Archive - Oct 14, 2013 - Story

Headlines just hitting:

• *MEETING BETWEEN OBAMA, CONGRESSIONAL LEADERS POSTPONED
• *WHITE HOUSE MEETING POSTPONED TO ALLOW FOR FURTHER TALKS
• *WHITE HOUSE STATEMENT SAYS DELAY TO GIVE MORE TIME FOR TALKS

Seems like there is no deal for now then... and sure enough that hope premium in stocks is fading

Though it has not received the same amount of media attention as Syria and Egypt, Barclays points out that Iraq has witnessed a relentless wave of bombings and shootings this year and the risks are rising of a return to serious sectarian strife and widespread civil unrest. This is raising the risk of serious sectarian strife and widespread civil unrest, with implications for oil production, exports, and regime stability.

On Saturday,  millions of Americans across 17 states found themselves in an unfamiliar situation: they couldn't rely on the US government for their daily foodstamp-funded bread. The result was anger, confusion and sometimes, outright panic, as shoppers left their full shopping carts in stores, and departed their favorite general retailer in a daze. However, while most outlets that accepted EBT were experiencing a one-day, non-recurring hit to their EPS, several Walmart stores in Louisiana decided to brave through the Xerox-induced blackout for several hours by eliminating the spending caps on EBT cards, leading to nothing short of shopping stampedes. The result, as CBS reports, is that "Walmart and local police ... were called into the stores to help maintain order Saturday as shoppers swept through the aisles at two stores and bought as much as they could carry."

If one looks at various sovereign states, it seemingly doesn't matter that their public debts continue to rise at a hefty clip. The largest ones are considered to have economies that are big and resilient enough to be able to support the growing debt load. Part of the calculus is no doubt the notion that they contain enough accumulated wealth to allow their governments to confiscate even more of their citizens property and income in order to make good on their debts. Then there are the small and mid-sized states in the EU that are getting bailed out by their larger brethren, or rather, the tax payers of their larger brethren. However, things are different when the territories or municipalities concerned are considered too small and have no such back-up. Detroit was a recent case in point, and it seems that the US territory of Puerto Rico is the next domino to fall.

As we noted earlier, this is not what the White House was hoping for. Thanks to no T-Bill police being at work today and on the back fo JPY-carry trades, the S&P 500 has now joined the NASDAQ in the green for the day having risen non-stop since Europe closed. Treasury futures are selling off notably too (and were higher in yield long before equities went green) - with the 5Y (shortest maturity trading) the worst hit. It's unclear whether the Treasury weakness is just a reflection of equity exuberance or (given the short end weakness) reflects anxiety over the deadline.

Despite the apparent preponderance of polls proclaiming the Republicans as the party at fault (with their ratings at record lows); it appears there are no winners in this game of global macro economic war. President Obama's job approval rating has plunged to two-year lows, near all-time lows.

When asked by Tom Keene about the "modest recovery" in stocks earlier this morning (which as of this post are unchanged), Bloomberg TV's Julianna Goldman responds quite simply: "that's not what White House officials were expecting or necessarily wanting this morning. They were all bracing for some negative market reaction that's going to be the fire that's alight under everyone."

UPDATE: *OBAMA SAYS REPUBLICANS MUST SET ASIDE SOME PARTISAN CONCERNS

Senator Harry Reid has a cunning new plan and says "we're getting closer," providing yet more hope that the US won't tip inauspiciously over the edge of the economic abyss. The latest rumored deal proposal, to be presented at the White House meeting at 3pm, includes automatic spending cuts, a framework for budget negotiations, extends the debt ceiling for 6-9 months, and funds the government through December at current sequester levels. Doing so, as AP reports, would punt the fight over whether to lock in 2014 sequestration levels at $967 billion until December. And by extending the debt ceiling until the middle of next year, it would put the issue in the center of the heated 2014 midterm elections. While this provided some short-term optimism, Obama was quick to remind the market that "it appears that has been some progress in the Senate in fiscal impasse negotiations and will see if it is real when he meets congressional leaders."

Five years ago, when QE first started, we blasted the Fed's "Plan Z" systemic rescue "policy" - which was merely a tried and true dilutive fallback plan used by every collapsing monetary regime starting with the Romans - stating it does absolutely nothing to resolve the biggest underlying threat to the economy and the western way of life, namely the epic accumulation of debt (most of it bad), courtesy of a Fed which has now unleashed a perpetual "buyer of only resort" QE (as we predicted months before QE^ternity was revealed), which instead only redistributes wealth from the middle class to the wealthiest 0.01%, while providing scraps to the poorest to keep them occupied and away from very violent thoughts. Enter the FT, which in an Op-Ed today titled "QE has stigmatised the well-off" says that "despite it being entirely justified as a save-the-world policy in its first round, it is still at best an unfair and at worst an evil policy. Why? Because of the way in which it redistributes wealth" And now we lean back and await for even more of the incisive mainstream media to suddenly come up with this timely, non-conspiratorial observation.

Yesterday afternoon, we tweeted:

What time tomorrow do we get the hope rally? Odds are between 10:30 and 10:45. Rejection news naturally just after 4 pm

— zerohedge (@zerohedge) October 14, 2013

And on the back of a statement from the White House that Obama and Biden will meet with McConnell, Reid, Pelosi, and Boehner - but "will not pay ransom" - and with the T-Bill market police on vacation, equity markets are surging back towards green (removing once again any incentive to act).

The fine upstanding people at the NASDAQ noticed something odd this morning with SBAC:

*POTENTIALLY ERRONOUS 'SBAC' TRANSACTIONS BEING PROBED

After some discussion, they have decided that it is indeed erroneous that, as Nanex notes, SBA Communications (a $10 billion market cap company) should see its stock price jerk from $80 to $299.73 in the space of a few seconds. NASDAQ will be canceling these trades on behalf of the participants involved (we suspect the "buying" algorithm is more relieved than the "seller")

Japan’s plan to raise taxes while expanding stimulus received “widespread skepticism” at the meeting of Group of 20 policy makers, according to Chinese Deputy Finance Minister Zhu Guangyao. "Japan, on the one hand, plans to raise consumption taxes next year," Zhu told reporters in Washington during the G-20 meetings. "On the other hand, it plans to unleash a fresh round of 5 trillion-yen economic stimulus to stem the economic slowdown. Such strategy received widespread skepticism."

Following President Obama's "win" a few years ago, the headline above may not be as entirely surprising as some would expect. However, we can't help but feel the Syrian President's comments represented his actual perspective and his 'just kidding'-moment was 13-year-old-girl-esque covering-up of the stunning comment given the 115,000 dead in his nation so far from the conflict. As The Tribune reports, the prize, which was given to the global chemical weapons watchdog on Friday, “should have been mine”, Assad said, according to Al-Akhbar newspaper. Hey, there's always next year Bashar...

While only a small sample so far, it is quite telling that despite the manic depression of earnings expectations heading into Q3 results, only 52% have topped revenue estimates (on aggregate missing expectations by 40bps). On the earnings side, the number of companies beating expectations plunged to its lowest since Q1 2009... sounds like another good reason to BTFATH...

Remember: what Goldman wants, Goldman gets. The only question is whether Jan Hatzius and Bill Dudley have had their talking point convergence meeting over a tasty lobster club sandwich at the Pound and Pence already today...