subject: Why a Government Shutdown Is Basically A Done Deal [print this page] Why a Government Shutdown Is Basically A Done Deal
It is practically already written in stone, and the policy wonks who say otherwise are fooling themselves and the readers/listeners. While I certainly hope I am wrong, I don't believe that we will be that lucky as a nation. There are many reasons a shutdown is likely, and several reasons you need to protect yourself from its effects.
First off, it is important to understand the politics behind our current government gridlock and how those politics will lead to a shutdown. John Boehner, the Republican Speaker of The House, is still building his political credibility with the "Tea Party" constituency that wants him to strike a hard-line with the democratic Senate and President. To them a hard-line means cutting anything and everything, just so long as they can show cuts. Now the reality is, neither party is serious about budget cutting. The domestic discretionary spending accounts for less than 12% of our national budget. You will never balance the budget and eliminate the debt by cutting Public Television, and you will end up with a dumber populous. To make serious cuts, both parties need to cut military spending (which has doubled in the last 10 years) and make improvements to the Social Security and Medicare programs. The hard truth is, neither party has the courage to do that, so they are left to argue about token cuts.
The cuts that Mr. Boehner and the Republican house have made include gutting the Environmental Protection Agency, Public Television, Laying Off 200,000 government workers, and reducing funding for certain types of public education. These are all non-starters. They are dead on arrival in the Senate, and Mr. Boehner (being a smart man) knows that full well. The two sides are so far apart that there is practically no chance they will find common ground by March 4th. There is just not enough time. This means that a shutdown is practically a sure thing.
So, what does that mean for you? It means that you need to take immediate action to protect your investments. Markets abhor uncertainty, this is the very worst type of uncertainty, so a sell off is extremely likely. To protect yourself, I would sell off some of your profitable stock positions, and gather cash. This will let you have available funds to buy good deals after a sell off. If you are a short-term trader, like I am, I would move largely to cash for your own protection.
Jesse S. Cash is a seasoned investor with more than 15 years of experience, and is a member of the National Association of Investment Professionals and the California Business Educators Association. He is the author of the Cashflow The Market Investing Course, http://www.CashflowtheMarket.com, a program focused on teaching a method for pulling massive cash flow out of the stock market, and is a contributing author to the Passive Incomes Blog, http://www.passiveincomes.net/articles. To learn more about investing and protecting yourself in difficult markets, check out my educational site and course at Cashflow The Market.
