T-Minus 15 Hours: The Complete Government Shutdown Summary

Tyler Durden's picture




 

Presenting the full summary about the only event the market is focused on today.

MAIN POINTS:

Today sees the Senate reconvene after yesterday saw the Republican-led House voted in favour of a modified continuing resolution (CR) which includes a one-year delay to Obamacare (the Affordable Care Act). The Senate is not scheduled to meet until 1400ET today meaning that if the new bill is rejected there is not enough time to create a new CR and pass it back to the Senate before the midnight deadline, leading to a government shutdown in which all non-essential government workers will stay at home. Expectations are now that it is likely there will be a temporary shutdown given that the White House signalled the new CR would be vetoed by President Barack Obama and Democrats in the Senate immediately said the legislation approved by the House yesterday is unacceptable.

Even if there is a government shutdown, it is expected to only last a day or two and a CR is expected to pass in Congress this week, however this shutdown could lead to a delay of Friday's release of this month's Non-Farm Payroll report. This will fund the government to at least November 15th, giving more time for Congress to create a CR which extends through the entire 2014 fiscal year. Goldmans estimate a 2-day US govt shutdown will hit Q4 GDP (annualised) by 0.1 percentage points and one week by 0.3 percentage points, however the more important issue for Congress to address will be the debt ceiling as the US is expected to exhaust borrowing capacity on October 17th.

One main concern of a delay to both a 2014 budget and raising the debt ceiling is the possibility of a credit rating downgrade of the US sovereign, although overnight Moody's said that a government shutdown wouldn't affect debt service and that a debt cap failure would lead to perceived default risk and that failure to raise the debt limit is worse than a shutdown.

It is worth bearing in mind that several members of Congress are likely to speak to the press throughout today as they arrive for discussions and the Senate vote, and as is often the case, any deal between the Senate and House is likely to be either overnight or within the next two days. Although a US government shutdown is a risk event for financial markets, many analysts have noted this week's voting is overshadowed by debt ceiling negotiations which will begin shortly after. These talks will have a much greater impact on market sentiment as a delay to increasing borrowing capacity risks a US default as the worst case scenario.

EVENTS OVER THE WEEKEND:

  • Shutdown seen as unavoidable without talks
  • U.S. 4Q GDP seen reduced by as much as 1.4 percentage pts. depending on shutdown’s duration
  • Latest House plan authorizes 10 wks of spending starting Oct.1 only if most provisions of Obama health law delayed a year
  • Senate Democrats, President Obama say they will reject any measure that includes provisions tied to Obamacare
  • Yday, Senate Majority leader Harry Reid D-Nev. says chamber has acted on Continuing Resolution, adjourns until today 2pm
  • Govt shutdown odds now at 90%, Democrat Collender says

ECONOMY:

  • In case of govt shutdown, Labor Dept says it will issue jobless claims data (scheduled Thursday 8:30am)
  • SEC says EDGAR system, crucial enforcement will continue
  • Treasury says it will operate debt programs and manage cash, USPTO says it will stay open “a few weeks”
  • Commerce Dept says it won’t issue economic data
  • Bearish impact on U.S. economy “significant” if shutdown lasts,  Morgan Stanley says in note
  • Shutdown means Fed will have to prolong QE: BNP Paribas

CONTRACTORS:

  • "Notable" cos. tied to potential continuing resolution moves; H.J. Res. 59 would fund govt at “close to current levels”  according to Sept. 27 note from Bloomberg Industries analyst Brian Friel: BLL, BAVA@DC, BA, CACI, ERICB@SS, XLS, GD, GSK@LN, HRS, LMT, NOC, NOVN@VX, RTN, SAN@FP, TTEK, URS
  • Top 20 tied to defense, healthcare, infrastructure, IT:LMT, BA, GD, RTN, NOC, UTX SAIC, BA/@LN, LLL, HII, MCK, Bechtel (2213Z@US), BAH, URS, CSC, DYN, HUM, HNT, Triwest Healthcare (1893Q@US), TXT/BA joint venture
  • Health Exchanges begin enrollment tomorrow there’s a partial shutdown of govt.
  • Fannie, Freddie don’t face direct shutdown effect: Moody’s
  • Senate bill ends protection Sept. 30 for Monsanto, Dupont on bioengineered seeds: BI’s Friel
  • USD begins week buffeted by increasing possibility of U.S. government shutdown

TRADING RECOMMENDATIONS BASED ON DEBT SHUTDOWN CATALYST:

Barclays

  • Go long USD/CAD 2w2w FVA; relatively low USD/CAD volatility and its exposure to U.S. economic outlook make this an attractive hedge against U.S. political risk from debt-ceiling negotiations and a potential spike in market volatility

Credit Agricole CIB

  • Risk aversion is rising, U.S. equities and USD are falling
  • Near-term prospects for USD are bleak, with limited potential for any upside unless budget deal is reached; safe-haven currencies, in particular JPY, will be buoyed in this environment
  • In terms of high-beta currencies including Asian currencies, any positive impact from the fact that U.S. yields are capped will be outweighed by rising risk aversion leaving most Asian currencies vulnerable

Bank of Tokyo-Mitsubishi UFJ

  • If no resolution is reached, partial govt shutdown will kick in on Oct. 1, which could prompt USD selling against majors although stronger against Asia
  • Beyond govt shutdown, bigger issue is how they move toward debt limit when govt runs out of cash on Oct. 17; under such circumstances, BOT-Mitsubishi UFJ’s one-week USD/JPY forecast is a wider 96.50-100.00 on safe-haven JPY bids

Westpac

  • Expects USD to continue to trade on the “backfoot” vs its peer core currencies during a govt shutdown; event risk early in the week is negative for USD
  • Failure to raise debt ceiling would mean the U.S. govt must pay all its bills out of current revenue, risking default and downgrade and probable chaos in markets

Source: RanSquawk, Bloomberg

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Mon, 09/30/2013 - 08:38 | 4005031 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

Is Obama on that airplane?

Mon, 09/30/2013 - 08:39 | 4005039 quasimodo
quasimodo's picture

Not sure but judging by the bloated appearance wifey is

Mon, 09/30/2013 - 08:39 | 4005042 Zer0head
Zer0head's picture

Watch the Bloomberg morning Crew call those opposed to Obamacare Jihadists and hostage takers

http://player.ooyala.com/cacheable/1c5c217cd02742b0516601d2cfbc6ce8/play...

If only someone would ask Julianna "Why the long face?" and tell Al Hunt to return to his crypt

Mon, 09/30/2013 - 08:45 | 4005059 GetZeeGold
GetZeeGold's picture

 

 

Can't we do something about these raping anarchist aronist jihadist terrorists?

Mon, 09/30/2013 - 08:50 | 4005076 AlaricBalth
AlaricBalth's picture

If the there is a government shutdown, many market participants should run roughshod over many rules and laws designed to protect the investing public. With the SEC and other government agencies running a skeleton crew, imagine what many bankers will try to get away with. It could be financial anarchy!!

 

Oh wait....

Mon, 09/30/2013 - 08:51 | 4005088 TeamDepends
TeamDepends's picture

You mean there might be clarity, reason, and a sense of sharing?

Mon, 09/30/2013 - 08:59 | 4005118 Stuart
Stuart's picture

Good cartoon.  It fits.  Either way the US no longer deserves to be the sole reserve currency.   It's clear it's a matter of time before it goes bankrupt.

Mon, 09/30/2013 - 09:05 | 4005136 GetZeeGold
GetZeeGold's picture

 

 

Tell me why we have to raise the spending limit again.....if everything is free?

Mon, 09/30/2013 - 09:12 | 4005148 Chupacabra-322
Chupacabra-322's picture

It's just a partial Fascist shutdown. The rest has just been all business as usual political grandstanding dog & pony bullshit.

Mon, 09/30/2013 - 09:42 | 4005234 BaBaBouy
BaBaBouy's picture

GovERMENT SHUTDOWN, That Means GOLD MANIPULATION ENDS.
Ore Is That Part Of The Military Budget ???

Mon, 09/30/2013 - 09:52 | 4005264 monad
monad's picture

The US government is just one tool of the FR-IMF-WB-UN cabal. PM manipulation will continue unabated. 

Mon, 09/30/2013 - 10:37 | 4005380 Fish Gone Bad
Fish Gone Bad's picture

The thought of borrowing money, to pay someone's salary has pissed me off for too long.  Government is just too big.

Mon, 09/30/2013 - 11:10 | 4005484 Hard1
Hard1's picture

This looks like the reality "Biggest Looser" but renamed "Biggest Asshole".  There's plenty of competition, but Boenher takes the top prize 

Mon, 09/30/2013 - 18:24 | 4007326 TheRedScourge
TheRedScourge's picture

So what really happens if there's a "shutdown"? The budget has to be balanced in a hurry if they don't come to an agreement.

So, if it doesn't happen, what will they cut? Fixed income like welfare, pensions, or food stamps? Hmm, no, they don't like being pitchforked by hungry homeless with nothing left to lose. Military wages? No, they need protection incase people show up with pitchforks. "Critical services" like domestic spying? No, for the same reason they won't cut military wages. Lay off employees or sell off buildings? No, they need the support of all the friends they gave jobs to keep moving up the ranks. What's left then?

- capital expenditures, from replacing fleet vehicles, to new military weaponry, to toilet paper and everything in between

- all but the bare minimum contributions necessary to keep social security and various pension funds going

- non-critical services that don't turn a profit, the absense of which will piss off the voters, causing them to pressure their congressmen to please spend more

That sounds about right. Any others I've forgotten? Anyone? Bueller?

Mon, 09/30/2013 - 10:11 | 4005312 Papasmurf
Papasmurf's picture

Fed gold manipulation will not stop during a gov't shutdown.  The Fed is not a goverment agency, it is a self-dealing private cabal corporation

Mon, 09/30/2013 - 10:28 | 4005354 Joe Davola
Joe Davola's picture

SEC says ... crucial enforcement will continue

And the difference between continuing enforcement and if it were shutdown is?

Mon, 09/30/2013 - 10:30 | 4005361 Max Hunter
Max Hunter's picture

I finally read on KWN the idea i've been spewing for some time.  China and US are in on the suppression and it's because China is stocking up and getting gold on the cheap. The US is going along with it because they know that's the only thing stoping China from dumping US paper.  This is so simple my 9 year old could see it.   Jesus, they have people with signs on the sidewalks trying to get you to sell your gold to this store that just popped up for the sole purpose of buying your gold. They do not sell, i've checked.  Are you people kidding me? Where the hell do people think all of this gold is going?

Mon, 09/30/2013 - 11:04 | 4005465 JR
JR's picture

The world is broadening: to fail to heed the build up of power in the Asiatic nations that the multinationals helped fast forward by offshoring America's manufacturing and intellectual base to achieve it, is to ignore, as does the Congress, that China, now Communist, could again be the power it once was and that America and freedom would atrophy and die.

Louis L'Amour writes:

"Seneca had made fiery speches in the Roman forum protesting the adverse balance of trade with India, and the vast sums in gold that were being sent to purchase Indian goods. Some historians have even gone so far as to suggest it was one of the reasons for the decline and fall of the Roman Empire. Certainly it was for some years a contributing factor."

Says L'Amour: "If our civilization should be destroyed now, or should simply die, in five hundred years to a thousand years nothing would remain but a few stone carvings. All of our vaunted machine civilization would have rusted or eroded away and nothing would be left to indicate what we had been and what we had done. Gold alone lasts; silver disappears, as was discoverd in the ruins of UR of the Chaldees."

Mon, 09/30/2013 - 11:39 | 4005615 Herd Redirectio...
Herd Redirection Committee's picture

The Fed is an organized crime banking cartel.  They are tied at the hip to the big financial firms in Wall St and the City of London. 

Mon, 09/30/2013 - 09:45 | 4005251 nickels
nickels's picture

The shutdown is a stroke of genius. Non-essential govt workers are to stay home- never to return. Why were we paying for non-essential stuff in the first place?

Mon, 09/30/2013 - 11:42 | 4005631 Overfed
Overfed's picture

Unfortunately, the NSA, CIA, FBI, DEA, EPA, BATF, and all the rest of the parasitic jackboots will still be on the job.

Mon, 09/30/2013 - 11:58 | 4005660 RKDS
RKDS's picture

Because somebody somewhere (not you, apparently) understands the difference between non-essential and unnecessary?

I say we should fire the air traffic controllers and firemen.  Afterall, I am not flying and my house is not on fire.  Therefore nobody could ever find any use for those people.

Besides, this shutdown is a fraud.  Nothing bad will shut down, just the stuff that benefits the public.  Legislators will still get their unearned perks, bank bailouts won't be disrupted, the adventures will continue (even if soldiers fighting them aren't paid), etc.

Mon, 09/30/2013 - 13:31 | 4006158 RKDS
RKDS's picture

So, seriously, I want anybody who junks this to answer a question for me.  If these public employees stay home, do you really think your taxes will go down?  Or do you, like me, expect every last dime of the "savings" to be squandered on more bankster bailouts and foreign adventures?

Mon, 09/30/2013 - 14:14 | 4006345 nickels
nickels's picture

I wax sardonic--

Mon, 09/30/2013 - 09:42 | 4005222 rehypothecator
rehypothecator's picture

Well, Corzine is free, and that's the important thing.

Mon, 09/30/2013 - 09:44 | 4005235 Keyser
Keyser's picture

The only fitting description of the US government for the last 13 years is the image of a monkey fucking a football. While initially entertaining, one would hope that the monkey has more than one trick. 

Mon, 09/30/2013 - 12:44 | 4005895 Things that go bump
Things that go bump's picture

That is the monkey's most charming trick. If you're bored with that, it can always fling poop .

Mon, 09/30/2013 - 09:12 | 4005149 1100-TACTICAL-12
1100-TACTICAL-12's picture

shut it down, leave it shut down..

Mon, 09/30/2013 - 09:40 | 4005221 dontgoforit
dontgoforit's picture

At least the 30-40% we can't afford anyway.

Mon, 09/30/2013 - 10:53 | 4005433 JonNadler
JonNadler's picture

maybe the truth about gold and silver manipulation will come out now if the governmanet shuts down for a few hours

Mon, 09/30/2013 - 08:46 | 4005063 old naughty
old naughty's picture

Why are we (they) playing this silly game?

Mon, 09/30/2013 - 08:51 | 4005089 Sudden Debt
Sudden Debt's picture

why do people play angry birds?

Mon, 09/30/2013 - 09:45 | 4005244 TeamDepends
TeamDepends's picture

Insider tip:  The next big game coming down the pike is entitled Game of Drones.

Mon, 09/30/2013 - 12:05 | 4005686 krispkritter
krispkritter's picture

If it was a TV show I'd watch only if was 'Breaking Bad Banks'...

Mon, 09/30/2013 - 14:13 | 4006338 old naughty
old naughty's picture

Br...Ba

Bad chemistry.

Mon, 09/30/2013 - 10:04 | 4005300 Clycntct
Mon, 09/30/2013 - 09:03 | 4005132 NumberNone
NumberNone's picture

Against the desire of most US citizens, they tied us to them with handcuffs, strapped a bomb to our back that they control, and then started pointing the finger at us every time we decide we don't go along with them.  All of this is disgusting.  

Mon, 09/30/2013 - 09:39 | 4005216 czardas
czardas's picture

At leat they allowed you to bith and yell about it without too much woory.  

Mon, 09/30/2013 - 10:38 | 4005391 Lewshine
Lewshine's picture

Czardas,

You believe the US elections actually have anything to do with how the American people vote? If so, do you also believe the stock market would be at these levels if not for Ben Bernanke and his printing machine - Because one has everything to do with other. Critical thinking is the first thing lost in a crumbling Nation. 

Mon, 09/30/2013 - 08:41 | 4005044 Pladizow
Pladizow's picture

If you had to vote on whether or not you got a paycheck - what would the outcome be?

Mon, 09/30/2013 - 08:45 | 4005067 Sudden Debt
Sudden Debt's picture

good question...

but...

will public idiots get last months paycheck or will they only lose next months paycheck?

Mon, 09/30/2013 - 08:58 | 4005113 smlbizman
smlbizman's picture

they wont lose any pay checks......they will get their back pay.....

Mon, 09/30/2013 - 08:55 | 4005099 Whoa Dammit
Whoa Dammit's picture

Who needs a paycheck when you have insider trading and PAC money?  Why do you think they are not even bothering to show up for work until 2 o'clock today? Their paycheck is peanuts.

Mon, 09/30/2013 - 08:44 | 4005058 Jannn
Jannn's picture

The Biggest Central Bank Gold Buyers Since 2009 

http://koosjansen.blogspot.nl/2013/09/the-biggest-central-bank-gold-buye...

 

Mon, 09/30/2013 - 09:45 | 4005252 Keyser
Keyser's picture

And the US is not even on the list. Reason being, they have been a net exporting of PMs, pillaging the US reserves.

Mon, 09/30/2013 - 08:43 | 4005052 Millivanilli
Millivanilli's picture
Israel's Netanyahu to press Obama for no let-up on Iran pressure LOL Peace and diplomacy?  Can't have that.   Count on war.  It is on deck.
Mon, 09/30/2013 - 10:00 | 4005277 machineh
machineh's picture

Save the AIPAChyderms! 

Mon, 09/30/2013 - 08:43 | 4005054 J Pancreas
J Pancreas's picture

Moochelle's the one weighing it down.

Mon, 09/30/2013 - 08:49 | 4005074 CaptainObvious
CaptainObvious's picture

If there are any theoretical physicists on this board, please explain to me how it is even possible for a plane to get off the ground with Moochelle's wide load on board.  Or how she can even cram that bulk through the doorway of the plane.

Mon, 09/30/2013 - 08:55 | 4005097 Grande Tetons
Grande Tetons's picture

Operation Dumbo Drop.  

That is my non scientific guess. 

 

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