Blog : Donkeys Live a Long Time

by Ed Zwirn on September 27th, 2013

Having dodged both the Syrian crisis and the recent round of speculation over U.S. Federal Reserve Bank policy, which ended on Sept. 18, the U.S. economy - and, by extension, the global economy - has progressed predictably into another "crisis" as the nation's political leaders duke it out over the federal budget.

And the result has been predictable so far, as congressional Republicans and Democrats are at an apparent stalemate that could delay pay for thousands of federal workers in the likely event that this stalemate is not resolved before Tuesday, when the current fiscal year comes to an end.

Up until the passage last week of a bill extending the government's operation for a matter of weeks, contingent upon the defunding of what has come to be known (with affection or hatred, depending upon where you sit) as Obamacare, risk appetite had in fact been growing, with investments in everything from penny stocks to blue chip shares benefiting.

As we noted earlier in this space, the week leading up to the Fed announcement saw what may have been the most money ever pouring on a global basis into the stock market, eclipsing a record set in 2007.

But, even ahead of the probable delayed pay date for everyone from soldiers (who are supposed to keep following orders without getting paid) to IRS agents,  investors have started to pull back, with the government shutdown looming just ahead of the next political battle royale, that of whether or not the government will continue to pay its bills even after the debt ceiling gets reached in mid-October.

At least in part in reaction to these self-imposed wounds, the worldwide flow into stocks saw a sharp reversal last week, with money rushing into U.S. money market funds hitting their highest level so far this year while over $7 billion flowed out of equity funds, according to EPFR Global, which tracks fund flows.

Somehow this makes me think about Yugoslavia. I am old enough to remember when that country had Yugo auto dealerships in the U.S. and in my closet hung a suit that had been manufactured in Yugoslavia. As maligned as the profit motive may be in some circles, I would rather see our country concentrate on making money, much as the Yugoslavians did before killing each other in large numbers, and put all this fractiousness aside.

Of course, simply making money is not as inspiring or ideological as fighting battles, whether they be political or military. But, as one of Orwell's characters put it in Animal Farm: "Donkeys live a long time."
,