Editor's Note: Todd posts his vibes in real time each day on
Buzz & Banter
"Not happening" are two of the most powerful words around when
I remember my high-school buddy asking me if the captain of the
cheerleading squad would go out with him. I responded, as kindly as
I could, "Not happening."
My nine-year-old girl excitedly asked at the beginning of this NFL
season if I would take her to the Super Bowl if the Raiders made
it. "Sure," I said, which she followed with a quick, "Do you think
they'll make it?" "Not happening," I told her as reality set in.
In recent weeks, the smartest smart money has weighed in on the
potential of a US credit default.
Bill Gross, Larry Fink
) institutional research has been uniform in their response: "Not
Here in Minyanville, our view has been that while this process will
drag out-the theater provides leverage to one side or the other, or
the thinking goes-a short-term debt-ceiling resolution would emerge
to once again kick the can down the road. It could get hairy and
likely will, but in the end, calmer heads
The world stage assumed a contingency plan would be knocked out
over the weekend-but that proved elusive.
Now, three days before the US government's borrowing authority
lapses, the Senate continues to whittle away at an agreement.
Senate Majority Leader Harry Reid said yesterday that his
discussion with Minority Leader Mitch McConnell was "substantive"
and "productive" and he is "optimistic about the prospects for a
While an eleventh-hour accord remains the most likely scenario-if
only because a default would be apocalyptic-it is not, and I repeat
, guaranteed. Anytime you have human beings involved in a process,
as is the case with anything political, you have the potential for
human error, be it in the form of emotion, judgment, or
underestimating a response to your decisions.
For the last six years,
I have been writing about the tricky trifecta
of "societal acrimony, social unrest, and geopolitical conflict."
It has manifested in many ways, shapes, and forms-from
The Short Sale of American Icons
Why Kim Kardashian Matters to the Stock
-and infected companies on Wall Street with the rejection of wealth
and families on Main Street through
the chasm between the haves and have-nots.
This Devolution of Social Mood
in classic "chicken vs. egg" fashion, we've witnessed the
emergence of Government .com
as the risk from the first phase of the financial crisis
transferred from reality to perception. Indeed, as we've repeatedly
posited, the state of the global social mood and the steady
progression of our tricky trifecta is very much the "other side" of
the US fiscal and monetary policy decisions.
Which leads us to this morning: T-3 until October 17.
As the world waits for
headline that an accord has been reached, the shadow of doubt is
knocking on the financial market door. The most likely scenario
remains on the table-a last-minute deal that somehow positions
politicians as magnanimous in their efforts-but these events tie
the above dynamics into one not-so-neat moment of truth.
While my inner cynic continues to whisper that an inability of
career politicians to agree on the most basic legislative functions
is an apropos pin prick to the Government .com bubble-one that
would unwind the financial engineering they've worked so hard to
create-the husband and father in me hopes those feelings prove
fleeting and wrong.
For if that comes to pass, there's no winner in that game,
"who don't go home with all, not with all."
- As gold tickles the all-important 1275 level-which, as
breached, "works" through a pure technical lens to $1,180-I
wanted to update our
(INDEXSP:.INX) chart, which you can see below. A picture, as they
say, speaks 1,000 words.
-the 2013 high-is a level to watch, per the chart below.
- Earnings season is in full force, and while numbers could
disappoint, you should expect companies to point to the
government shutdown as a reason for their misses (even though the
government shut down after the third quarter ended).
- One potential outcome being bandied about is the
prioritization of debt should an accord fail to be reached by
October 17. For what it's worth and so it's said, I think that's
a recipe for disaster and a catalyst for a deep stock market
- Last Thursday and Friday's rally is being attributed to
markets pricing in a debt ceiling and government shutdown accord.
That begs the question, if those rallies took place, what will we
see when an accord is actually reached?
- Thus far in 2013, market corrections have been extremely
tame, with a 7.5%, 4.8%, and the latest 4.8% pullback littering
an otherwise stellar uptrend.
question is whether we've seen the last spate of fear before
performance anxiety kicks in-or if that's just what they want us
- The action late last week in the credit markets supported,
and some would say drove, the equity move. November and December
T-bill rates ratcheted higher on Friday, however, suggesting that
concerns remain into year-end.
- The bulls will argue that the big money, many of whom are up
20% or more, won't let their gains slip away as they want to get
paid. The bears view the conditioned complacency of dip buyers as
a recipe for disappointment, if not disaster, as we edge into the
meat of the quarterly reports.
- The earnings avalanche will continue this week with
Bank of America
(MS). Thursday will bring the October 17 debt deadline, which is
widely expected to be pushed out, and China's third quarter GDP
will be released on Friday.
- Let's roll, and hey-
let's be careful out there.