Why the market is ignoring Washington

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Gavyn Davies tries to explain why markets have not yet reacted to the government shutdown and looming debt ceiling, and how that could be a big problem.

“If investors repeatedly buy more insurance than their competitors, and this insurance then expires worthless, the safety-first investors will under-perform their peers most of the time… But market disruption in both of those earlier episodes turned out to be relatively minor and short-lived. Investors who purchased insurance probably incurred costs which did not prove worthwhile.”

“One consequence is that the normal feedback from political error to market disruption and back to improved political decisions is not really operating this time. This could make Washington more likely to go to the very brink, implying that the bout of uncertainty in markets could come very late in the day, and be more severe when it happens.”

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.