The Three "Plan B" FX-Response Scenarios

Tyler Durden's picture

Citi's Greg Anderson provides a quick-and-dirty scenario outline for the FX (and implicitly market) implications of today's 'Plan B' vote.

Via Citi:

US House Speaker Boehner has promised to hold a vote on his so-called ‘Plan B’ proposal today. There is no published time for the vote as of yet. Boehner has a scheduled press conference at 1:15 PM EST, but beyond that the schedule is flexible. I suspect that if a vote is in fact taken it will be done late in the day after US markets have closed.


Although “Plan B’ is beginning to look more like something that was thrown together to mollify his party rather than to pressure Obama and the Democrats, I would still venture to say that its primary intent is to bring a deal on ‘Plan A’ quickly. With that in mind, its passage may not matter much to markets one way or another. Democrats have already said that it won’t be brought to a vote in the Senate, so it is more symbolic than real. With that in mind, I can see three scenarios:

  • Scenario 1: If Plan B doesn't pass because Obama caves in on negotiations and gives Republicans the 'Plan A' solution they want some time before tomorrow’s US close, then markets will celebrate. Some compromise between Obama's last proposal and Plan A would probably bring a 1% USD selloff.
  • Scenario 2:  If Plan B doesn't pass today or tonight because Boehner can't keep his party members together, then markets will likely sell off. What that would demonstrate is that the Tea Party and/or other factions in the Republican Party will not vote for any deal that raises taxes, which would make reaching any type of compromise by Dec 31 difficult to fathom. I would imagine something like a 2% USD rally.
  • Scenario 3: If Plan B doesn't end up coming to a vote today or we don’t at least get a firm time scheduled for a vote tomorrow, markets will probably view that as a sign that progress is being made on Plan A and not react much. However, if the rumor is that no vote will be called because Boehner counted votes and realized that even Plan B is destined to fail, then we reduce to a Scenario 2 price response.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
drink or die's picture

Maybe the real plan is to keep stalling until the end of the world scheduled for tomorrow?  After all, your typical politician is dumb enough to believe the Mayans.

Dr. Engali's picture

It better end tomorrow. I'm going to be pissed if I have to go Christmas shopping.

smlbizman's picture

i agree they are stalling, but they are doing it so they can get as much shit stuffed in this turkey as possible .....and oh yeah by the way, we have converted your 401k and ira uh, did i say converted , i meant confiscated, sorry about that and you will have to read the rest yourself, i dont have time.....

slaughterer's picture

Naive in the above article are the % change calculations in USD under each scenario.  Very naive.

TruthInSunshine's picture


I love your succinctness, but I have to elaborate more.

Why so many people so serious? I'm speaking in terms of analyzing what is, for all practical purposes, Kabuki Theater of the worst kind, quite similar to the Hank "Tanks In The Streets & Martial Law Within 24 Hours Unless I Can Haz Blank Check" Paulson moment that opened up the TARP/TALF/QE-POMO/TWIST/QE4ever saga.

This is no different.

They will go over the cliff if only so both sides can try and blunt criticism from their base that they "did all they could," and then after the taxpayer flesh and blood stops flowing to the defense complex for 12 to 48 hours, they will "hurriedly agree" on a plan (already drafted, waiting in the wings) that is designed to screw over as many actually productive, but not too-big-to-fail-although-too-small-to-get-unlimited-mammary-gland people and businesses as possible.

C'est la vie, bitchez.

SheepDog-One's picture

Right....he let's write some articles about how the next act of the puppet show will play out due to outside economic forces!

csmith's picture

Ah...what about "Plan B passes and that's the end of it...we're done and over the cliff we go?"

docj's picture

Yeah, funny how (TBTF) Citi didn't seem to want to talk about this.


CPL's picture

Scenario  1:  Screwed

Scenario  2:  Screwed

Scenario  3:  Screwed

Coldsun's picture

Let the politicking and finger pointing begin. It’s almost like two large malignant tumors blaming the cancer on the other.

scatterbrains's picture

The market truth detector "gold" is saying it's time to harvest the middle class via ramping taxes up his ass.

Dr. Engali's picture

Markets...heh heh....such a barbaric  arcane word.

wandstrasse's picture

when you want to praise a central planner, you say: 'you have not only created an ordinary price, you have created a MARKET price, congratulations!'

Cookie's picture

Thanks Ben, now buying double the original intended amount tomorrow...few here in Asia are buying your shennanigans

Right-on Left-off's picture

Are we actually seeing a market 'Crash' that is being covered up?  The only thing that is being left alone is the commodities.  You know not exactly a seamless manipulation to an 'Un-Crash', some bulges here, some dents there with massive everywhere de-coupling.  Nothing making any sense.

CPL's picture

Welcome to your financial future.


Take a seat, beer is in the fridge, coffee is in the pot.  Grab a deck chair.  We'll watch it burn together and then go rebuild it.

ptoemmes's picture

Can't quite remember the name of this movie.  On the tip of my tongue:

Dr. Engali's picture

I'll be glad when we get past this fical cliff meme and move on to something fresh Greece.

1eyedman's picture

there will be no vote and we will go over the 'cliff'

SmoothCoolSmoke's picture

C'mon!  Does anyone think TPTB are gonna let the Dow sell-off big the last trading day before Xmas.....and spook the sheeple before their final 72 hour Santa buying spree?

youngman's picture

Most of them are Jewish..they don´t do Christmas

SheepDog-One's picture

All indications show this 'Christmas retail buying spree' will be even worse than last years total faceplant.

game theory's picture

No matter what plan they end up with, they'll vote themselves and their friends some raises next year...just like every year. Or wait, they will cleverly declare a freeze on pay raises because they are "sharing the burden" with us, but instead they get backdoor pension/benefit bumps to mask the fact that they have many ways to loot from the citizenry. And meanwhile, the prez will pow-wow with the CEOs for some advice (a group of top notch folk who are taking a break from their busy day of looting their company's with excessive pay and options). What advice will he get from them? How to increase executive pay?  The US is brazenly embracing fascism...and only the gov't workers and corporate workers who play along and don't rock the boat while collecting their loot are satisfied with this system right now. 

saycheeeese's picture

who cares....  or the media wants us to care?  this is  all BS and the truth will be decided by the market one day  (tomorrow?)

One day we gonna wake and see a lot of red ink on our screen and....  that's gonna be the beginning of the end. At least we are all warned.... RED (by public acceptance..) it the color of the mourning

gould's fisker's picture

When does Caligula pop out of the cake?--that's all I want to know.

youngman's picture

I am ready to "do the jump" might educate some of the sheeple....I will survive....but some won´t I think....votes have consiquences...they need to learn free lunch ...that kind of crap...

Canadian Dirtlump's picture

I can tell you the likely scenario for gold and silver under each option. Getting tuned like a cheap guitar by organic market action. Fuckers.

Joe moneybags's picture

Where else would Boner be getting the camera time he is now?  Once the fiscal cliffhanger event is finished, his face won't be found anywhere but on a milk carton.  He simply must milk this drama for as long as he can.

rubearish10's picture

So Tea Party retreats and ES rallies? Sceanrio 2? WTF, another blunder by sell side cornballs!

WPO Article:

FreedomWorks flips, now opposes ‘Plan B’

The tea party-aligned FreedomWorks has gone from tentative support for House Speaker John Boehner’s “Plan B” to outright opposition. 

The group joins Club for Growth and the Heritage Foundation in opposing the GOP proposal, which would let  tax cuts on income over $1 million expire. House Republicans are planning a vote on the plan Thursday.  

In a blog post Wednesday, FreedomWorks’s Dean Clancy celebrated Boehner’s proposal as “good news!” 

“While not nearly as good as the FreedomWorks Plan to avert the fiscal cliff, Plan B is much better than the so-called ‘balanced approach’ that Mr. Boehner had, until Monday, been trying to negotiate with Mr. Obama,” Clancy wrote.; background-color: transparent; width: 300px; display: block; background-position: 103px -398px; background-repeat: no-repeat no-repeat; border: 0px initial initial;">

An update to that post Thursday afternoon shows that the group no longer sees the plan as an acceptable alternative. 

“After review of the Boehner Plan B legislation, pending in the House today, FreedomWorks has found it must oppose the legislation, and will be urging House members to vote NO on the bill,” the statement reads. “We will post our formal opposition letter on our site, soon.” (The headline still reads “Two Cheers for Boehner’s Plan B.”)

House Majority Leader Eric Cantor (R-Va.) has predicted that the plan will pass, regardless of conservative opposition. Senate Majority Leader Harry Reid (D-Nev.) has labeled the proposal a distraction from bipartisan negotiations and vowed that the upper chamber will not vote on it.

Republicans charge that President Obama has not put forward a balanced offer for the GOP to consider, a claim the White House strongly disputes.

helping_friendly_book's picture

Either way Kevin will still be at the controls propping up the S&P.