A looming government shutdown
A looming government shutdown is causing concern among investors with the shutdown scheduled for midnight Saturday. It will have an impact on various sectors of the economy including airline and transportation services, goA looming government shutdownvernment services including publishing the social security increase for 2024, economic statistics from the labor and commerce department, and more.
Most obviously, Federal workers including the military will not be paid except Congress will continue getting paid. Some federal workers will be furloughed, and some federal workers will have to work without pay such as the military. Many Federal workers live paycheck to paycheck like many Americans but without pay for some indeterminate amount of time this could cause problems. Once a spending bill or continuing resolution to maintain spending at current levels gives Congress time to negotiate and pass annual spending bills, previous missed payroll will be paid.
In the meantime, intermediate to long term interest rates continue to rise as the impact of previous thinking that the Fed will lower rates sooner rather than later begin to fade. There is talk of a changed interest rate environment for a longer period of time than previous thinking. Are we in an environment in contrast for the last 12 years where interest rates remain higher in a secular economic change with inflation also returning to the secular level of 3% vs. the Feds target for inflation at 2%. Certainly, current fixed income rates of over 5% are offering a positive return over current annual inflation of 3.7%. The current return above inflation makes bonds very attractive now. Especially as the inflation rate has been declining.
I have finally been paying attention to Artificial Intelligence. It first got my attention when I read that San Francisco is the center for this growing business and firms located in San Francisco dominate the AI market. In fact, those firms are expanding their office space and leasing even in my neighborhood Jackson square. To some degree, AI has been part of our lives like Alexa and Siri but the leap forward in the past year seems pretty remarkable. I just saw one AI firm in SF is valued now at $90 billion. Amazon just made an investment of $4 billion in a local SF AI firm. Here is some links to understand better what is happening:
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