Thursday, October 10, 2013

Well, that was fast - everything is fixed and then some

The markets have decided that a temporary debt ceiling deal will fix all of our problems and they have exploded back to pre-shutdown levels.

Here's the way I see things right now:

The Senate wants to move the issue of the debt ceiling off the table until December 2014.  Hmm, I wonder what happens in NOVEMBER 2014 that they would want to have the issue of the debt ceiling removed from our collective minds? Oh, that's right, those silly mid-term elections.

Anyway, that's the Senate's proposal and I suspect that is what we will ultimately end up with.  I imagine we'll get a series of small debt ceiling extensions with a final grand deal around Thanksgiving that hikes the debt ceiling by $990 billion (then everyone can claim a victory lap because they stopped moving up in trillions and they will defer the next conversation until after the elections).

The House is in a tougher spot.  They really want the conversation to begin on spending/debt, but they can't get out of their own way.  I believe they'll move forward with a continuing resolution in the near-term, but it might be very short-term (4-6 weeks).

Finally, the White House is sticking by its position that they want a clean budget and a debt ceiling hike.

Right now it sounds like very little has changed but someone must know something because the markets haven't sold off one bit during the day.

This feels a lot like many of the wild swings we used to get during 2008.  Markets fall 1% on bad news, then rally 2% on a rumor and then fall 1% on the actual deal.  It's not great for the confidence of the markets or the long-term investor, but for traders (who represent the bulk of market activity on any given day) this is just what the doctor ordered.

Cheers!

1 comment:

Elizabeth J. Neal said...

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