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The market's 'triumph of hope over history': Farr

Thursday, 3 Oct 2013 | 2:31 PM ET
A trader working the NYSE floor.
Adam Jeffery | CNBC
A trader working the NYSE floor.

Well, here we are again.

For the umpteenth time in recent memory, our lawmakers are unable to compromise and do the job that the people expect of them.

Yet again our elected officials are more interested in serving their narrow bases of constituents than ensuring the long-term well-being of the nation as a whole.

Yet again the focus on Capitol Hill is on political consequence for the legislators themselves, almost ignoring the potential consequences for the US and her citizens.

Yet again the two sides have dug their heels in so far that they believe there is little choice but to stay the course.

Closing Bell Exchange
To discuss the impact the government shutdown is having on the markets, is Richard Bernstein, Richard Bernstein Advisors; Michael Farr, Farr, Miller, and Washington; Larry Glazer, Mayflower Advisors; and CNBC's Rick Santelli.

(Read more: First a default, then a depression? Some think so)

And so here we are again, with the federal government shut down for an indeterminable amount of time and the country uncertain as to its future course.

I, for one, can't complain too much as my daily commute is much more tolerable these days. But kidding aside, the intensity of the political debates should be alarming to us all.

The venom on both sides of the aisle is remarkably high. This is a group of stubborn, angry, agenda-driven folks who are becoming more entrenched by the hour, and the public backlash is getting quite harsh as well.

To quote from a recent editorial in Esquire magazine ("The Reign of Morons is Here," by Charles P. Pierce), "We have elected a national legislature in which the true power resides in a cabal of vandals, a nihilistic brigade that believes that its opposition to a bill directing millions of new customers to the nation's insurance companies is the equivalent of standing up to the Nazis in 1938, to the bravery of the passengers on Flight 93 on September 11, 2001, and to Mel Gibson's account of the Scottish Wars of Independence in the 13th Century."

(Read more: Wall St. wonders if Obama wants 'severe' selloff)

While this one-sided article doesn't share any of the blame with Democrats, you get the drift. Suffice it to say that regardless of the outcome this time around, we continue to set very bad precedents for the future.

Upon waking Wednesday morning I caught a segment on CNBC that discussed a relationship that may seem almost unbelievable to people these days.

Republican President Ronald Reagan and Democratic Speaker of the House Tip O'Neill had a very special bond and personal friendship that transcended their political ideologies.

Their mutual respect and admiration should serve as an example for all our elected officials to emulate. The two differed dramatically in their views on just about everything, but they were still able to work together and compromise for the good of the country. They got it; they knew that public service was much more important than their own political fates.

Unfortunately times have changed, and the result of all this grandstanding is that little gets accomplished in D.C. without a crisis. We fear this time will be no different.

(Read more: Boehner to GOP: Iwon't let the nation default)

Our suspicion is that the stock market will be the sore point, and stocks will have to fall a good deal further than they already have. It's ironic that Wall Street held its breath to see the effects of a government shutdown and legislative dysfunction when we can't seem to imagine what a well-oiled, collegial, collaborative legislature looks like.

But it does beg the question, why hasn't the stock market tanked yet in response to the government shutdown?

While stocks were down in anticipation of the government shutdown on Monday, they quickly rebounded on Day 1 of the furloughs. Wall Street's rally Tuesday and Wednesday's bounce off of the lows show that investors are still expecting a reasonable resolution to this "crisis."

This strikes us as the ultimate triumph of hope over history.

(Read more: Buffett speaks out against DC's 'extreme idiocy')

In 2011, I was dead wrong in thinking that our elected representatives could never be as reckless and arrogant as to actually jeopardize the AAA rating of U.S. Treasury bonds. They breezed past the downgrade with barely a huff or a puff as they pursued their own agendas, constituents be damned! Don't be surprised if they get pushed to the brink again.

Shame on this bunch! Shame on their failure to lead! And shame on us for clamoring to reelect them! We remain defensively positioned as this saga unfolds.

—By Michael K. Farr, president of Farr, Miller & Washington and a CNBC contributor.

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