Ed’s Daily Notes for September 30th   2 comments

Reuters (via Yahoo): Wall Street braces for volatility as shutdown seems likely

There is only one thing you need to know today:

As a last-minute deal to resolve spending negotiations in Washington appeared less likely, U.S. stock investors braced for what had previously seemed remote: a shutdown of the U.S. government that could spark a major equity decline.

The House of Representatives early on Sunday voted for an emergency spending bill that includes a delay of President Barack Obama’s signature healthcare reform law despite veto threats from the White House.

While a deal could be reached before the government’s fiscal year ends at midnight on Monday, the unanimous passage of a bill to continue paying U.S. soldiers in the event the government runs out of money was viewed as a sign that there would be no agreement between Republicans, who hold a majority in the House, and the Democrats, who control the White House and Senate.

Among the consequences of no deal being reached are many government employees will be furloughed, and the Labor Department will not issue its monthly employment report scheduled for next Friday.

A shutdown is expected to have a major impact on markets, injecting massive amounts of uncertainty into all asset classes. If a deal is reached quickly, that might allow markets to recover, but a prolonged shutdown could have significant implications for economic growth and consumer confidence.

However, for all the “sturm und drang” from the Media, history tells a different story:

Historically, Wall Street has managed to avoid steep downside during similar incidents. During the federal government shutdown from December 15, 1995, to January 6, 1996, the S&P 500 added 0.1 percent. During the November 13 to November 19, 1995, shutdown, the benchmark index rose 1.3 percent, according to data by Jason Goepfert, president of SentimenTrader.com.

But don’t get cocky:

Even if a last-minute deal is reached, investors face a second Washington cliffhanger as Congress must agree to increase the $16.7 trillion limit on federal borrowing by October 17. If Capitol Hill fails to act in time, the unthinkable could happen and the United States could default on its debts.

The key word there is “could”. President Obama would have to make an executive decision to default. Considering that would effectively kill the U.S. government’s borrowing ability, which would have the side effect of killing Obamacare, as well as killing Obama’s legacy, I would call the probability of a U.S. debt default as somewhere between slim and none.

Bloomberg: Apple Overtakes Coca-Cola as Most Valuable Brand, Study Finds

Apple (AAPL) has unseated Coca-Cola as the world’s No. 1 brand, as the company founded by Steve Jobs is a leader in design, performance and focuses on customers, according to a study of the Top 100 brands by Interbrand Corp.

Apple Inc.’s brand value jumped 28 percent to $98.3 billion, Google Inc. (GOOG) is now in second place at $93.3 billion, and Coca-Cola Co. has slipped from the top seat after 13 years to third place at $79.2 billion.

“Every so often, a company changes our lives — not just with its products, but with its ethos,” Jez Frampton, chief executive officer at New York-based brand consultancy Interbrand, said in a statement. Current Apple CEO “Tim Cook has assembled a solid leadership team and has kept Steve Jobs’ vision intact — a vision that has allowed Apple to deliver on its promise of innovation time and time again.”

The annual study, closely watched by the industry, determines a brand’s value by examining its financial performance, role in influencing consumer buying and ability to secure earnings. The Top 10 is rounded out in descending order by IBM, Microsoft, GE, McDonald’s, Samsung, Intel and Toyota. The 100 companies on the Interbrand list have a combined brand value of $1.5 trillion, an 8.4 percent increase from last year.

Technology names were among the biggest climbers. Google’s brand value rose 34 percent, while Samsung’s advanced 20 percent. Yahoo and BlackBerry fell off this year’s ranking. Nokia dropped to 57th place from 19th with the largest decline in brand value in the history of the 14-year study.

New names on the list include Discovery, Duracell and Chevrolet. The fastest-rising brands were Apple, Facebook, Prada, Google and Amazon.

Even though I don’t personally favor Apple products, the market does. However, note that Google is hot on Apple’s heels.

The Daily Caller: Newest UN climate report is ‘hilariously’ flawed

A top climate scientist from the Massachusetts Institute of Technology lambasted a new report by the UN’s climate bureaucracy that blamed mankind as the main cause of global warming and whitewashed the fact that there has been a hiatus in warming for the last 15 years.

“I think that the latest IPCC report has truly sunk to level of hilarious incoherence,” Dr. Richard Lindzen told Climate Depot, a global warming skeptic news site. “They are proclaiming increased confidence in their models as the discrepancies between their models and observations increase.”

The Intergovernmental Panel on Climate Change claimed it was 95 percent sure that global warming was mainly driven by human burning of fossil fuels that produce greenhouse gases. The I.P.C.C. also glossed over the fact that the Earth has not warmed in the past 15 years, arguing that the heat was absorbed by the ocean.

“Their excuse for the absence of warming over the past 17 years is that the heat is hiding in the deep ocean,” Lindzen added. “However, this is simply an admission that the models fail to simulate the exchanges of heat between the surface layers and the deeper oceans.”

“However, it is this heat transport that plays a major role in natural internal variability of climate, and the IPCC assertions that observed warming can be attributed to man depend crucially on their assertion that these models accurately simulate natural internal variability,” Lindzen continued. “Thus, they now, somewhat obscurely, admit that their crucial assumption was totally unjustified.”

…The Associated Press obtained documents that show the Obama administration and some European governments pressured UN climate scientists to downplay or even omit data that shows the world hasn’t warmed in over a decade.

“Germany called for the reference to the slowdown to be deleted, saying a time span of 10-15 years was misleading in the context of climate change, which is measured over decades and centuries,” the AP report said. “The U.S. also urged the authors to include the ‘leading hypothesis’ that the reduction in warming is linked to more heat being transferred to the deep ocean.”

This is what the world’s governments do in their spare time? Blame humans for something they don’t even fully understand? Maybe we should shut down ALL of the governments…

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Posted September 30, 2013 by edmcgon in Market Analysis, News, Politics, Stocks

2 responses to “Ed’s Daily Notes for September 30th

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  1. The UN climate board is a joke. I read an article that highlighted the “experts” that make up the group.
    Most work, have worked or have close ties to environmental groups that get their money from saying man is causing all the warming.

    I bet in 20 years we will be talking about how the earth is cooling to much

  2. Bought a full position in TVIX last Friday and liquidated a bunch of my positions to cash. Today the move seems to be paying off. Thinking of cashing out a couple other positions and increasing my TVIX if no budget deal is forthcoming by the end of the day. I’m not running for the door but am leaning that way.

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