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Jonathan Yates
Stocks Rise as US Government Falls: There is a Lesson in That for Investors!

When asked when was the best time was to buy stocks, billionaire investor Shelby Davis would always reply, “Whenever you have the money.”

That the stock market rose on the first day of the US Government shutdown demonstrates the faith of investors in the stock market.  Traditional thinking would be that the stock market would fall as “safe haven assets” such as gold and silver would rise due to the weak political leadership.  But that has not been the case.

Like Shelby Davis, Warren Buffett has always been an investor who always bought stocks, no matter what the economic conditions.  Buffett is famous for saying, “Be greedy when others are fearful and fearful when others are greedy.”  At the nadir of The Great Recession, Buffett invested heavily in such companies as Goldman Sachs (NYSE: GS) and General Electric (NYSE: GE).  He also invested billions in Bank of America after it had been pounded by the forces of The Great Recession.

For those who have continued to buy stocks “Whenever you have the money” the rewards have been substantial since 2009.

After bottoming out in March of that year, both the Dow Jones Industrial Average and the Standard & Poor’s 500 Index have more than doubled.  As for the recent performance of the stock markets, for 2013 the Dow Jones Industrial Average is up more than 18%.  For this year, the Standard & Poor’s 500 Index has risen over 200%.

Obviously, that has been the story for the individual stocks that make up the indexes.

For 2013, Goldman Sachs has climbed more than 25%.  General Electric has risen nearly 19%.  Over the same period, Bank of America is up more than 20%.

As demonstrated so far, the investment community does not expect the US Government shutdown to impair the performance of the publicly traded companies that constitute the stock market.  As Buffett noted in an op-ed he wrote for The New York Times back in the Fall of 2008, the worst of The Great Recession, “Buy American, I am.”  What Washington, DC is now showing us is that is American stocks, not American political leadership!

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