What Is the Definition of Insanity (a.k.a. Will the Government Shut Down)?

Insanity: doing the same thing over and over again and expecting different results.”
—Albert Einstein

I can’t believe the Congress, more specifically—the U.S. House of Representatives—has done it again. For the 40-something-time, the House has voted to pass a law ONLY IF ObamaCare (The Affordable Care Act) is de-funded. Since the chances of that happening is absolutely zero, there is no getting around this fact: this was an act of crazy people (not a word I have ever employed in my writings). These are the people that are well paid to represent the will of the people, and obviously shutting down the government is not what we sent these people to Washington to do. Yet even cautionary notes from people like Karl Rove and the Wall Street Journal Op-Ed page (not exactly bastions of the left), could not convince them to take a saner path. And they don’t even know—or care—that the choice they have just made may just shut down the U.S. government.

However, that is precisely what I believe the House has just set in motion. And if that happens, it will cost the U.S. much more than the $100 million a day it has estimated.

Before explaining how, here’s a few “fun” truisms. The smartest people I have ever known—people like Jack Welch and Peter Drucker—insist that leaders must “face reality” (that became Jack Welch’s mantra and his first rule of leadership). It is apparent that the 113th United States Congress can’t do even that. Never mind that both chambers of the current Congress has gotten less done than any other Congress since the earliest days of Thomas Jefferson’s tri-tiered vision of government (and much less than the so-labelled “do-nothing Congress” that served under Harry Truman from 1947-1949).

Conventional wisdom—as expressed by pundits and politicians on the Sunday morning shows—is that the Congress will right the ship and reach a last-minute deal before October 1st. But what they fail to realize that even if that happens, much damage would already have been done. In fact, I assert that some damage has already been done.

How? Let’s look at the events of the last 48 hours to find the answer.

On Friday, September 20th, the House actually applauded themselves on their vote to defund ObamaCare.

Unbelievable.

Leave it to this House to celebrate the politics of suicide, as most Americans will blame Republicans if the government shuts down. Although, ultimately, it hurts us all, but I expect it to reap its greatest damage on the GOP in the 2104, mid-term elections.

On that same day, last Friday, the U.S. stock market—as measured by the 30 stocks in the Dow Jones Industrial Average—fell by almost 200 points, making it one of the worst days of the year (this in a year when the S&P index is up nearly 20 percent). And nearly half of that selling on Friday took place in the last half- hour of trading—after the House vote. So, if you believe Isaac Newton’s law: “To every action there is always opposed an equal reaction,” then the stock market likely fell on Friday because of the uncertainty set in motion by the House vote. All stock market participants know that the stock market hates uncertainty. That is why the market fell by well over 700 points in early August of 2011 when the U.S. lost its triple “A” credit rating (and not only has it not gotten it back, Congress has the chance to take it down another notch or two in the next 40 days). And we have not even got to the Debt Ceiling debate set for early-to-mid October, one more land mine likely to trip up this obstructionist chamber of Congress.

One point of clarification: it is not only the House that has crazies. The biggest, most dangerous individual in either chamber is not the save-my-own-hide-no-matter-what House leader John Boehner, but the junior Senator from Texas, Ted Cruz. That is the man that has vowed to spare no action in tearing down the Affordable Care Act, which he knows was voted into law by both chambers of Congress, the Office of the Executive, and upheld by the highest court in the land. He is only too happy to play scorched earth politics, while secretly (or not so secretly) plotting a run for president in 2016 (please say it ‘aint so).

So now we wait and watch. If I am correct, or even if there is a last-minute deal, the stock market will be the ultimate scorekeeper of the Kabuki theater taking place inside the District of Colombia. If a deal is not reached by 4 pm Eastern Standard Time on Friday, September 27th, then the stock market will likely lose another 300-600 points between Monday and Friday of this upcoming week. And for one, I am betting heavily on my own blog posting by shorting the market in a big way. I have lost a lot of money over the years, but not once by betting heavily against the likely acts of an irrational chamber of our government.

—-Jeffrey A. Krames, Sunday, September 22, 2013

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