Shutdown Shopping?

[TomK]

So the market is plunging (ha!) this morning on "shutdown fears." Two questions:

1) Do you think there will be a shutdown and what will be its effects on the market short and long term?

2) Are folks getting ready to buy? If so, what will you be looking to pick up today / this week?

[hendi_alex]

I'm not so sure about the plunging characterization. Looks like a typical down day to me, with the indices down about 0.9%. I'm doing a little better at down around 0.4%, probably because of my numerous short calls that are still in the money.

I think the market is pretty numb to this kind of budget, debt ceiling, Obama care bickering, so am not expecting any major move in the indices. My initial buy points for any stocks of interest remain unchanged.

[TomK]

(09-30-2013, 08:52 AM)hendi_alex Wrote: I'm not so sure about the plunging characterization.

I meant that as a joke, though hard to pull off in text, I guess. The link is to another thread I started a while back expressing annoyance about how every move greater than half a percent is characterized a "plunging" or "soaring" by breathless media idiots.

(09-30-2013, 08:52 AM)hendi_alex Wrote: I think the market is pretty numb to this kind of budget, debt ceiling, Obama care bickering, so am not expecting any major move in the indices. My initial buy points for any stocks of interest remain unchanged.

You may be right about this. And perhaps it is a good sign if the markets are less susceptible to be roiled by the political bickering than they used to be. I'm having trouble figuring out exactly how or why a shutdown should or would lead to different share prices.

[hendi_alex]

They visit this topic kind of regularly on Bloomberg. Recently one guest was discussing how about 70% of the market action comes from day traders and high frequency traders, and that they almost exclusively make their decisions based upon the headlines of the day or of the week. For 'investors' I think that your observation is correct. Such headline news has no effect on the value of a company and the fair value of its stock.

[TomK]

(09-30-2013, 09:07 AM)hendi_alex Wrote: They visit this topic kind of regularly on Bloomberg. Recently one guest was discussing how about 70% of the market action comes from day traders and high frequency traders, and that they almost exclusively make their decisions based upon the headlines of the day or of the week. For 'investors' I think that your observation is correct. Such headline news has no effect on the value of a company and the fair value of its stock.

That's good insight. I guess that is as good an explanation as any as to why an individual investor following a conservative dividend growth strategy with a long time horizon really can beat the "smart money" on Wall Street. The myopic focus on short term results almost forces them to put far too much emphasis on daily and weekly political events, creating periods of over- and under-pricing that smart individuals can use to great advantage, if they have the time and patience to do so.

[Kerim]

(09-30-2013, 09:22 AM)TomK Wrote: That's good insight. I guess that is as good an explanation as any as to why an individual investor following a conservative dividend growth strategy with a long time horizon really can beat the "smart money" on Wall Street. The myopic focus on short term results almost forces them to put far too much emphasis on daily and weekly political events, creating periods of over- and under-pricing that smart individuals can use to great advantage, if they have the time and patience to do so.

Nice post, Tom!

As to shopping, my short list is the usual suspects I've been after lately, with PM and KO at the very top of the list, with TGT close behind.

[TomK]

Government shuts down, stocks go up. Go figure. So much for buying opportunity!

[hendi_alex]

Looks like I was right on this one. Just a big market yawn! I believe this morning's activity is just a sucker rally though, and the strength will fizzle by mid morning.

[TomK]

(10-01-2013, 08:41 AM)hendi_alex Wrote: Looks like I was right on this one. Just a big market yawn!

+1

Dead on. I can't find the link right now, but actually saw an article yesterday that showed the market almost completely ignoring all of the shutdowns in the last 50 years.

EDIT: Here is the article I mentioned.

[TomK]

But maybe we'll get our buying opportunity after all? Here is another article explaining that the impending debt ceiling debacle is potentially much worse that the shutdown.

Conclusion of the article:

Quote:And that’s the big difference between these two events. There hasn’t been a government shutdown in a while but they were common in the 1970s and 1980s. They’re a big deal in Washington, D.C. because federal employees don’t get paid when they happen. But as long as it doesn’t last too long, it’ll be fine. A debt ceiling breach, by contrast, is completely unprecedented. There’s no guarantee that it’ll lead to a worldwide financial panic and a massive global depression, but there’s honestly no guarantee that it won’t. Nobody knows what will happen, and you should find that prospect terrifying.

[fiveoh]

PMI numbers > shutdown apparently.

[ronn38]

If the debit ceiling foolishness comes to pass, what effect will that have on those of us holding considerable cash in E bonds?