Monday, September 30, 2013

Lower markets as US faces a partial government shutdown

Dow fell 128, decliners over advancers 2-1 & NAZ  slumped 10.  With buying into the close the MLP index went up 1 to 447 & the REIT index dropped 2+ to the 268s.  Junk bond funds were weak & Treasuries inched higher.  Oil sold off & gold declined the most in more than a week as equities & commodities dropped with the US gov poised for a partial shutdown.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM....Crude Oil Nov 13....102.09 Down ...0.78  (0.8%)

Live 24 hours gold chart [Kitco Inc.]


Photo:   Bloomberg

The Dem-led Senate has rejected conditions that House Reps attached to a temporary spending bill.  On the brink of a gov shutdown, the Senate voted 54-46 to strip a one-year delay in Obamacare from the bill that would keep the gov operating.  The Senate also stripped a provision that would have eliminated the tax on medical devices.  House Reps had added the provisions yesterday in their campaign to undo Obamacare.  The vote came less than 10 hours before a possible shutdown & with no compromise in sight.  Dems & a few Reps are pressing for the House to approve a straightforward spending bill with no conditions. 

Senate Rejects House Bill, Sets Stage for Gov't Shutdown  Associated Press

Italian Prime Minister Enrico Letta

Photo:   Bloomberg

Italian Prime Minister Enrico Letta’s deputy finance chief expressed confidence in overcoming Silvio Berlusconi’s challenge, saying the former premier’s faction in parliament is splintering.  “In Berlusconi’s party, there are a number of parliament members responsible enough to understand the serious consequences of a crisis,” Deputy Finance Minister Stefano Fassina said.  “We are confident that we will have the strength for continuing with Letta’s government.”  Letta said last night that he’ll seek backing from the Parliament in Rome this week to try to save his 5-month-old administration after Berlusconi, a partner in the ruling coalition, withdrew his support.  Underscoring how fluid the situation is, Letta won’t make a decision on calling a confidence vote until after an Oct 2 debate in the lower house.  It has been reported that as many as 20 senators of Berlusconi’s People of Liberty, or PDL, are ready to form a breakaway group if the ex-premier doesn’t back down on his confrontation with Letta.  However that was denied by Deborah Bergamini, from the party.  “I don’t have evidence of any defections,” she said.  The rift between Letta & Berlusconi, a 3-time prime minister, has rattled the financial markets.  Italian bonds declined for a 3rd day, pushing the 10-year yield up 3 basis points to 4.45% which increased the difference with German bunds to 266 basis points. Another country is coming unglued.

Letta Aide Sees Berlusconi’s Challenge Undermined as His Faction Splinters

Berkshire Hathaway CEO Warren Buffett

Photo:   Bloomberg

Warren Buffett's Berkhire Hathaway is poised to get more than $2B in Goldman Sachs stock thru warrants acquired during the depths of the 2008 financial crisis.  That could work out to 13.2M shares.  GS turned to BRK.A in 2008 to bolster capital & shore up market confidence when shares plunged following the collapse of Lehman Brothers.  BRK.A invested $5B for a preferred holding & received warrants to buy $5B of stock for $115 a share.  GS CEO Lloyd Blankfein redeemed the preferred shares in 2011 at a 10% premium.  Buffett agreed in Mar to exercise the warrants thru a cashless transaction, in which he passed on a chance to spend $5B for stock at below-market prices.  He instead gets an amount of stock equivalent to his paper profit, based on closing prices.  The revised agreement will let BRK.A focus on its top holdings, including Wells Fargo (WFC) & Coca-Cola (KO).  BRK.A fell $1800 to the $159Ks & GS was off 1.64.

Buffett Poised to Get $2 Billion Goldman Stake With Warrants

Berkshire Hathaway (BRK.A)

stock chart

Goldman Sachs (GS)

stock chart

Stocks had a tough day although it was not as bad as it could have been given all the uncertainty in DC.  It's difficult to make any comments because nobody has a clue how the budget debate will turn out.  The gov shutdown is not truly 100% because the gov takes in a lot of money each year.  But if there is a shutdown, bureaucrats will squeeze & make it as painful as possible to punish taxpayers.  The strength of the stock market was impressive although that could be due to portfolio adjustments to make Sep 30 numbers look better in what has be an outstanding year.

Dow Jones Industrials

stock chart

I’m a huge fan of INO, and from what I have seen so far, their service Marketclub!  This isn’t a stripped down version, everything in MarketClub is available to you. I don’t want to give everything away, but you’ll have unlimited access to my favorite three tools: Trade Triangles, Smart Scan, and Alerts!  The best part is that the MarketClub customer support team will be providing UNLIMITED support!  You can call or email for an instant response to any question, comment or concern. 
Here’s that link again:

I’d recommend you jump on this now.

No comments: