Archive - Sep 30, 2013

Over the past week, many have been scratching their heads over why JPMorgan is so eager to comply with the DOJ's investigation into the banks misrepresentation of the quality of its RMBS bundled mortgages, having gone so far as to suggest a number that could be as large as $4 billion in cash (with a $7 billion non-cash component), though still shy of the DOJ's $20 billion ask. The reason, as the WSJ reports, may be very simple one: a rat is providing the Feds with information deep from within the house of the whale. "The Justice Department's pursuit of possible criminal charges against J.P. Morgan Chase & Co. is based in large part on a key cooperator from inside the bank who is aiding the government and has provided information suggesting the bank vastly overstated the quality of mortgages that were being bundled into securities and sold to investors, according to people familiar with the matter."

We've heard from Boehner, Reid has chipped in, and even Schumer had a cameo but now the big man steps up to point fingers, clarify where the blame should lie, and demand his way or the highway. We are sure soon after we will get the same speech from Boehner wit ha word replace "Republicans" for "Democrats" but the farce continues...

The USA is turning into a sorry state of affairs. But, it only has itself to blame. The successive governments for the past decades have done nothing but increase the debt ceiling in the country.

As headline after headline hit today, US equity markets jumped and dumped as the early POMO ramp faded in an oh-so-familiar manner. As the day-session opened, "most shorted" stocks tumbled hard (-1.6% vs the market -1%) and that provided the ammo for the ramp as POMO and PMI hit. That rally stopped on time as EU closed and POMO ended and then Washington took over. FX and commodity markets were volatile early on a settled late as a EUR surge early on (on Italian political news) smashed the USD lower and sparked some risk on. The USD spent the rest of the recovering back to unchanged. Commodities ended the day cuffed at -0.5% in an oddly cozy way given the early rips and dips in Gold and Silver. The S&P has fallen 3.5% from its all-time un-taper highs, is closing right at its 50DMA, and underperformed gold and silver for the quarter.

Want to fund your "grilled cheesus" project? Need money to continue your "edible cup" business? Kickstarter is the platform of choice. But now, with the muni bond market suffering from outflows in retail funds and bankruptcies mounting across the nation, cities are increasingly turning to 'crowd-funding'. As Bloomberg reports, Central Falls (which filed for bankruptcy 2 years ago) is using Citizinvestor to seek $10,044 in funds for 5 new trash cans. "Even with attractive yields, there aren't a lot of people lining up to get involved with places that have gone through bankruptcy," as the initiative has raised $295 so far...

As pointed out earlier, the Federal Reserve does not depend on Congressional appropriations, and will not see any cutbacks due to a shutdown which with every passing hour seems more inevitable. It also means that even if the entire US government were to be shutdown, the daily wealth effect injection into the stock market for the benefit of the 0.01% will continue and the confidence show must go on. Specifically, as was released moments ago by the NY Fed, Bernanke will inject another $45 billion in the capital markets courtesy of 18 distinct bond-monetizing POMO operations over the next 31 days. These will take place regardless of anything else that may happen to the government, which perhaps better than anything else, shows who is truly in control of this country and on whose behalf they operate.

The major headline of the day is the pending government shutdown in the Land of the Free. This is nothing more than an obvious symptom that they have passed the point of no return. As we have routinely discussed, the US government now fails to collect enough tax revenue to pay interest on the debt and cover mandatory entitlement spending. They’re already in the hole before they write a single check for anything we consider ‘government’, from national parks to the Internal Revenue Service. Basically all the stuff that will be shut down now. Unless you missed your IRS agent today, it should be clear that all this stuff they waste money on is completely... unnecessary. Or can/should be privatized.

Update: and just to seal the deal, Reid literally adds insult to injury: REID CALLS HOUSE REPUBLICANS `ANARCHISTS'

Now that the Senate has killed the latest proposal passed by the House, and with Harry Reid making it clear he is not interested in a one week Continuing Resolution stopgap, Bloomberg reports that the House will take the tabled bill and make these two changes to it:

• HOUSE PLAN SAID TO DELAY INDIVIDUAL MANDATE OF HEALTH CARE LAW
• HOUSE PLAN SAID TO CUT HEALTH SUBSIDIES FOR LAWMAKERS, STAFF; U.S. HOUSE WILL TRY TO PASS NEW EMERGENCY FUNDING BILL REQUIRING OBAMA AND ADMINISTRATION OFFICIALS TO SIGN UP FOR OBAMACARE-REP. ISSA

And, as expected, if and when this iteration of the dead-end bill passes, the Senate will kill it again. So unless there is a dramatic change in strategy by either party, the government shutdown in just over 9 hours (however brief or not so brief) seems inevitable.

The Senate Democrats need to have a few minutes of uber blame...

• *REID SAYS THERE ARE ENOUGH VOTES IN HOUSE FOR `CLEAN' BILL
• *REID SAYS BOEHNER SHOULD LET HOUSE VOTE ON SENATE BILL

With 54 voting Aye (and 46 against), the Senate has enough votes to kill the house proposal to delay Obamacare and send it back to the House. What happens next, only Vince Gilligan knows.

Harry Reid has already made it abundantly clear that they will take up the House-passed continuing resolution and immediately table (or put aside) the two amendments added on Saturday night (Sunday morning). Under Senate rules, a move to table one or both of the amendments would require a simple majority vote and send the Senate-amended version of the bill back to the House. News reports indicate that the House leadership is planning for this possibility (and will not acceot a "clean bill". Given Reid has scheduled a press conference for 245ET, it would appear he is not too hopeful that anything else will occur. Once the new new new 'clean' bill is passed, it ping pongs back.. and we start all over again... with a new blame game starting.

Before the Senate begins its "debate", we thought it worth a glance at who the average US citizen believes wil be to blame if the government does shutdown...

Update Well, that didn't last long:

REID SAYS HE WOULDN'T ACCEPT ONE-WEEK CONTINUING RESOLUTION

Curious why the market just spiked? The reason: first Obama flip flops, now it is the republicans' turn to prove that all is fair in faux war and Congressional IMAX drama. Here's the headline that drove it.

SEN. REPUBLICANS SAID DISCUSSING 1-WEEK STOPGAP BILL: POLITICO

Can kicked for one more week: BTFATH. Now that Breaking Bad is over, perhaps it is time for Congress to hire Vince Gilligan to make this tragicomedy somewhat more believable.

Last week Obama was unwilling to negotiate on the two key issues in the current government pre-shutdown debacle: Obamacare and the debt ceiling. Things seem to have changed quite quickly, now that the government shutdown is just 11 hours away.

• OBAMA SAYS EVERYONE MUST SIT DOWN AND NEGOTIATE IN GOOD FAITH, CAN'T HAVE TALKS UNDER RISK OF POTENTIAL U.S. DEBT DEFAULT
• OBAMA SAYS HE IS NOT RESIGNED TO A GOVERNMENT SHUTDOWN TAKING PLACE
• OBAMA SAYS U.S. DOLLAR IS RESERVE CURRENCY OF THE WORLD, "WE DON'T MESS WITH THAT
• OBAMA SAYS EXPECTS TO SPEAK TO CONGRESSIONAL LEADERS MONDAY, TUESDAY, WEDNESDAY

In other words, Obama blinked (for the n-th time in what has not been a good year for presidential leverage). And to think it took less than a 1% drop in the S&P (and a rather stubborn Republican party) to get "diplomacy" going...

POMO Magic... Politicians Tragic? The question is - will it end differently this time?