Default averted, but advisers pan politicians

Financial advisers are expressing a general sense of disdain about the way Congress and President Barack Obama handled the most recent budget battle, which was wrapped up in an 11th-hour deal last Wednesday with an agreement to fund the government until at least February. An online survey of InvestmentNews readers after the deal was struck found that 92% of the respondents described themselves as either somewhat or very skeptical that Democrats and Republicans can forge a long-term budget plan. Asked about the actual budget deal, which lifted a three-week partial government shutdown and added a short-term increase to the federal government's $16.7 trillion borrowing limit, 78% of those surveyed said they are either somewhat or very dissatisfied with the agreement. “My opinion of Washington can't get any lower at this point because it is zero, exactly zero,” said Paul Schatz, president of Heritage Capital LLC. Mr. Shatz' views, while among the most critical of Washington's latest budget crisis, are clearly reflective of how the advice community is interpreting the national political process. Of the 706 survey respondents — 15% of whom are Democrats, 42% independents and 43% Republicans — only 17% hold a more favorable view of their political party since the developments of the past few weeks. A more detailed breakdown of the data shows that 38% of Democratic respondents now have a more favorable view of their political party, while 21% reported a less favorable view, with 41% unchanged. Among Republican respondents, just 9% now have a more favorable view of their party, while more than 49% report a less favorable view and 42% are unchanged. In terms of placing blame for the partisan gridlock, 53% of respondents blame Mr. Obama, 41% blame congressional Republicans and 6% blame congressional Democrats. A big joke Mr. Schatz, who described last year's fiscal cliff drama as the “biggest hoax since Y2K,” called the bitter political fight over the debt ceiling and partial government shutdown, which was resolved the day before the Treasury was set to hit its current $16.7 trillion debt limit, “an even bigger joke.” In terms of investing, he still thinks that the Dow Jones Industrial Average will gain another 675 points by January and he uses any short-term market pullbacks to buy more stocks. “Obama is an idiot, and [House Speaker John] Boehner is a moron,” he said. “As an investment adviser, you ignore those idiots, and follow your process and do what's best for your clients.” Across the financial advice industry, disgust for Washington's political bickering might be considered an understatement. “Nothing they did over the past few weeks changes my opinion of Washington, because I was disappointed in them before, during and after the shutdown and debt deal,” said Joseph Witthohn, vice president of product development at Emerald Asset Management. With the full debt-ceiling debate now pushed out until Feb. 7, he thinks that the fight will just drag on and possibly get even nastier. “I'm afraid some factions are just sharpening their swords and trying to re-evaluate ways of getting some things done,” Mr. Witthohn said. “I don't know if this fighting will calm down over the next few months, but I do think we're headed toward another fight over the debt limit.” Sam Jones, president of All Season Financial Advisors Inc., is expecting nothing to change between now and the next debt limit deadline. “I think the debate will just remain alive from now until February, although it might be a milder version of what we saw these past few weeks,” he said. Looking ahead to the midterm elections next year, there is a good chance many Republicans in Congress could lose their jobs because of the tough stances they embraced in the debt limit and government shutdown battles, Mr. Jones said, adding that he believes voters will support whichever side offers them the most benefits. House majority “If the Republicans lose the House in November, then you lose all the checks and balances in D.C., and that will cause a pretty significant drop in the markets,” Mr. Schatz said. Theodore Feight, owner of Creative Financial Design, said that he was hoping for a longer-term agreement on the debt limit, which he thinks would have provided a stronger boost to the equity markets. The short-term agreement does take some of the pressure off the markets, he said. “I still think it's time to be cautious about investing, but not as cautious as over the last three months,” he said. Regarding his opinion of Washington politicians, Mr. Feight said that Mr. Boehner gave up too much power to the fiscally conservative Tea Party members in Congress. “I think Congress will be able to pass something the next time around because the non-Tea Party Republicans will pass it through,” Mr. Feight said. The frustration drove him to write letters to members of both political parties expressing his distaste for the political gamesmanship. “This whole thing lowered my opinion of Washington a lot more,” Mr. Feight said. “I told them in my letters that they needed to get this done; they're costing my people money.” Mr. Schatz echoed that sentiment. “What really infuriates me is, the Obama administration says they're winning, and Boehner said they fought a good fight,” he said. “Well, this is not a game, and it's not supposed to be a war.”