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[US] Government Nears Shutdown as Parties Reject Budget Plans -

Last updated: 09:31 01 Oct 2013 BST, First published: 08:31 01 Oct 2013 BST

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[US] Government Nears Shutdown as Parties Reject Budget Plans - Here is the opening from today's financial news story, reported by Bloomberg:

Both parties in Congress dug in deeper hours before a midnight deadline to keep the government open, lobbing dead-end proposals and insults across the Capitol as the first partial shutdown in 17 years looked inevitable.

The Senate voted 54-46 to reject the House's latest plan, in a move that puts the pressure back on House Republicans, who are insisting on tying changes in the 2010 Affordable Care Act to a short-term extension of government funding after tonight.

"With a bully, you can't let them slap you around," said Senate Majority Leader Harry Reid, a Nevada Democrat. "Because if they slap you around today, they'll slap you around five or six times tomorrow."

Senate Republicans floated the idea to extend by one week the funding deadline to avert a shutdown. Reid said no. Democrats urged House Speaker John Boehner to allow a vote on a spending bill without conditions.

"That's not going to happen," Boehner said.

Instead, House Republican leaders are planning another volley today that Reid has already rejected.

The Republican proposal would include a delay of the individual mandate to buy health insurance and end government contributions to coverage for lawmakers and congressional staff.

My view - Global markets would obviously prefer to see a dynamic US government with bipartisan cooperation. Well, that is certainly not on the agenda and although a shutdown would be temporary, there is the more important hurdle of the US Debt Ceiling on 17th October.

Nevertheless,

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Tim Price: Return of the cockroach -
My thanks to the author for his refreshingly free-press report published by PFP Wealth Management. It is posted in the Subscriber's Area but here is a brief sample:

This multi-asset fund has, over the last decade, handily outperformed the broad US stock market, despite carrying less risk. This is probably what most investors realistically want. In passing, we also note that the fund's shorter term performance has been negative, with year-to-date returns of -7.6%. Is the model broken ? Does it no longer make sense to diversify across multiple asset classes ? Or is it simply that over the shorter term, markets are inherently volatile, and those in instruments like gold doubly so ? We think the latter.

Last week we also had the opportunity to attend Didasko's Practical History of Financial Markets course in London, taught by Andrew Smithers, Stephen Wright, Gordon Pepper, Michael Oliver, Peter Warburton, Herman Brodie and Russell Napier. We can only echo the testimonial of Sebastian Lyon of Troy Asset Management, who described the course as:

"The best and most valuable two days I have spent outside the office in twenty years (holidays excepted). In a field which remains mired in short-termism and brevity of memory, all aspiring and experienced fund managers should attend this course. They will gain the invaluable advantage of historical perspective."

My view - Veteran subscribers may recall that Tim Price has often mentioned diversified, multi-asset funds. These have generated considerable interest, not least because of their respectable performance which has often outperformed Wall Street or any number of stock markets over the last 10 to 15 years, and without the volatility of equities.

The secret of a good stew is in the quality and weighting of its ingredients. Chefs will have their favourites, as will investment managers when determining the menu for their multi-asset funds. However, ensuring a long-term supply of successfully balance ingredients for a fund is more difficult for the investment manager than the chef's task of recreating a satisfying stew every year.

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Additional commentary by Eoin Treacy

The Autonomies In writing Crowd Money I used the companies we refer to as Autonomies as a way of highlighting how the confluence of various macro, behavioural, fundamental and pricing factors create major investment themes.

In compiling my presentation for the Contrary Opinion Forum, which takes place at the Basin Harbor Club in Vermont this week, I clicked through the constituents of this group of companies to get a feeling for how current events are affecting the constituents. Here are some of the most notable charts:

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TIPS Gain Most Since '11 With Treasuries as Taper Delayed
This article by Daniel Kruger and Liz Capo McCormick for Bloomberg may be of interest to subscribers. Here is a section:

For almost a year Wan-Chong Kung avoided U.S. government debt insured against inflation as consumer prices stagnated. Now, the bond-fund manager at Nuveen Asset Management whose inflation-indexed fund has beaten 95 percent of its peers the last three years, is loading up on Treasury Inflation-Protected Securities.

Her change comes as Federal Reserve Vice Chairman Janet Yellen, who voted for every stimulus measure since 2008, became the favorite to succeed Ben S. Bernanke as the next Fed chief and the central bank maintained its $85 billion a month in bond buying. Policy makers also said their target interest rate for overnight loans between banks may rise at a slower pace than suggested by historical measures.

That last big dovish surprise shows the Fed is continuing to err on the side of promoting sustained job growth potentially at the risk of higher inflation, Kung, who helps manage $125 billion at Nuveen, said in a Sept. 24 telephone interview from Minneapolis.
     
Kung has plenty of company. TIPS, as the inflation-indexed bonds are known, have gained 3.5 percent since Sept. 5, the best three-week rally since August 2011, after losing 8.7 percent in the first eight months, the most ever in that period, according to Bank of America Merrill Lynch's U.S. Inflation-Linked Treasury Index.

My view Bull markets that persist for a number of years have a conditioning effect on investors. We learn what is required of us to make money. For as long as a bull market remains in motion forbearance will be rewarded. Holding on through declines will eventually result in higher prices and using reactions to increase long positions will be one of the most profitable strategies. Of course that all changes when the animating factor that drove demand dominance is removed.

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Eoin's personal portfolio: stock market index long closed and stop lowered on stock market index short
I will be heading out to Vermont for the 51 st Contrary Opinion forum tomorrow evening so I have been tailoring my positions to cater to the fact that I will be away from the office.

 

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