Equity markets are holding their gains despite the bond-market's bid this morning (and weakness in Nov bills).. it seems the optimism is a little premature...
Source close to last night's talks tell me CR deal is not as close as many press reports; House Rs far from ready to move on a clean CR
— Robert Costa (@robertcostaNRO) October 11, 2013
Everyone is pointing to national polls blaming the Repblicans and this there is pressure to act... do not forget "All politics is local"
A plausible debt ceiling agreement is finally on the table, but BofAML doesn't expect a deal until next week or later.
With 81% "Dissatisfied" and somehow 18% "Satisfied" there has never been more disappointment at the way the nation is being governed... Still, X-Factor is on later so that doesn't really matter...
JPM Hammered By Massive $9.2 Billion In Legal Expenses, Posts First Loss Under Dimon; Takes $1.6 Billion Reserve ReleaseSubmitted by Tyler Durden on 10/11/2013 - 07:42
So much for the JPM "fortress balance sheet." Moments ago the bank which 18 months ago stunned the world with the biggest prop trading loss in history, just reported its first quarterly loss under Jamie Dimon, missing expected revenue of $24 billion with a print of $23.88 billion, but it was net income where the stunner was in the form of a $0.4 billion net income. The reason: the fact that from the government's best friend, Jamie Dimon has become the punching bag du jour, and having to pay $9.15 billion in pretax legal expenses, the biggest in company history. Considering that the other key component of Q3 net income was a whopping $1.6 billion in loan loss reserve releases, one wonders just how truly strong Q3 earnings really were. But of course, this being Wall Street, all negative news is "one-time" and to be added back. Which is why JPM promptly took benefit for all charges, which means adding back the $7.2 billion legal expense and $992 MM reserve release after tax benefit. In short: of the firm's $1.42 in pro forma EPS, a whopping $1.59 was purely from the addback of these two items.
- Dot Com part deux: Investors are showing increasing hunger for initial public offerings of unprofitable technology companies (WSJ)
- Poll Finds GOP Blamed More for Shutdown (WSJ)
- House, Senate Republicans Offer Competing Plans on Debt-Limit, Government Shutdown (WAPO)
- Obama, Republicans aim to end crisis after meeting, hurdles remain (Reuters)
- US Rethinks How to Release Sensitive Economic Data (WSJ)
- Chinese East Oil Fuels Fresh China-US Tensions (WSJ)
- ECB Agrees on Swap Line With PBOC as Trade Increases (BBG)
- China September Auto Sales Surge 21% on Japanese Rebound (BBG)
- JPMorgan Taps Taxpayer-Backed Banks for Basel Rules (BBG)
Despite stock (not bond) euphoria yesterday that a DC debt ceiling deal was sealed leading to the second largest risk ramp of 2013, last night was spent diffusing the excitement as one after another politician talked back the success of a "non-deal" that Obama rejected, at least according to the NYT. As a result, with both retail sales data and the PPI not being released (and the only data of note the always leaked UMichigan consumer confidence) markets will again be at the behest of developments on Capitol Hill, with some talk from Republicans suggesting a deal as early as today could be possible in an effort to reopen government on Monday. It is entirely possible that talks could continue over the weekend though, which would ensure a gappy open to Asian markets on Monday.
Only a week ago, the consensus among most mainstream economic analysts and even some alternative analysts was that a government shutdown was not going to happen. The Republicans would fold in the shadow of President Barack Obama’s overwhelming drive for socialization, spending would continue to grow unabated, and the debt ceiling would be vaulted yet again to feed the bureaucratic machine with more fiat. Today, there is no consensus, very few people continue to be so blithely self-assured and even the mainstream is beginning to wonder if a much bigger game is afoot here.
After seven months of investigating Goldman Sachs' legal and compliance divisions, former NYFed examiner Carmen Segarra found numerous conflicts of interest and breach of client ethics (specifically related to three transactions - Solyndra, Capmark, and the El Paso / Kinder Morgan deal) that she believed warranted a downgrade of Goldman's regulatory rating. Her bosses were not happy, concerned that this action would hurt Goldman's ability to do business, and, she alleges, they urged her to change her position. She refused, and as Reuters reports, she was fired and escorted from the building. “I was just documenting what Goldman was doing,” she said. “If I was not able to push through something that obvious, the [NY Fed] certainly won’t be capable of supervising banks when even more serious issues arise.”
The U.S. Constitution leaves too many areas open to interpretation; a New Constitution of 2,300 pages (+ 200 redacted secret pages) is the solution.
UPDATE: The Day in Washington in 2 minutes added
In what can at best be described as a "fluid" situation, one in which according to initial press reports the White House and the GOP couldn't even compromise on what had actually been said, it seems that while both sides are eager to move on with the debt ceiling extension, the GOP is still hoping in trying to preserve some political capital, of which it will be left with virtually nil if it caves to every last demand by the democrats, namely "reopen the government and then we can negotiate" losing all leverage in the process. And a loss of all capital and leverage is precisely what the GOP will "achieve" according to Politico, which clarified that "House Republicans told Obama that they could reopen the federal government by early next week if the president and Senate Democrats agree to their debt-ceiling proposal" - a proposal which Obama has already said he would accept. In other words, full capitulation by Boehner appears imminent. Politico adds: "President Barack Obama and House Republicans clashed in a meeting Thursday afternoon over how soon the government can be reopened, even as the GOP offered to lift the debt limit for six weeks, according to sources familiar with the session. Aides will continue the discussion through the night to see if they could find common ground on how to move forward on the debt limit and government funding."
While the following may look like a broken scene from "Breaking Bad" (one wonders just how much methylamine was on the train) we couldn't help but see the analogy of an oncoming train (no tunnel, so no warning light this time) of inevitable default, whether in one week or later, and the USA sat square across the tracks as reserve currency status (as we discussed last night) becomes increasingly challenged.
It would appear that the two sides cannot even compromise of what was said the compromise talks.
- *REPUBLICAN RYAN SAYS OBAMA `DIDN'T SAY YES, DIDN'T SAY NO'
- *REPUBLICAN ROGERS SAYS OBAMA TOLD LAWMAKERS TO END SHUTDOWN
- *WHITE HOUSE STATEMENT SAYS PRESIDENT SEES `PROGRESS' ON DEBT
- *REPUBLICANS SAY NO FINAL DECISIONS MADE IN WHITE HOUSE MEETING
- *DEBT TALKS TO CONTINUE INTO THE NIGHT: REPUBLICAN STATEMENT
“Well, he didn’t say yes. He didn’t say no,” Ryan said. “We’re continuing to negotiate this eventing,” Ryan said.
UPDATE: S&P Futures recover most of their losses following new reports, denials, and clarifications that Obama did not in fact "reject" but that discussions are and will be ongoing during the night. Most importantly, the meeting was inconclusive, which however seems good enough for stocks which have rebounded to pre-drop levels.
S&P futures are now over 15 points off the day's highs, as it seems equity investors were hoping for a Cumbaya moment after the White House meeting today. However, as Bloomberg reports,
*BOEHNER, REPUBLICANS LEAVES OBAMA MEETING WITHOUT SPEAKING TO REPORTERS and *OBAMA REJECTS REPUBLICAN PROPOSAL FOR SHORT-TERM PLAN: NYT
It would seem that Obama's "unconditional surrender or default" position has merely placed the pressure to act back on Boehner's shoulders. Rep. Cantor:"we expect further talks tonight" keeps the dream alive.