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Market Morning: Shutdown Showdown, Brexit Redux, Ford Airbag Woes, Sears Still Teeters

ME Staff

Shutdown Continues, But IRS And Treasury To Reopen For Business

After failing to resolve the partial government shutdown over the weekend over a spat concerning $5.6 billion of funding for a border wall with Mexico, congressional Democrats are trying to reopen the government piece by piece, with funding first for everybody’s favorite service, the Internal Revenue Service, and the Treasury. According to President Trump, the shutdown could last “for years” if the Democrats don’t give him the money for the wall. That should be fun.

Democrats have taken the high road of less government spending suddenly, and Trump has taken the low road of still more government spending on this matter, even though Republicans are generally elected over promises to cut spending and Democrats are generally elected to increase spending. Nancy Pelosi, meanwhile, back at the gavel, has called the wall spending “immoral” and “unnecessary”, which makes sense given her clean record of frugality with taxpayer money, and never spending on anything unnecessary. Meanwhile, 800,000 government workers have gone unpaid, but they’ll get retroactive pay whenever the government is reopened anyway, so no need to worry about them until the bond market collapses and the US can’t borrow any more money to pay them.

SEE: Cannabis Stock News Daily Roundup January 4

British Want New EU Referendum

It looks like Brussels may win the fearmongering war of attrition with London, having convinced Britons that exiting the European Union without a deal would be Armageddon. A new poll of 25,000 voters showed remain now in the lead at 54%-46%, stripping out undecideds and those who refused to answer the question. Previous polls before the initial vote took place also had remain winning, so it is unclear who to trust, or whether to even put any stock in national  referendums at all given that the powers-that-be do everything they can to invalidate them. There is little to no chance that Prime Minister Theresa May’s Brexit deal will pass, given that it includes a backstop that will essentially keep the country in the EU anyway without any say as to the laws that govern it, which is why so many Brexiters are against it in the first place. With Brussels unwilling to negotiate an actual deal that would keep the UK out of the Union but maintain trade with it, Brussels has been essentially daring the UK to leave without a deal, calling its bluff. It looks like Brussels may win, though it would be a pyrrhic victory considering the EU is pretty much bankrupt anyway. If a second referendum is called for, expect UK stocks and especially financials to skyrocket. (NYSEARCA:EWU) (NYSEARCA:EUFN)

Back To Investment Basics With Bullish Sideliners

Marketwatch is out with a refreshingly honest piece, picking apart the argument that there are trillions of dollars “on the sidelines” waiting for investors to just plow it all into stocks and rescue the bull market. As this article makes clear though and which should be obvious to every participant in the economy since the dawn of indirect exchange, for every buyer, there is a seller. This also holds for short selling, as for every short seller, there is also a buyer. What is true, however, is that if more money is created at a faster rate, that new money can be used to coax others to sell at higher prices, thereby raising stock markets across the board.

Exploding Ford Airbags Trigger Largest Recall in US History

Rising interest rates smothering zero percent financing for new purchases has been hard enough for Ford (NYSE:F) to stomach, but the largest recall in US history could really end up hurting the passenger car giant for the long terms. Close to 1 million cars in total are being recalled worldwide due to exploding airbags that can spew shrapnel, not really what you want your airbag to be doing so much, or at all. Tragically, 23 people have been killed by the exploding airbags, so this recall is quite necessary. The problem comes from the propellant used to inflate the airbags, ammonium nitrate, which explodes and inflates the bag when punctured, but when it gets too old and is exposed to humidity, it can explode with too much force, shattering the metal container that holds to compound and those pieces can come out into the airbag, which is why testing the airbags didn’t catch the defect, since it only shows up over time.

On the Calendar This Week

Monday: Durable Goods and Factory Orders

Wednesday: 30Y Mortgage Rates

Thursday: Jobless Claims

Friday: Consumer Price Index, Inflation Rate

Sears Keeps Teetering

In what could be Sears’ (OTCMKTS:SHLDQ) final days as a retailer, days that began way back in the 19th century, Sears Chairman Eddie Lampert’s hedge fund ESL has failed in to meet banker qualifications for taking Sears out of bankruptcy and keeping it a going concern. ESL has until Tuesday to sweeten the deal for the concerned banks, who will otherwise dissolved what remains of the retailer to get their money back. Lamprt could also position ESL to take only parts of Sears, like its real estate and brand name, to keep the name alive while the meat of the company is liquidated. Lampert could then use the brand name to market whatever he wants. Like widgets.

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