With Republicans In Disarray, And No Debt Ceiling Deal, All Eyes Turn To November 18 When The US Runs Out Of CashSubmitted by Tyler Durden on 10/09/2015 10:29 -0500
As The GOP lurches from turmoil to chaos, following speaker-in-waiting McCarthy's pulling out, Fox News Bret Baier reports that Speaker John Boehner has agreed to stay on as Speaker - not just until the Caucus nominates someone - but, until that person can confirm 218 votes on the House floor (needed to take the Speaker’s gavel).
Just two weeks after House speaker John Boehner dramatically announced his premature resignation without cause from his position seemingly in an attempt to difuse the tension within the GOP, there has been another just as dramatic development when moments ago we learned that Boehner's chosen successor Kevin McCarthy has withdrawn his candidacy for the speaker position: "While I am grateful for the encouragement I’ve received, I will not be a candidate." This puts in jeopardy not only any future negotiations over US government funding when the continuing resolution expires in mid-December but more importantly puts into question what happens with the US debt ceiling when the US government runs out of emergency measures some time in early November as Jack Lew has warned is the deadline for getting a deal struck.
Following two stellar auctions earlier this week, when both the 3 and 10 Year showed substantial demand, and in the case of the latter a near record surge in foreign central bank takedown, today's final 30Year auction went without a glitch as the Treasury sold $13 billion in the RN0 reopening, which priced at 2.914%, through the When Issued 2.917%, lower than the 2.98% in September, and virtually unchanged from the yield the 30Y paid at the last auction of 2014. In other words, just like stocks, so the long end of the curve has gone exactly nowhere in 2015.
"This earlier deadline raises the probability that the House will vote to raise the debt limit prior to the time Speaker Boehner steps down on October 30. If so, this would reduce the risk of a disruptive debate on the issue, because Speaker Boehner is more likely than his successor, in our view, to allow a "clean" debt limit increase without the debate over extraneous issues that have delayed enactment until shortly before the deadline in the past."
Last week, following the shocking news that House Speaker John Boehner had resigned, we analyzed the "flowchart" of next steps for both the US government shutdown and the debt ceiling showdown. The most urgent one, that of the imminent shutdown or passage of a continuing resolution, was as follows: "Boehner will move to advance a "clean" CR -- with the help of Democrats -- before the new fiscal year starts on Thursday." And he will succeed. This is precisely what happened moments ago when following a 277-151 vote in the House, Congress sent legislation to Obama to prevent a government shutdown and will keep federal agencies funded through Dec. 11.
Goldman Capitulates, Cuts S&P 500 Earnings Forecast And Price Target; Sees Market At 2,000 By Year EndSubmitted by Tyler Durden on 09/29/2015 06:18 -0500
With three months left in the year, we were wondering how long it would take before Goldman's equity strategist would throw in the towel on his increasingly improbable (unless of course the Fed launches QE4, NIRP and/or helicopter money in the coming months) year-end S&P500 price target of 2100. The answer: not very long, as this is precisely what Goldman did overnight, when it cut both its 2015 and 2016 EPS forecasts (to $109 and $120 from $114 and $126), with a corresponding cut in Goldman's 2015 year-end price target from 2100 to 2,000, rising to a nice round 2,100 the year following.
The divergence theme is likely to strengthen in the week ahead.
In the aftermath of John Boehner's surprising resignation announcement, the punditry has been scrambling to opine what this departure means for the odds of a government shut down, some saying the likelihood has increased, while others, such as Goldman, confident shutdown odds are materially reduced. The truth is likely in the middle, and while the odds of a government shutdown next week are reduced as a Continuing Resolution now appears more feasible, the probability of a broader shutdown in December once the CR expires, have materially risen.
The combination of another debt limit fight, the defunding of Planned Parenthood, and prospect of another government shutdown tearing his party apart, the GOP just suffered its latest major blow, when news hit that House speaker John Boehner, just 24 hours after getting a visit by none other than the Pope, is folding one last time: according to the NYT, "Speaker John A. Boehner will resign from Congress and give up his House seat at the end of October."
Two weeks ago, when no one was talking about the possibility of a government shutdown, we warned it was coming. Today, as Politico reports, with very little time left to reach a deal, budget experts project a 75% chance of a shutdown. No matter how immaterial in terms of their economic impacts, government shutdowns create uncertainty and thus influence Fed decisions and as SocGen notes, with the odds of an October liftoff low, a government shutdown could lower them further. Although funding issues should be resolved by the December FOMC meeting, there is a small chance that the fiscal standoff extends into the end of the year (i.e. due to a temporary continuing resolution), creating another deterrent for the Fed.
For those of you who don’t want to take the time reading through the ponderous 7000-word transcript of yesterday’s FOMC press conference, we bring you the shorter Janet Yellen, translated from Fedspeak into plain English. Enjoy!
"There have been a number of studies that have been done recently that have tried to take account of many different ways in which monetary policy acting through different parts of the transmission mechanism affect inequality, and there's a lot of guesswork involved, and different analyses can come up with different things. But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality."
Despite all the confidence-inspiring propaganda from any and every mainstream talking-head, CEOs are cautious about the U.S. economy’s near-term prospects and are trimming business plans for hiring and capital investment over the next six months. According to The Business Roundtable, the CEO Economic Outlook Index tumbled 7.2 pts, from 81.3 in Q2 to 74.1 in Q3 with the disparity between CEO's employment perspective and the BLS 'augmented reality' having never been higher.