What To Look Out For Today - The Three Congressional Scenarios

Tyler Durden's picture


From Citi's Steven Englander

What To Look Out For Today: Posturing OK, But Watch Out For Amendments

The key for markets when they reopen is whether the House passes the fiscal cliff fix. Bother Boehner and Pelosi have indicated they support bringing the bill to a vote but they have not endorsed it. There are reports that the House vote would be as early as 2PM but that seems unlikely given the need for debate and posturing. Other reports suggest a vote around 5PM. The key is not when the vote occurs or how much Representatives denounce the imperfections of the fix, but whether they get a majority to pass it. So it’s a case of ignoring the rhetoric and seeing how many votes there are, and for reasons discussed below they are likely to be there.

The news that would tank markets when they open is the House passing the bill with significant amendments. It is unlikely that Democrats have the votes to significantly amend the bill, so any amendments would come from the Republican side. That would mean another round of voting in the Senate and quite probably an unchoreographed fall over the cliff. Markets would sell off badly on that outcome. House Republicans meet at 1PM before the House reconvenes, so be prepared for a storm of invective.

The Senate voted 89-8 overnight to pass the fiscal cliff fix. The provisions were pretty much as discussed Monday afternoon and a very good summary is found in the Washington Post link.

Technically, the US has gone over the fiscal cliff, as the IRS pointedly indicated early today, so House members will be voting to cut taxes rather than raise them.  So between the dairy fix (which extends dairy subsidies), the Medicare doctor fix, the permanent AMT fix, the unemployment benefits extension fix, the estate tax fix, the capital gains/dividend tax pretty good fix,  and so on, there are enough important Democrat and Republican constituencies that will be severely damaged that the House cannot afford to vote it down. The voting in the House will likely be closer as Representatives who may face a 2014 challenge will be given a pass to show a ‘Demonstration of Character’ but the odds are strong that the votes will be there.

The other reason that Republicans will likely vote ‘yes’ is that the sequester is delayed, not derailed, so those spending cuts will come on line in two months. In the meantime, they are obligated to find some savings elsewhere in the budget to lower spending partially in line with the sequester over the next two months. Combined with the debt ceiling, the republicans will have a couple of bites at the spending apple in coming months, so they are not giving up much by voting ‘yes’ today.


  1. A close vote before 6PM – Asian markets open up, catching up to the Monday S&P move; S&P futures probably have priced in most of the benefit of the fiscal cliff resolution. EUR CAD, and AUD have a bit of catching up to do with the S&P, but there should be little drama
  2. A rancorous debate that extends into the night – again the key will be whether the votes are there, however, reluctantly, but if it looks as if support is waning we will see sharp moves in markets. With brinkmanship the new normal, the sell-off will be partial on the view that a last minute rabbit will be pulled from a hat.
  3. Amendments or rejection – markets will sell off sharply.  If it turns out that the House can’t vote ‘yes’ on an acceptable, yet inelegant fix, the confidence that has emerged in 11th hour fixes will dissipate and tail risk scenarios will shift into baseline outcomes. This would be USDJPY negative,  but risk-correlated currencies now price in 80-90% probably of a successful fix in our view, so the downside pressures will be large.
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Tue, 01/01/2013 - 11:33 | 3111962 Boilermaker
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Hey, do you think Purdue has a chance today against Oklahoma State?  I'm considering putting a bundle on the Boilers with the spread.


Oh, and the house will pass it. The massive buying after the bell yesterday kinda told that tale.  The in-the-know already know.

Tue, 01/01/2013 - 11:39 | 3111987 Seasmoke
Seasmoke's picture

Just imagine how much the 545 "legally" made in their day trading accounts

Tue, 01/01/2013 - 11:58 | 3112041 Zer0head
Zer0head's picture

and to that point perhaps they want to drag it into tomorrow for one last visit to the trough

the gift that keeps on giving

Tue, 01/01/2013 - 12:36 | 3112153 stocktivity
stocktivity's picture

Algos will love it...another 3 digit gain tomorrow.

Wed, 01/02/2013 - 01:31 | 3114101 monogratis
monogratis's picture

Commodities up and precious metals holding solid... Oil nearly $92 a barrel.  I think it's a trap

Tue, 01/01/2013 - 12:07 | 3112075 AlaricBalth
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If you are interested in looking through the actual bill which passed the Senate, here is the link. http://thomas.loc.gov/cgi-bin/query/D?c112:4:./temp/~c112oifWqi::

Of particular interest is the extension of significant tax breaks for multinational corporations domiciled in the US.


The following link explains how this works in terms even I can understand.


Tue, 01/01/2013 - 12:18 | 3112097 Bindar Dundat
Bindar Dundat's picture

Politics -- Show Biz for Ugly people!

Tue, 01/01/2013 - 14:07 | 3112363 SmackDaddy
SmackDaddy's picture

Link dead.  What is the bill number.  Skimmed a dozen articles on this bill and not one mention of the bill number.  Journalism is dead...

Tue, 01/01/2013 - 14:40 | 3112418 AlaricBalth
AlaricBalth's picture

The Bill number is HR 8.
No need to read it. You can trust them.

Try this and go to 7.

Tue, 01/01/2013 - 11:46 | 3112002 Everybodys All ...
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As a Buckeye I'd say stand clear of that bet.

Tue, 01/01/2013 - 11:52 | 3112018 Boilermaker
Boilermaker's picture

17 points...

But, yea, could be a blow out also.

Oh, and house will pass the bill.

Tue, 01/01/2013 - 12:04 | 3112068 jtz5
jtz5's picture


Safer bet is Ok St over 44...

Tue, 01/01/2013 - 12:26 | 3112120 chunga
chunga's picture

It should be a good game either way.

It's only fair to give a shout out to the good folks at Capital One and AT&T for being sponsors.

My favorite last week was the Bell Helicopter Military Bowl.

(The JP Morgan Chase commercials are especially heart-warming.)

Next year can we expect the Homeland Security Bowl Week brought to us by MERS?

Tue, 01/01/2013 - 13:04 | 3112220 knukles
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Oh yeah, they were talking about that.  Audience participation at half time, burning, lashing and stoning the less patriotic, derisional, those of sanrky and cynical comments, the non believers and anybody else randomly scooped off the street who appears to be white Anglo-Saxon protestant male or just plain Christian or just gives a shit about more than Dancing for the Tsars.

Tue, 01/01/2013 - 13:44 | 3112309 chunga
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It seems to me that a callous has developed around my mind.

I only absorb enough of TV and commercials to piss me off; the rest just bounces away.

Speaking of attendence...I see a lot of empty seats at the games. (They ARE green shoots but we aren't supposed to notice)

It's just an excuse to drink beer down here at Rattlesnake Ranch and I've got an ice-cold 18-pack to slam down.

Tue, 01/01/2013 - 11:39 | 3111983 CrashisOptimistic
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In terms of overall deficit reduction, this looks a lot like about 60Billion off of 1.15 Trillion.  The ratings agencies SHOULD cut AAA over this failure to cut the deficit sharply and immediately.


Tue, 01/01/2013 - 12:38 | 3112158 JPM Hater001
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I have the fortune of going to church with my State Senator (not to mention decades of campaigning) whom I have tried repeatedly to get to grasp what 40% less fed money would mean (my buddy is Deputy Director at the DOR, Sheila's former Chief of Staff and he thinks I'm nuts too) and she was shocked last weekend that Boehners offer was rejected by the president...he already gave on the taxes... "I only recently realized they arent going to fix this."

"Sheila, I know you think I'm nuts but this does not end well.  These are not real cuts and the tax increases are a further drag on our state."

Anyway...Game on Wayne.

Game over Garth.

Tue, 01/01/2013 - 11:46 | 3112004 adr
adr's picture

Like the market has any bearing on the economy.

If there is a resolution it will just be to figure out what the capital gains tax rate will be so they can monkey hammer the market the extra percentage needed to cover the tax bill.

I'd like the capital gains tax rate to be 95% just to end the farce of the stock market as a source of wealth once and for all.

Tue, 01/01/2013 - 12:14 | 3112065 dwdollar
dwdollar's picture

Excellent point. Since Bernanke can print indefinitely, supposedly without consequence, thereby driving the market to new highs forever, why not raise the capital gains tax rate much, much higher. It's a win, win for everyone, right?

Tue, 01/01/2013 - 12:15 | 3112074 dwdollar
dwdollar's picture


Tue, 01/01/2013 - 12:23 | 3112113 CrimsonAvenger
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yep, we're all gonna get DP'd.

Tue, 01/01/2013 - 11:47 | 3112006 BlueStreet
BlueStreet's picture

It's like the tiny little band-aid in the box that you look at and wonder what could that possibly be used for. 

Tue, 01/01/2013 - 13:16 | 3112247 knukles
knukles's picture

It's statistically insignificant.

Tue, 01/01/2013 - 11:48 | 3112009 Racer
Racer's picture

But, but, but, the markets soared yesterday so I thought it was all perfect and fixed and everything

Tue, 01/01/2013 - 11:56 | 3112015 lizzy36
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Three people trading, 26 year old interns maning desks and no credit market after 1pm. 

Market perfectly efficient.

Tue, 01/01/2013 - 11:59 | 3112044 SmoothCoolSmoke
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Kicking the Can wll be looked back on, years from now, as the perfect fix. Sound insane?  Sure.  But it has yet to fail as a strategy: Greece, Spain, Italy, Portugal, Ireland...and Japan, who have been Kicking the Can for 20+ years and STILL ranks in the Top 10 in standard of living.  If Japan can be successful KTC for 20 years and counting, how long do you think the US can pull it off?      

Tue, 01/01/2013 - 16:30 | 3112714 Clowns on Acid
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Smooth - the difference is that the USD is the world's reserve currency.

  • The US has bailed out the EUR for the past 3 years or the EUR would be dust.
  • Japan has a homgenuos population of Savers. They domactually buy their Gov't worthless bonds. Additionally, Japan has largely been a US protectorate since WWII.
  • The US will ahve 6 to 12 months before "they" try to fix the inflation problem. Price ceilings? Forecd purchases (if they can force Obamacare) for the common good?
  • The can is going to become very heavy. It is going to get very real.
Tue, 01/01/2013 - 16:54 | 3112771 DosZap
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Japan has a homgenuos population of Savers. They domactually buy their Gov't worthless bonds.



No longer, the elderly outnumber the young, and they have had to use that 25% savings all up to live on.



The Fed has bailed out the EUR for the past 3 years or the EUR would be dust.( and not 10%  of the working sheeple have a clue.

Tue, 01/01/2013 - 11:50 | 3112013 lizzy36
lizzy36's picture

I hope Congress refuses to pass that POS bill.

Show some fucking sack and force everyone back to the table to negoiate a REAL solution. That includes the debt ceiling. Even if it takes until MARCH. 

Tue, 01/01/2013 - 12:02 | 3112057 SmoothCoolSmoke
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I would not bet the corn-turd I cranked out this morning on that happening.

Tue, 01/01/2013 - 11:53 | 3112027 SmoothCoolSmoke
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If SP 1400 holds when the dust settles Wed or Thurs..... then TPTB will have won again (fooling the sheeple), and panecea of kicking-the-can will control the markets for 2013.

Tue, 01/01/2013 - 11:56 | 3112036 Boilermaker
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What the chances of that?  Like 1 in 1?

Tue, 01/01/2013 - 12:28 | 3112130 Brokenarrow
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Does anyone that reads and posts to zh have any skin in the game? There are alot of edgy remarks, but I rarely see anyone one say, "I'm short the es, etc." Alot of "fuck bernanke........" Is everyone that reads zh "too smart to be in the market?"

I do know this:anyone short yesterday got their head ripped off. If I recall, alot of people predicted that there would be nothing done in congress last night---that the market would fall apart??? Just askin?

My guess is that the house will pass tonight and you get a es move up tomorrow by 1-2%

Short of an exigent event, the equity market will move up the remainder of the year 5-10%


Tue, 01/01/2013 - 12:36 | 3112156 Boilermaker
Boilermaker's picture

Every citizen has 'skin in the game'.  Considering Bernake is (illegally) buying equities with US notes, we're all 'in the market'.

Tue, 01/01/2013 - 13:32 | 3112280 Beam Me Up Scotty
Beam Me Up Scotty's picture

Funny thing is, remember all the liberals crying and whining about Bush Jr. privatizing part of Social Security?  But they support Obama going all in now.

Obama is like Bush cubed, and for all the reasons the Dems hated Bush, they love Obama, even though he's tripled down on just about every Bush policy.

Tue, 01/01/2013 - 15:42 | 3112581 wee-weed up
wee-weed up's picture

Of course, this is abundantly facilitated by the lapdog MSM.

Tue, 01/01/2013 - 13:23 | 3112261 knukles
knukles's picture

I got my whole life savings in the game as my career path has never offered a pension or health care.  I pay for it all, 100% by my little lonesome, self employed ass in the investment business.

I own lotsa bonds, primarily munis with a good dollop of TIPS and a few long Treasuries, off set with precious metals, as I sincerely believe we're following in the Japanese model for which there will be premiums paid going forward for income and inflation protection, together, during a period of stasis within a Liquidity Trap.

As I've stated here, numerous times.

That's skin, son.

Every day when I wake up, long, short or flat, I'm all in.

Tue, 01/01/2013 - 12:52 | 3112193 SheepDog-One
SheepDog-One's picture

Big deal, SmoothCoolSmoke....it's like doing card tricks for sheep in a pen and declaring you fooled em...who gives a fuck?

Tue, 01/01/2013 - 13:10 | 3112232 SmoothCoolSmoke
SmoothCoolSmoke's picture

I think it is a big deal SD, the biggest deal in fact...it is what keeps TPTB the TPTB.  All TPTB are ego-manics.  The don't love power cause it gives them money.  Quite the opposite. Money is just a tool to retain their power.  If the SP headed directly to 800 coming off this FC BS then something might really change.  They know that all too well.

Tue, 01/01/2013 - 13:45 | 3112313 SheepDog-One
SheepDog-One's picture

Well you can just sit and be mesmerized byt a 'scoreboard' that the fuktard sheeple are concerned with on their drive home from slave labor I myself dont really give a fuck. '13,000 = 'I WIN!' Yea whatever.

Tue, 01/01/2013 - 11:59 | 3112042 Disenchanted
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What's in Boner's flask today...hard cider or Everclear?

Tue, 01/01/2013 - 12:02 | 3112058 Spastica Rex
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Hard cider is a European beverage. Only homos drink it in the US.


Tue, 01/01/2013 - 12:18 | 3112098 Boilermaker
Boilermaker's picture

What?  You can still be manly and drink non-beer alternatives.  It's very metro-sexual.



Tue, 01/01/2013 - 12:50 | 3112182 Spastica Rex
Spastica Rex's picture

I used to get hammered on Strongbow at the Blue Moon Tavern in Seattle. Oh, to be young again.

edit: and I'm hardly homo at all.

Tue, 01/01/2013 - 13:25 | 3112265 knukles
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And to think I was gathering up the nerve to ask for your phone number.

Tue, 01/01/2013 - 16:46 | 3112761 FubarNation
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Canadians drink it.

Tue, 01/01/2013 - 16:49 | 3112764 DosZap
DosZap's picture

What's in Boner's flask today...hard cider or Everclear?

Think you have mixed up,it's Bidens IV under his suit coat, w/ the Everclear, just like Am Ex Card, He NEVER leaves home(or anywhere)without it.

Tue, 01/01/2013 - 11:59 | 3112043 TerminalDebt
TerminalDebt's picture

Funny how they openly make decisions based on "the markets". No more pretending it's all for the good of the common man.

Every speech is timed for the sake of goosing "the markets"

Every vote timed based on "the markets" opening.

TARP vote was the last time a major vote happened while "the markets" were open?

Tue, 01/01/2013 - 12:04 | 3112063 jtz5
jtz5's picture


Safer bet is Ok St over 44...

Tue, 01/01/2013 - 12:03 | 3112066 Threethreethree
Threethreethree's picture

The Obama does not want the can to be kicked.

The senate voted as expected (or told).

Obama prances around, and spun the spin as directed.

The media is doing their part.

The market run-up was to show the retirees and the interested that Obamas way is right.

When it all falls apart,

The right wingers and Tea Party Extremists will be blamed.

The can was only kicked to get another 4 years.

Time to use the Bully Pulpit.

There is a season for all things.

First Change.

Now Forward.


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