Archive - Oct 16, 2013 - Story

The Russell 2000 made a new all-time record high and the S&P 500 gets close as rumor turned into almost news and expectations of a done deal by 11pm tonight. The rumor was bought on the back of JPY-carry surging once again, the "news" was sold - smacking the S&P down around 8 points to VWAP, and then the ubiquitous closing ramp lifted stock back near their highs. The kicking the can left USA CDS wider on the day, put a bid under T-Bills (though the Feb Bills underperformed), lifted gold and silver off their lows, and while the USD was sent scurrying lower (after an early surge), Treasury Bonds ripped lower in yield (10Y _8bps from its highs early on). Spot VIX was crushed back below 15% (down 20% - the most in 2013) and while the rest of the VIX term structure was bid, the Feb/Mar maturities were less exuberant.

House Speaker Boehner explains in a statement how the GOP will keep fighting the good fight...

"The House has fought with everything it has to convince the president of the United States to engage in bipartisan negotiations aimed at addressing our country's debt and providing fairness for the American people under ObamaCare.  That fight will continue...

Apparently the IRS has fallen on hard times in light of all this government shutdown and sequestration nonsense. Too bad. According to a recent report from the Treasury Department, ‘enforcement revenue’ at the IRS has fallen for the second straight year. Tax enforcement is one of the only ‘money makers’ for the US government; according to the IRS, every dollar spent on tax enforcement generates six dollars in additional tax revenue.  Unfortunately for the IRS, though, the agency’s head count has been thinning. They no longer have enough people, and enforcement revenue has been declining. Ordinarily the IRS supplements its ranks with legions of unpaid spies in the financial sector. Starting July 1, 2014, though, the Foreign Account Tax Compliance Act (FATCA) will give the IRS a new addition in its ever-growing list of unpaid spies. You.

By now the general public has long made up its mind about Obamacare, aka the ACA, either positive or negative, and as such any anecdotes about its impact on the broader economy are usually covered by layers of political and ideological bias. One place, however, where the views on the ACA should be impartial is the Federal Reserve. Which is why we were surprised to note that in the just released Beige Book, whose market-moving impact is now absolutely irrelevant as the importance of fundamentals in a time of central planning is "modest to moderate" at best, there were no less than eight instances of "Affordable Care Act."  So in order to further the discussion and debate of Obamacare's impact on the economy from a purportedly apolitical entity, here is what the latest Beige Book had to say about Obama's crowning achievement.

One of these lines represents the return due to the wisdom of the Oracle of Omaha, the unquestionable "what he says is law" asset manager who adds so much value to everything he does.. and the other is the S&P 500...

Q. How worried are you that one morning the bond market has moved against the United States?

A. It’s virtually assured, the question is when and how. I don't know if it will be two years of five years but it will happen. It is a matter of time, the United States can’t borrow indefinitely. Over hundred years bankruptcies of country after country who thought they could get away with it because they had the reserve currency and the military power of the world. We are going to have fiscal discipline. It’s imposed upon us or we do the right thing and do it to ourselves the right way.... America knows the way, it doesn't have the will.

While the House looks set to vote for the Senate bill and kick the can just a little down the road, the Washington Post reports that at least one tea party group is calling for Republicans to hold their ground.

"The Senate deal is a complete sellout.  Speaker Boehner and the House should stand firm and reject this deal to reign in the executive branch’s power before it is too late,” Tea Party Patriots head Jenny Beth Martin said.

We noted earlier that T-Bills have merely sloshed the risk bucket from Oct/Nov to Feb and it seems CDS markets have apparently not gotten the memo. Joking aside, either CDS traders have gotten really slow or as a result of the recent fiasco US default risk has been repriced to a permanently higher baseline, some 50% higher than where it was one short month ago.

With the Senate having presented the fully endorsed can-kicking deal, and a House vote pending later this afternoon, here is White House spokesman Jay Carney to share the White House's blessings.

Gold and silver are rising; Treasury bonds are bid, and stocks are leaking off their highs as the momentum igniting euphoria of rumor after rumor has hit the fiscal cliff of a "can-kicked" deal... For now, it's "sell the news"...

Very short-dated Treasury-Bills have dropped in yield this morning but you can't just get rid of that risk by kicking the can and it would appear that the February Treasury-Bills are already repricing higher in yield in preparation for the next fight...

Two-and-a-half years later and Congressman Ted Deutch is spinning his GOP "Wheel of Misfortune" once again...

Done deal? Let them explain...

REID SAYS HE'S GOING TO WAIT FOR MCCONNELL TO TALK ON BUDGET
REID SAYS MCCONNELL COMING TO FLOOR SOON
SENATE SAID TO HAVE DEAL ENDING SHUTDOWN, RAISING DEBT CEILING