Why The Stock Market Should Not React To Government Shutdown

Stock futures were rebounding before the opening bell Friday, Oct. 4, from a significant sell-off over the past two days, but major averages that have been rattled by the partial government shutdown appear to be headed for a weekly loss. By Associated Press, NEW YORK The stock market is closing modestly higher even as a partial shutdown of the U.S. government continues.
Source: http://www.washingtonpost.com/business/stock-market-gains-even-as-government-shutdown-continues-sandp-500-erases-most-of-a-weekly-loss/2013/10/04/6069e9b2-2d32-11e3-b141-298f46539716_story.html

Stock Market Volatility Wakes Up, More Ahead?

Investors have been discouraged this week as political wrangling over the new health care law led to a partial shutdown of the government that is now in its fourth day. The Dow Jones industrial average was up 17 points, or 0.1 percent, to 15,013 after the first few minutes of trading Friday. The Standard & Poor’s 500 index was up three points, or 0.2 percent, at 1,682. The Nasdaq composite was up 15 points, or 0.4 percent, at 3,790. The S&P has finished higher only twice in the past 11 days as disgust over the budget impasse grows. The index is down 0.5 percent for the week.
Source: http://abcnews.go.com/Business/wireStory/stock-market-track-losing-week-20470139

Stock market shaken by shutdown — but debt default would be much worse

In other words, risk only turns into real damage if you trade to realize the risk. As a result, some experts even believe government shutdown is a buying opportunity. In short, government shutdown may be a media event, but it is definitely not a stock market event. After all, the stock market shrugged off the Republicans’ first 41 attempts to repeal Obamacare, why should it be different the 42nd time?
Source: http://www.huffingtonpost.com/dr-kc-ma/why-the-stock-market-shou_b_4045565.html

So have the prices of credit-default swaps on U.S. debt, having more than doubled since Sept. 19. Those are the early seeds of trouble being planted, says Ader. He also worries that the hollowing out of trading desks at the big broker-dealer banks over the past two years could potentially accelerate whatever selloff occurs, since there wont be as many traders willing to buy what investors are selling. We have the potential risk that if the market decides to start selling, there wont be enough broker-dealers to stand on the other side of those trades, Ader explains.
Source: http://www.businessweek.com/articles/2013-10-04/the-market-calm-before-the-debt-ceiling-storm

UPDATE 1-Kenyan shilling firms, stock market rally slows down

And the only way to capitalize on higher volatility is to be ready before it strikes. (See our piece ” Is the Sleeping Giant Ready to Awaken” from 8/30/13) Is this time different or a repeat of what the VIX did just a few months ago? From May 24 to June 20 the VIX (NYSEARCA:VXX) surged just over 46%. And per our June 2013 ETF Profit Strategy Newsletter (published on May 23, 2013) we were again able to identify another high profit setup for our readers. We wrote: “Our favorite way to trade the VIX is not with VIX exchange-traded products (ETPs), but rather using VIX call and put options. We like the flexibility of being able to customize our VIX trades with specific strike prices and specific time horizons.
Source: http://www.nasdaq.com/article/stock-market-volatility-wakes-up-more-ahead-cm282748

The Market Calm Before the Debt-Ceiling Storm

The network got hold of court documents that show Ephron left a massive estate of up to $27 million almost double the estimate she made in her will after making millions on the stock market. “You’ve got money: Hollywood scribe Ephron made a fortune on the stock market,” the network blared on its online site late today. Ephron had more than $10 million in stocks and real estate investments by the time she died at 71 in June 2012 of acute myeloid leukemia, the documents showed. Ephron was savvy enough to http://www.todayhotstocks.com invest in Internet ventures early, before they became blockbusters, amassing $642,000 in Apple shares, over $110,000 in Google and $89,000 in Amazon, according to the documents.
Source: http://www.usatoday.com/story/life/people/2013/10/01/nora-ephron-was-boffo-in-stock-market-left-huge-estate/2905261/

Nora Ephron was boffo in stock market, left huge estate

S&P has already warned this week that political brinksmanship is exactly the reason that the United States has never recovered the top-of-the-line AAA credit rating it lost two years ago. If the Oct. 17 deadline passes without a deal on the debt limit, S&P warned that it could classify the United States as being in sovereign default. Hugh Johnson, the chief investment officer and chief economist at Hugh Johnson Advisors, a financial management company in Albany, N.Y., warned that such a downgrade could send the stock market into hysterics. And if a downgrade forces investors around the world to dump their U.S. bonds, interest rates could spike. In the 2011 crisis, the reverse happened: Interest rates fell because investors determined that there was still no safer place in the world to put their money than U.S.
Source: http://usnews.nbcnews.com/_news/2013/10/02/20787272-stock-market-shaken-by-shutdown-but-debt-default-would-be-much-worse?lite


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