Sam Zell brings a calm voice to Washington’s budget fight

Sam Zell on Squawk Box on CNBC

WASHINGTON, October 8, 2013 — Stocks opened modestly down at the opening bell this morning, failing to give investors any relief from the big sell-off that started Wall Street’s week on Monday. Even a flat day might give those individual investors who still remain upright a bit more time to assess their positions, given the ongoing Federal government shutdown and the looming debt ceiling battle that will come to a boil next week if nothing happens soon on Capitol Hill.

Heading into what may be the third straight week of losses on the Standard & Poor’s 500 index, Starbucks CEO Howard Schultz said the company is planning actions this week through its coffee shops to perhaps “remind the Congress and the President of their duty to put citizenship over partisanship.”

It’s not exactly clear, however, toward whom Schultz intends to direct his message. The House has dug in its collective heels on Obamacare, while the President has flatly refused to negotiate anything—his observation, not ours.

Making matters worse, Obamacrat functionaries are needlessly employing “essential” (?) personnel to make sure folks can’t get into national parklands or even access their own homes or boat in Federally owned and operated reservoirs. This Chicago-style bullying and arrogance is virtually without precedent.

Word this morning is that Senate Democrats on Tuesday may try to pass a stand-alone measure to increase the government’s borrowing cap, challenging Republicans to a filibuster showdown. That’s more political theater, though, the usual Washington sound and fury signifying nothing.

Saner heads on the Hill indicate that some kind of interim, short-term budget ceiling raise is actually possible to give the warring parties some breathing room to share a beer together and start talking. Unfortunately, such bristly camaraderie would have been far more likely during the Reagan-O’Neill Era than it is today.

We now live in a time in which a political argument is usually launched against the opposition with some kind of “yo’ mama” style of personal insult. But to paraphrase “The Godfather’s” Hyman Roth, “this is the life that the voters have chosen.”

Outspoken billionaire investor Sam Zell* opined on the Federal stalemate this morning on CNBC’s “Squawk Box,” observing that real, living voters—“a significant percent of the voting population”—elected those much-maligned Tea Party Republicans. But the way the media habitually characterize Tea Partiers as “some kind of disease” is unfair, he observed. “Can you imagine the press vilifying the ACLU?” he asked.

While quick to note that he’s not a Tea Partier himself, Zell regards their existence as ” a reaction to an imperial White House. “The idea that they are treated as though they are crazy is ridiculous, and not very representative of a democratic society.”

But Zell was merely warming up. Carrying his observations further into the budget and debt ceiling debate, he further noted, “The way in which this is being postured is as though the president sits on high and says, ‘I will not negotiate.’ And everybody is expected to lie down. I don’t understand that. What makes this man different than anyone else? The president is elected to negotiate.”

“The answer is somebody has to pull it all together and say, ‘I represent everyone,'” said Zell, summarizing his argument. “I don’t think it’s ever too late for reality to overcome ideology.” We’d like to think so, too, but the longer all the political posturing and nonsense drags on, the more the markets—and the economy—will deteriorate.

It’s small wonder Uncle Ben and the Fed backtracked on their much-vaunted tapering scheme last week. They saw this train-wreck coming and wisely chose to stand back and not be a part of it.

— AP contributed to this report

Today’s trading tips

Hewing to our recent tradition, we have no real investment picks or pans today.

We do continue to monitor our tiny stash of Puerto Rican bonds with some alarm, however, as that island Commonwealth’s fiscal house is increasingly beginning to look like Greece, except that the U.S. owns the debt problem there more or less. Our holdings will mature in only slightly more than a year from now. But the press is trumpeting this latest Detroit-style issue like the next Armageddon, so who knows what will happen next? Or when?

Following one of our advisory services, however, we have added some small positions in internationally oriented stock ETFs as a balance against our remaining U.S. positions. But we’re also maintaining small positions in the somewhat unreliable short-S&P 500 index ETF—SH—and the double short S&P 500 ETF, SDS, whose symbol unfailingly reminds us of the Port Huron Statement that arguably launched the Democrats on their inexorable Marxist turn. But that’s just showing our age, as Mrs. Maven would observe.

If the market starts to tank this week as they did yesterday, we’re likely to get rid of malfunctioning positions while increasing our short ETF hedges. It’s not true that nobody can make money in a down market—short sellers often do. But the current downdraft, based on pure political nonsense as it is—defies all manner of technical and fundamental analysis.

Like the HFTs, which trade pretty much exclusively on headlines and rumors—planted or otherwise—we’re watching the news, particularly the “Wall Street Journal,” and taking our cues from these sources.

Rational investing has been relatively impossible for quite some time now. We’re in extraordinarily irrational territory, and the only other investing possibility is getting out entirely and collecting those swell 0.01 percent returns we plebeians currently get on our money market and/or bank checking accounts. It’s really rather pathetic.

*Note: An earlier version of this article erroneously attributed quotes to Zell Miller.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently holds small positions in SH and SDS plus a few other stocks and select bonds primarily purchased at the height of the 2008-2009 debacle.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17


A caravan of boats inches up the Las Vegas Strip, passing the city’s massive new residential and shopping development. Owners are protesting the closure of the Lake Mead National Recreation Area, Sunday, Oct. 6, 2013. Several dozen boaters “peacefully cruised” from Tropicana to Sahara Avenues to showtheir frustrations with politicians in DC. (AP Photo/Las Vegas Review-Journal, David Becker)


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17