The deadline for the spending bill was December 22. If nothing passed there would be a government shutdown. On Thursday, the government averted this issue as the House passed another short term spending bill which lasts until January 19th. This means there won't be volatility in the next week, but it also means we'll need to follow this story next month. The bill included the $2.85 billion in funding for the Children's Health Insurance Program that the Democrats wanted and $750 million for diabetes programs and community health centers. The GOP got what it wanted also as the funding plan also extended the Foreign Intelligence Surveillance Act program. It also gave $4.7 billion in funding to the Department of Defense to fund ship repair and the missile defense programs. My hope was that if the GOP and the Democrats compromised, they would pass a spending bill that lasts for the next year.  Once the Senate passes this stopgap measure, the President will be able to sign the tax bill.

Epic Run Continues

Valuations Are Absurd

As I've discussed many times, valuations are very high. This means that long term returns will be low. The chart below is a mock portfolio with 60% stocks (using the CAPE yield) and 40% 10 year treasuries. As you can see, we're in uncharted territory. The starting yield of this mock portfolio is below 3%. If you were to extend the blue dots toward the dotted line, you would get close to zero returns. The red dots are for 30 year returns. Valuations are less of an issue for this time frame. Keep in mind, that the beginning of this 30 year holding period will likely be rough. As you can see, the forward real growth of capital at these valuations over 30 years will likely be between double and quadruple the initial investment.