SOURCE: John Thomas Financial

John Thomas Financial

April 04, 2011 19:30 ET

John Thomas Financial Releases Chief Economist Mike Norman's Analysis and Commentary on Government Shutdown

NEW YORK, NY--(Marketwire - April 4, 2011) - John Thomas Financial, an independent broker-dealer and investment banking firm located in New York City's Financial District, today released Chief Analyst Mike Norman's analysis and commentary on the potential government shutdown relating to the pending budget agreement. The report reads as follows and is available for download on the JTF Blog:

It's crunch time for the Federal Government this week. Without an agreement on a budget the government will shut down come Friday.

Both sides continue bickering on the level of cuts and where they'll be targeted, but the likelihood of a deal looks slim as Tea Party conservatives in Congress continue to stand their ground in demanding large spending cuts. They have some leverage, too, because a majority of Americans support a shutdown if it leads to lower spending, at least according to the recent opinion polls.

What gets affected in the case of a government shutdown? All non-essential services are cut. In addition, government workers not deemed "essential" are furloughed while essential employees (members of Congress, uniformed military personnel and federal employees working in areas of national security and law enforcement are deemed essential) continue to work in a non-pay status. National parks and museums close, visa and passport applications are halted, veterans' benefits cease and so do payments to federal contractors.

There have been shutdowns in the past. Most recently we saw shutdowns in 1995 and 1996. These did not cause major disruptions, but the situation was decidedly different back then as Congress had already appropriated funds to meet spending needs prior to those shutdowns. In the current case, there are no appropriations after April 8.

In addition, the unemployment rate was 5.5 percent in 1996 compared to today's 8.8 percent level. The economy's ability to weather a hit to demand is much more questionable now than it was then. Many business leaders agree. Verizon CEO Ivan Seidenberg, who is also the Chairman of the Business Roundtable, said that a government shutdown would do "serious damage" to the economy.

Financial markets have surging recently thanks to technical factors and improving investor optimism. Stocks have largely ignored the budget battle along with the disaster in Japan, surging commodity and oil prices and a new war in Libya. That may be a testament to its strength, but it could also be a sign that things are getting a bit frothy.

About John Thomas Financial
John Thomas Financial, member of the FINRA and SIPC, is an independent broker-dealer and investment banking firm headquartered in New York City's Wall Street district. Emphasizing a client-centric approach to managing all aspects of its business, the firm offers a full complement of retail brokerage and corporate advisory services tailored to the unique needs of its clients. For more information on the firm, please visit www.johnthomasbd.com.

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THE INFORMATION PROVIDED IN THIS PUBLICATION IS FOR INFORMATIONAL PURPOSES ONLY. INVESTORS SHOULD CONSIDER THIS REPORT AS ONLY A SINGLE FACTOR IN MAKING THEIR INVESTMENT DECISION. THIS INFORMATIONAL REPORT IS NOT AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. THIS REPORT HAS BEEN PREPARED AS A MATTER OF GENERAL INFORMATION. IT IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ANY COMPANY, AND IS NOT AN OFFER TO BUY OR SELL ANY SECURITY. ALL FACTS AND STATISTICS ARE FROM SOURCES BELIEVED TO BE RELIABLE, BUT ARE NOT GUARANTEED AS TO ACCURACY. BEFORE ACTING ON THE MATERIALS HEREIN YOU SHOULD CONSIDER WHETHER IT IS SUITABLE FOR YOU PARTICULAR CIRCUMSTANCES AND, IF NECESSARY SEEK PROFESSIONAL ADVICE INVESTMENTS INVOLVE RISK AND AN INVESTOR MAY INCUR LOSSES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.

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