One of the stories in today’s Wall Street Journal describes how a number of U.S. cities are coming to terms with their inability to pay their obligations. Earlier articles in the WSJ and elsewhere gave some details—specifically, in years when investments did better than expected, many cities took the excess returns to add to payments, making the cookie jar smaller when the inevitable underperforming years came. They had confused the short term with the long term.

I get the same kind of question, in a different form, when I speak with investors. Should we invest in the stock market? Well, I say, what is your time frame? Over the long term, you absolutely have to invest in the market. Over the short term, you might be best off not doing so. Is this a one-time investment or a continuing stream of investments? How old are you? And so on.

This morning, I had the chance to talk with the lead fixed income (bond) portfolio manager from one of the largest Chinese mutual fund companies. Arranging the call was a bit difficult, what with the difference in time zones and our travel schedules (which is probably a metaphor for something or other), but the conversation turned out to be well worth the effort. As an aside, we really do live in a miraculous age, where you can talk to someone on the other side of the planet.

While rushing between planes yesterday, I had a good conversation with one of our advisors, who was preparing a talk for his clients about whether the recovery is real. Specifically, he was concerned about the fact that money velocity is so low.

I’m at the airport waiting to board a plane, so this will be a short post. Fortunately, today it writes itself. I mentioned last year how proud all of us here at Commonwealth’s research and asset management groups were to be named, again, to Financial Advisor and Private Wealth magazines’ list of investment research and wealth management all-stars. Last year, we had more winners than any other firm, for the second year in a row.

Well, we’ve done it again, and you can read the article here. Once again, we have the greatest number—and scope—of winners, and we’re the only major broker/dealer included.

Part of the problem with the government shutdown was that many of the economic reports we rely on were collateral damage. In the absence of data, everyone (including the Federal Reserve) has been flying blind. With the government back at work, the catch-up process has begun, and the September employment data was released this morning, giving us our first look at the effects of the (then looming) shutdown. A number of private data points have also been released since then, so I think it’s now possible to start to consider the economic damage.

The news on employment is not good. Total nonfarm payrolls were up by 148,000—much less than the expected 180,000 and well below the previous month’s figure of 193,000, which was adjusted up from 169,000. On the face of it, employment growth took a real hit here. While we can’t make too much of one month, the magnitude of the decline, combined with the fact that it took place before the shutdown, suggests that the actual shutdown damage will be worse. Both the unemployment rate and underemployment rate did drop slightly, from 7.3 percent to 7.2 percent and 13.7 percent to 13.6 percent, respectively, but even that news isn’t particularly positive, as the drops weren’t driven by job gains but by changes in the workforce.

Now that we are entering peak week for earnings reporting, it is time to take a look at what that means for the stock market. We have some data so far, but not much, so I want to defer a detailed analysis to next week. For the moment, let’s look at financials.

I wrote back on June 11 and July 10 about the pressure the financial services industry, particularly banks, was likely to come under and the negative effect that was likely to have. Specific points I made were regulations, capital requirements, more operational scrutiny, slowing mortgage demand, and others.

In the past 24 hours, I’ve had several discussions that centered on the question “What do we do now?” During one, on Fox Business News yesterday afternoon, the anchor pointed out that, even as I was cautious on equities, the market had climbed a wall of worry all year—and looked likely to continue to do so. Does that make caution on equities wrong? Similarly, I was talking with a Wall Street Journal reporter this morning about where the market was going, and we got into the continuing government confrontation, earnings, and the real economy—all without coming to any real conclusions.

First things first: The fact that the market keeps going up doesn’t mean everything is all right. Under that standard, the housing market was perfectly fine in 2007, so I don’t think the fact that the market is rising means caution is inappropriate.

“Pro football is like nuclear warfare. There are no winners, only survivors.” — Frank Gifford

That pretty much sums up my take on the most recent confrontation in Washington, DC. No one won, and everyone lost. The Republicans took a huge poll and public relations hit, for no gain at all. The Democrats didn’t lose as much but, in many ways, came out looking just as petty and political. Congress has hit all-time lows in public support, something I would have said was almost impossible, and the White House has been roundly and justly lambasted for its lack of leadership.

Recently, I was invited by the CFA Institute to contribute some thoughts to a discussion about why the Fed doesn’t forgive the debt. My commentary was published, and I’ve received some very nice feedback on it. You can read it here.

I’ve spent quite a bit of time over the past couple of days talking with advisors about the potential consequences if the government doesn’t make a deal in time. Yesterday, I did an interview with Chuck Jaffe of MoneyLife Radio that focused on exactly that. As we move closer to the supposed drop-dead date—that would be tomorrow—I thought it would be useful to look at how I’m thinking about investing.

First of all, let’s hit a couple of points I’ve made before. In the longer term, the events of the next week or so will not be significant. The U.S. economy is diverse, solid, and set to outperform for at least the next 20 years and probably more. Markets will reflect that growth, and, longer term, you absolutely want to be invested here. At the same time, current valuations are at the very least not cheap, and it’s been some time since we’ve had a correction in the U.S. stock market. Quite apart from the current situation, we are overdue. Again, this isn’t to minimize what might happen, simply to put it in context.