Archives for October 2013

October 2013 - Page 13 of 13 - Money Morning - Only the News You Can Profit From

What's Closed in a Government Shutdown

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Today has surprised some people who went about their daily business without knowing what's closed in a government shutdown.

Another surprise: Markets didn't plummet. There are a few reasons for that:

  • The government isn't entirely closed.
  • A closing isn't as uncommon as it is being made out to be. Government shutdowns have occurred 18 times since 1976.
  • Negotiations are still being talked about behind the scenes.
  • Markets are really more concerned about the debt ceiling deadline (which is now Oct. 17).

And assuming a deal is reached sometime within the next few weeks, the impact on fourth-quarter economic growth from this U.S. government shutdown is expected to be relatively minimal. Any loss is expected to be easily made up in Q1 of 2014.

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The Real "Pin" That Could Pop the Stock Bubble

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Nothing goes up forever. Not the Federal Reserve's balance sheet, not global debt levels, and not stock markets… even when governments don't shut down.

Precisely because the Fed's balance sheet ballooned from $869 billion in August 2007 to over $3.6 trillion (and counting) today, and in spite of ballooning U.S. and global debt levels, U.S. equity benchmarks have been inflated to precarious heights.

"Houston, we have a bubble."

While the sky-high Fed balance sheet and rising global debt levels are their own bubbles, when they diverge – meaning, when the Fed starts to taper as global debt inflates – look out.

If the Fed-induced pump priming of financial assets isn't backstopped by strong and real global GDP growth, the increasing debt burden of the world's citizens will act as the ultimate pinprick that explodes the United States' inflated financial assets bubble… and other global bubbles.

So here's what's really happening, how to prepare for the eventual correction (or possible crash), and - more importantly - how to make money from it...