Uncle Gary asks: “What do you think will happen to stocks and bonds if the short term funding bill is not passes ?? Should I be selling here as it can’t possibly be bullish ??”
The shutdown could be bullish if investors see the shutdown as a step toward closing the budget deficit. And if past history is any indicator, it is indeed bullish. In a Feb 28, 2011 article by CNN Money titled: “Government shutdown? Wall Street isn’t worried” they made the statement that the last time the government shutdown the S%P 500 rose 4%.
From the article: During the previous two times the government pulled the plug — five days in November 1995 and another 21 days in January 1996, both during the Clinton administration — the Dow (INDU) and the S&P 500 (SPX) moved higher. In fact, the market continued its bull run until the dot-com crash in early 2000. Full article: http://money.cnn.com/2011/02/28/markets/stock_market_government_shutdown/index.htm
As long as the market believes that the US can pay it’s bills, I’m going to remain in this market. But at the first sign that the market doubts the US ability to pay, I will start to aggressively move money out of the US market, into commodities and foreign investments.