.  We are at the point again where the House and Senate are at loggerheads and no one wants to budge.

What looms in the balance is that if a resolution cannot come to form, then we will have a government shutdown as we did in 1995, which lasted 28 days.  Many are saying if this does happen that it will destroy the economy and the recovery we are currently experiencing.  One of the main areas that will be shut down will be federal loan programs for mortgages.  So if you were seeking a loan funded by the government and the shut down occurs it will delay property closings in a fragile housing market.  National parks will shut down as well (not an economy killer by any stretch).  The military and essential functions of the government will not be affected (police, fire, air traffic controllers).  It appears it will be more of an administrative shutdown.

My view is that I’m tired of all the fighting, but I do side with the Republicans on this.  I hate that Obamacare was shoved down our throats when It was not even supported by the majority of the citizens.   I hate that my premiums have gone up 55% in the past two years (had a big argument Thursday with my mom’s husband on that one…he’s an Obama lover).  I also hate that this president cannot reign in his spending habits.

To make matters worse, the Fed under rule of the great Bernanke decides to keep spending his $85Billion per month in the treasury markets and mortgage backed securities like there is no tomorrow.  How do we ever get out from under the additional $1.2 trillion of debt he is adding to our tab per year?  We’re over $16 trillion in debt and climbing…with no end in site.

This week is going to be an interesting one.  If there is a shutdown, we can assume this will be a negative for the markets.  Once a resolution is put in place that seems a good solution, you can count on another rally in the equity markets.

Last week we saw some very mixed results in the economic reports.  Consumer sentiment dropped, but new home sales increased.  I’m sure we will see a mixed bag of reports going forward as well.  Earnings season is right around the corner, and that could be the big indicator we need to really see how the economy is shaping up.

On Monday watch out for the fallout from either a shutdown or resolution.   Along with that we have the Chicago PMI report that is staged to be lower (another sign of a weaker than expected market).

Tuesday starts Q4 and brings us ISM and construction spending numbers that are both forecast at a lower figure than prior periods.  Again disappointing.  Even motor vehicle sales are forecast lower.

Wednesday we have the ADP employment numbers which show more jobs created by 4,000 over last month.

Thursday gives us the weekly jobless claims numbers set to be at 313K, vs the past week’s 305K.  Still, being in the low 300′s is a good thing.  The ISM nonmanufacturing sector is going to report as well with a lower number.  So both ISM numbers are set to be lower.  Factory orders are the bright spot for the day with growth of 0.4% expected vs the previous months loss of 2.4%.

Friday will be the fireworks day.  The non-farm payroll numbers, which are set to show an upward drift of 11K over the previous month will be closely watched for any deviation in either direction.  And we end with the unemployment rate.  Which by now people should all discount at a BS report.  But it is still watched and is set to hold steady at 7.3%.  Far from the Fed target of 6.5%…which is their number to start to taper the QE-infinity program.

Happy Trading!

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