Budget Deal – Last night Rep. Paul Ryan and Sen. Patty Murray announced a deal on the budget, avoiding a government shutdown in 2014. It certainly isn’t the “grand bargain” many have talked about and it doesn’t address tax reform which I believe is an imperative to any final solution that hopes to grow the economy.
While it raises the budget to $1 Trillion for federal agencies up from $967 Billion, it does reduce the deficit over 10 years by $22.5 Billion through permanent changes to some programs including the way government pensions are funded. If I’m reading it correctly we’re agreeing to spend a little more money now and pay for it down the road.
I’ll leave the details of the deal to your favorite media outlet as it will be the lead story for most of the day but I would encourage you to read the WSJ article this morning – How Ryan and Murray Will Sell the Budget Deal
The Taper – Yesterday on the floor of the exchange for CNBC we debated the Taper and the possibility it could come as early as next week. “Investors have spent far too much time worrying about the Fed and the taper believing QE is the only reason stocks are higher this year. This thinking has shaken people out of the market for most of 2013.” While the odds the taper could come in December have risen, I still believe it is an end of 1st quarter event. If it does come next week, the knee jerk reaction will be to sell. Use it as an opportunity to get involved if you are still on the sidelines.
The normalization of interest rates is coming but I don’t believe it is the Armageddon that many fear.
Canaries in the Coal Mine – Every analyst and portfolio manager looks for signals that the market has come to the end of its bull run. Some use technical analysis while others might look at investor sentiment. As bullish as I am I have my own indicators. I call them the Canaries in the Coal Mine. Coal miners used to take canaries down into the mines to make sure the air was safe. As long as the birds were still fluttering around their cage, miners were confident there were no toxic gasses.
My canaries are the asset managers. Stocks like Blackrock (BLK), Ameriprise (AMP), Invesco (IVZ) and others are almost leveraged bets on the markets. Bad news will likely show up in these names first. Right now the canaries look like they’re doing just fine. (The weekly charts below tell a story)
Full Disclosure – Funds managed by Davi Nelson own IVZ
