The Government is Shutdown? Who Knew?

The Government is Shutdown? Who Knew?

The Federal Government has been shut down a record setting number of days, reaching the longest on record on January 12th at 22 days, and there is no end in sight.

The complexities of the shutdown debate are endless – who is at fault, what is being affected – and knowing both sides have entrenched positions means this could go on for quite some time.  Most know the central dispute governing this shutdown is funding for a Border Wall.

But does anyone even notice there is a shutdown?  Many news outlets have found government employees in different departments who are struggling, and that is a frustrating outcome of this impasse.  But 70% of the government operates on auto-pilot, from the military to critical services like air traffic controllers.  The markets seem to have shrugged – after weeks of fear-inducing volatility and downturns, the markets have actually been up over the last week or so.  Your job keeps going, the kids keep playing Little League, and the TV is still showing movies and sports.  Maybe we should keep the government shut down permanently – life would be a lot … quieter.

So, what are the top 10 issues affected by a government shutdown, and is having a shutdown good or bad?

Top 10 of what is getting paid, and not paid, during the current government shutdown:

10. “Monuments and national parks are closed down”: Sorta’, kinda’, maybe? Parks are closed but monuments and certain open public spaces remain available for your enjoyment, including the Smithsonian.   Unless you planned a month-long trip to Yellowstone, there is still a lot to do in DC.

SHUTDOWN IMPACT GOOD OR BAD?  – Good!  Saving money at minimal impact on your vacation enjoyment.

9. “Federal employees are not getting paid”: No-so-fast my friend … many federal employees are not getting paid, for now. Nearly every position is retroactively paid, so whenever it ends, a big check will make up for the lost income.

8.  “Nation’s military remains on watch”: As a critical service, the military remains funded regardless of Congressional appropriation. Despite social media posts to the contrary, national defense gets paid.

 7. “Banks can still access Federal support and access to live currency”: Also, like the military, major US banks remain open and available for service. The Federal Reserve and the Treasury Department makes sure the nations big banks can meet the needs of their clients.

6.  “Yes, the postal service is still operational”: A 19th century creation remains in operation, in the 21st Century, through a shutdown. Albeit with a reduced staff.

5. “Social security continues”: Social Security, Medicare, Medicaid … all social services remain fully funded.

4. “Small businesses are cut-off from government lending”: The Small Business Administration has been shuttered during the impasse, and small-business formation dependent on SBA lending guarantees are simply out of luck for now.

 3. “Obamacare keeps going”: It should be no surprise that a government program that could survive a conservative Chief Justice, numerous lawsuits, and politicians running for office with the singular campaign theme of repealing Obamacare would still be running through a government shutdown. Classified as a “critical service,” the program would be funded under current law even without congressional appropriation, making it even more certain than the death and taxes.

2. “Garbage collection may stop in DC”: The District’s funding comes directly from Congress, but rainy-day funds could keep the garbage collected for a few more weeks.

1. “Mueller … Mueller … Mueller”: Somehow, garbage may not be collected in DC, and monuments may not open, but the investigation into President Trump continues. The Justice Department is a “critical service,” and there funding continues unabated.

It is clear that a government shutdown is not really a shutdown at all, since so much of government operations remains funded regardless of Congressional appropriation.  The services we are going without apparently has not impacted everyday life:

  1. There is no recession currently.
  2. Jobs report showed jobless claims were below the estimates.
  3. The market is down year over year – but up this past month.

Some have argued that Trump plans to push the shutdown past 30 days.  Under US law, if a federal employee has been furloughed for more than 30 days, he can be terminated without cause under the “Reduction in Force” (RIF) statutes.  It would be met with lawsuits across the country, but it certainly is within the President’s prerogative.

In conclusion, this has always been about the politics, and not the efficacy or effectiveness of a “wall.”  Two informed people on the subject from the other side of the aisle have said so:

  1. Democratic House Majority Leader Steny Hoyer: “…border walls obviously work in some areas” … and “…we should not tear down barriers” where they already exist.
  2. President Obama’s Chief of the Border Patrol, Mark Morgan: “I cannot think of a legitimate argument why anyone would not support the wall as part of a multi-layered border security issue.”

In conclusion, the President has already intimated at compromise – 3-year DACA extension in exchange for wall funding.  A wall will help us keep US citizens safer, and it is a paltry sum relative to our budget to bring an end to the budget impasse.  Congress should come together and give the President his request in exchange for a compromise on an issue of importance to their side.

Election is Over: Who Were the Winners and Losers?

Election is Over: Who Were the Winners and Losers?

Thanks to social media and 24-hour cable news, it feels like modern America lives in a perpetual news cycle … and a perpetual election cycle.

The most recent of the never-ending campaigns – the 2018 midterms – has concluded, and most of what was expected did not occur.  There was no blue wave, the Republicans did not lose the Senate, and there were zero upsets that would leave you scratching your head.

While several House districts remain to have a final vote tally, it is safe to report as of this writing that the Democrats have taken control of the House of Representatives for the first time since 2010.  Their vote margin will range anywhere between 26 and 40 seats when the final vote counts are reported.

Some contests remain undecided and carry significant political interest, but do not change the balance of power in Congress.  That includes the Georgia governor’s race.  Stacey Abrams has refused to concede, although 100% of the precincts have reported their vote totals as of Wednesday afternoon and she trails by more than 1%.   Counties in Georgia have until November 13th to certify their vote totals, and expect this to be a protracted battle for the next several days or weeks.

With the 2018 election now in the rear-view mirror, at least most of it, we can look back at the winners and losers from this past Tuesday and what it means for you:

I. Who are the top three election night losers?

  1. “Moderate Republicans take it on the chin”: More than 40 House Republican incumbents decided to retire rather than run for re-election … the highest numbers since the Civil War.  Senators Jeff Flake and Bob Corker, both Trump critics, decided to step down.  Moderate House Republicans Carlos Curbelo and Leonard Lance both tried to distance themselves from Trump – and got defeated rather easily.  The mid-terms are about turnout, and you never win a race in a mid-term running from your base.
  2. “Progressive Democrats”: Beto O’Rourke, Richard Cordray  … there are others, but every media darling who received an Obama visit and hundreds of millions of dollars from left-wing PACs and left-wing donors such as Tom Steyer – lost.  And don’t forget Democrats who voted against Senate nominee Brett Kavanaugh – all took it on the chin in red states with the exception of Joe Manchin, who voted for Kavanaugh.  There are still many progressives left in the Congress, and some even won Tuesday night, such as Alexandria Ocasio-Cortez and many candidates in California.  There is no doubt that progressive money, progressive Hollywood, and the Obama machine are ascendant in the Democratic Party … they’re just not that good at winning votes from a majority of Americans, at least not yet.
  3. “President Trump”: This should be obvious, but the President’s party lost control of the House and his Congressional opponents will be ready on day one to launch investigation after investigation into his administration … including but not limited to impeachment proceedings.  No longer protected by his Party in the House, this will make daily governance a significant challenge for President Trump.

II. Who are the top three election night winners?

  1. “Conservative lawmakers”: As strange as it may seem, red state lawmakers survived and in fact the Republicans won several Senate seats to expand their majority.  The Democrats won House seats in the Midwest primarily as they did in 2006 – by selecting pro-life and pro-gun moderate-to-conservative candidates.  Except in California and other blue pockets here and there, conservative candidates were the big winners from Tuesday night.
  2. “President Trump”: That’s correct.  While the House will be pushing an investigatory, impeachment agenda, Trump’s losses are negligible compared to previous President’s … and none have contended with the media hostility he has engendered.  Clinton lost 54 House seats in his first mid-term, and 9 Senate seats.  Obama lost the all-time record of 63 House seats, and 6 Senate seats.  Trump will have lost in the mid-30s when the votes are all counted, and actually picked up three Senate seats.  All-in-all, it could have been MUCH worse.
  3. “The stock market and the economy”: Yes, things can change overnight, but markets like predictability, and gridlock is predictable.  Lots of variables such as Fed Rate Hikes and trade conflicts with China, but in general, the stock market and the main street economy were winners with the election results from Tuesday night.  There should be zero changes to the current low tax, deregulation policies at least for the next two years.

 The election seems to highlight the polarization found on social media, and not the day-to-day blessings of living in America.  There are always winners and losers in politics, but there should only be winning in your financial planning for the future.  Call now to have one of our advisors discuss the safe, simple and reasonable rate of return options for your portfolio! (877) 912-1919

Even with spiked volatility and the inevitable business cycle expectation of a stock market correction, the economy itself continues to hum along!

What Keeps Us Awake at Night…

We never hide our excitement for this economy.  Even with spiked volatility and the inevitable business cycle expectation of a stock market correction, the economy itself continues to hum along!

Wall Street is certainly overbought – a decade of bad monetary policy and government over-regulation gave us an artificial increase in our portfolio, without any job growth, wage growth or economic growth.  This means inevitably we will see market reversals.

But the economy itself – Main Street, NOT Wall Street – is as strong as it has been in decades.  Every month continues to bring positive, real growth numbers.  Consider:

1)  3rd Quarter GDP at 3.5% … annual growth rate above 3% for the first time in years.

2) Unemployment is at record lows – +3.7% .. the lowest since 1969!!!

3)  Wages are growing for the first time in a decade, +3.1% year over year, and are still in positive territory after adjusting for inflation.

4) There are 7.1 million job openings, but only 6.2 million available workers at the end of the 3rd quarter.

With all this great news, what possibly could keep us up at night?  As stated many times, the economy has not looked this good since the Reagan era!

Here are the 3 big economic issues that are keeping us awake at night:

1.“US-China conflict is getting hotter by the day”:   China’s military is war-gaming nuclear attacks against the US homeland … Trump is threatening tariff’s on ALL goods coming from China if a deal isn’t struck … markets are influenced by news reports because traders react to the daily headlines and move client money based upon short term information.  The expanding GDP is benefitting from corporate profitability, which will be impacted by changes to the US-China trade relationship.  This is a high-stakes game Trump is playing with China, one we are built to win, but could still take a whole lot of damage along the way.  Make no mistake, this administration is forcing the US and US companies to disengage from China – the outcome remains unknown.  Markets hate the unknown.

 2.“Does the Fed know what it is doing?”  We have supported here in our blog the Fed raising its benchmark rate for years.  When they finally officially ended their zero-interest rate policy (ZIRP) in 2015, and began raising rates, we applauded.   Raising rates and strengthening the dollar is what we argued for, and we believe is a strong move for a healthy economy.  But further rate hikes could be the cause of the correction and could tip the scales from a mild down-trend to a massive sell-off.  Stocks have already lost technical momentum, falling below their 200-week moving average.  The Fed’s new desire to increase rates despite changes in the environment could prove fool-hardy in the long run.

3.“Europe moves against the dollar”:  Such sentiment would have been unthinkable just a decade ago, but while Trump gets pilloried in the mainstream press for his “America First” mantra, he is usually proven right by global events.  Such an event was the most recent European move to create a dollar-less payment facility to allow European corporations to still do business with Iran and help circumvent US sanctions.  The result will be an entity that can accept non-dollar payments on one end, and convert money into dollars on the other side of the transaction, or even preferably, into Euros.  Fellow Western countries, allies, NATO countries seeking to circumvent US security policy in this manner would have simply been unthinkable until recently.  Yet that is where we are.  Never missing a chance to stick it to us, the Russians and Chinese jumped in with full support behind this new payment facility.  Whether it will work remains a question mark … if it does work, what European countries or businesses will be willing to risk losing the US market? Probably zero. But combined with Saudi moves on the dollar from this past spring, and other global players wanting out from under US financial control – this European move has opened some eyes as to what  future dollar-less world could look like.

Halloween has just passed – lots of treats have come our way in the last two years … but there are some tricks that could serve as headwinds if we don’t avoid them.  A business cycle correction we are due for – an epic bear market reaching crisis level risks will happen if we are not mindful of those risks, some of which we have mentioned here.  That is what keeps us up at night.

You can sleep much better if your portfolio has invested in principal protection products…call now!!! (877) 912-1919