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Goldman: "Today Was The First Day That Concerns About The Debt Ceiling Really Started To Be Felt"
If Obama's intention in his CNBC interview was to get Wall Street to start selling, then congratulations: today he finally made some headway. However, he will have to do more before the capitulation dump we saw in the summer of 2011 pushes the House, and Boehner to finally fold (in the case of the latter, for the last time). Much More. Goldman's Sales and Trading desk explains:
- Today was the first day that concerns about the debt ceiling really started to be felt. SPX tested the uptrend from the Nov12 lows but overall it still feels like risk-reduction rather than clients putting on active bearish trades. With the shutdown ongoing maybe earnings can save the day (and month). Utilities +0.6% but everything else closes down with telecom worst hit, down 2.4%. Closing levels: SPX -1.23% to 1655.45, DOW -1.07% to 14776.53, NASDAQ -2.0% to 3694.83.
- The VIX closed up 0.93 to 20.34, just shy of the highest levels of the year.
- FX in a holding pattern today, only notable moves were CAD and MXN, both down 0.6%. USDJPY continues to trade slightly above but perilously close to its 200dma. We have tested it a few times without a clean break lower, despite a decent amount of USDJPY put interest. FOMC minutes the highlight tomorrow as we all wait to get more information about just how close a call it was not to taper.
- The Treasury curve flattened again as 2s closed 2bps weaker while 5s, 10s, and 30s rallied 0.5bps, 2bps, and 3bps respectively. Today’s 1m bill auction was closely watched, opening at 15bps, clearing the auction at 35bps (2bp tail), and finally closing at 26bps. We also had a 3y auction that cleared 0.7bps through at 0.71%. Flows overall were quiet but skewed to better selling from a variety of accounts. Tomorrow is the 10y auction.
And some additional insights from Scotiabank's Guy Haselmann
Market Comment
- Washington remains firmly divided with little sense of urgency on either side. The S&P slid slightly more than 1% today and remains higher by over 16% YTD. Treasuries and the dollar were reasonably stable. Lawmakers are typically reactionary and markets have (so far) given them little reason to panic. Tensions will rise as Treasury Secretary Lew’s Oct 17th debt ceiling deadline approaches. CNBC has a countdown clock to this date that will perpetually remind investors and allow suspense to build.
- “Risk-free” Treasury bills showed some initial signs of concern over the debt ceiling stalemate. Bills maturing over the next 30 days rose above 30 basis points today as banks refused to take them as collateral for fear of not being paid. The T-Bill rate was above LIBOR for the first time in 12 years. This technically means that corporations can borrow unsecured more cheaply than the US government over this time frame. T-Bill investors will ultimately get paid, but uncertainties over a potential delay have prompted security sales and a migration to bank deposits.
Hilsenrath – Reasonable Idea Gone Wrong?
- When the WSJ puts a Jon Hilsenrath Fed article on its front page, it is often (correctly) assumed that it was leaked. The Fed’s efforts to expand its transparency could have transcended into using Hilsenrath in order to help explain its actions and complicated internal debates. This makes sense since the market believes its debates have ultimately resulted in confusing messages and lost credibility. Today’s article attempts to explain the history and timeframes of changes in FOMC communication. The purpose of the ‘leak’ is probably to reconcile how the markets came to expect a September tapering and why the FOMC disappointed market expectations.
- If my premise is correct, I believe this well-intentioned plan has back-fired. The article appears more successful at emphasizing the FOMC’s disunity and the considerably divergent views of members. The way Hilsenrath presented the arguments for making some decisions made the Fed look unsophisticated and insecure with a muddled communication strategy. Nonetheless, Hilsenrath’s concluding sentence suggests the Fed is wonderfully successful, since the 10yr has “moved back to 2.63%”. However, while the article intended to trumpet ‘success’, in reality, the article may have done damage, as it accentuates the challenges, disparities, and risks facing the FOMC.
- FOMC concerns about the economic impact of sequestration, as well as the sensitivities to fiscal gridlock, were likely greater than commonly perceived by Wall Street. Therefore, anxieties about implementing their exit strategies were high, particularly as lawmaker squabbles were active. However, once some type of deal is reached, FOMC members will naturely look more unified as they collectively shift their focus toward implementing an exit strategy as soon as reasonably possible.
Random Thoughts
- Democracy Corps, the research and polling firm of James Carville and Stan Greenberg, who were advisers to President Clinton, has produced an interesting report that tries to explain the mindset of the Republican Party’s supporters. The report states, “While many voters question whether Obama is succeeding and getting his agenda done, Republicans think he has won. The country may think gridlock has won, but Republicans see a President who has fooled and manipulated the public, lied, and gotten his secret socialist-Marxist agenda done. Republicans and their kind of Americans are losing.”
- US prosecutors have given SAC Capital until November to resolve criminal charges or risk paying more than the $1.8 billion fine currently on the table.
“Patriotism is supporting your country all the time, and your government when it deserves it.” – Mark Twain
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In other words, the first day of the rest of your life.
Weren't we told the SS Funds are in deficit. Al Gore's Lock Box etc.
WTH is this guy saying ? http://money.msn.com/business-news/article.aspx?feed=OBR&date=20131008&i...
Am I living in the Planet of the Apes ? May be I am.
Translation = Feed the Banking-Government Workers' Union/Contractors-Military Complex EVEN MORE PRESENT & FUTURE TAX DOLLARS (i.e.'MOAR DEBT), or the 401(k)s, pension funds & other Wall Street captive accounts get nuked, just like our puppet Obama warned, bitchez.
GS are so fucking perceptive: give them all larger bonuses for the exceedingly astute above observations. perhaps when the SP is at 800 they'll say we're back at par with QE; yes i'm being facetious.
I was thinking the same thing - big fucking deal, I can also state with complete confidence that the S&P closed down 20.67 points today, on 'debt ceiling concerns'. Wow, I feel so fucking astute and wise - where's my 7 figure bonus?
if i could print you up a bonus, i certainly would Al.
OMG! The dow is below 15,000!!! The sky is falling! The world is ending! It is so painful! Please stop it now!
This is the last week to buy the fuckn dip.
FUCK YOU, BLANKFEIN!
SYRIA SYRIA SYRIA MOAR WAR! MILEY MILEY MILEY CYRUS MOAR WHORE, GOVT SHUT DOWN SHUT DOWN MOAR SHUTDOWN. DEFAULT DEFAULT DEFAULT, MOAR DEFAULT
I dunno. I feel.... manipulated.
FUCK YOU OBAMA
Real sharp Goldman, you fella's are really sharp. Any ideas what happens next ?
Fuck off, GS! Still a 'bank' there are ya? Yea go fuck yourselves bunch of crooks!
What has really piqued my interest in the debt ceiling is the simple fact that there exists a universal consensus surrounding it. Every facet of society believes it will not be breached; institutions, billionaire investors, mom-n-pop investors, the common worker.
Every single person I have asked thinks it is impossible it will be breached and to the point responses are comical.
When was the last time a universal consensus played out to be true?
Epic complacency.
That's the point, you boomer sheeple are just starting the panic process...
LOL boomer sheeple, being one, I got a little chortle out of that one. Ya, it's all our fault...
It very well could be... the thing is the government still takes in enough tax revenues to pay for a majority of services. So not raising the debt ceiling doesnt guarantee default at all, not this year anyway. A default would only happen with the mis-management of funds.
POINT IS - this thing can go on a lot longer than people think without a true default.
Whoa there big bear...we miss one interest payment - that is called default. We go ahead and pay that int pmt and we dont pay some other bill, say WIC or EBT or SS, then we default the people.
The first one is BIG, HUGE, and starts a cascade, the second is big in that it would cause social unrest.
Still feel like it's no big deal?
Whoa yourself, Abi. We agree that any break with the contract terms of a bond payment is default. Late, less than promised, or not at all. They are all points on the default spectrum.
However, not making a SS payment or not sending General Dynamics some cash for a pile a fighter jets to be delivered in the future or deciding that the federal workforce must stay at shutdown levels or anything else that isn't backed by a contract which explicitly puts the full faith and credit on the line (which really means it places a promise against future tax collections), isn't a default. Not by any stretch of semantics.
Now, I’d hate to see a supply or service vendor have to wait on a payment for something already delivered to Uncle Sam beyond the terms agreed upon, but that is just an A/R issue. And I’d like for us all to be adult enough to come clean to the people who get benefits that simply can’t be sustained that they are going to be cut and have us do it in a more orderly and dependable manner, but again, this just isn’t the same as a default.
Oh I agree with you there, not a default in the sense of the word, but like I said a default to the American people...thus the civil unrest, deserved or not, all I was saying.
<<< He wants the default
<<< He wants the default
<------ I want the default
Because Obama
Good for them. Ignore the farce playing out solely for political ends:
"Call them the shut-down rebels: Individuals, businesses, cities and state agencies that are defying federal orders to shut down and go home. They are taking a page from the playbook of veterans who last week ignored "closed" signs at the WWII Memorial and--figuratively speaking—jumped the barricades."
http://news.yahoo.com/shutdown-rebels-defying-federal-orders-close-155647228.html
front loaded in your face fascism is not as
easy as it sounds. there is the torture, the
threat of torture, the intimidation, the scatological
disgraceful slurring, the trivializing, marginalizing
and ignoring; but then there is the misappropriation,
re prioritization and finally boring.
then comes concern that the normal and established
methods of dehumanization, theft and murder are
becoming transparent.
you see i talk like this because i do not understand
modern economics and do not know what it is that
is good for me. so they say
Sitting with the thinker
Trying to work it out
It's a traffic jam of the brain
Makes you want to scream and shout
Presidential party
No one wants to dance
Looking for a new star
To put you in a trance
Let's go all the way
Let's go all the way
Yeah yeah yeah yeah yeah
Let's go all the way
Ah man, that picture just makes me think about Becky Quick sucking my wrinkled old cock.
Fuck me, Sly Fox.
Fucking James Carville. That huckster needs to be tied up and thrown into a swamp in Louisiana so the alligators can eat him.
Re Hilsenrath and the FED's success - Yes, well done FED, all you have to do is keep buying ALL THE FUCKING DEBT, ad-infinitum, expand that balance sheet FOREVER, and rates will reming under control. You need never realize a loss, and rates never need to get out of control, as long as you just keep buying - FOREVER. Ha ha, way to go Ben, you must be so fucking proud of yourself.
DO YOU SUPPOSE that an intended, large correction is commencing? Look here:
http://www.showrealhist.com/recDJIAtoRD.html
I think most Americans (whatever their race, religion, gender, income, or party affiliation) are sick and damned tired of the 24/7/365 manufactured drama coming out of D.C. There truly is no honor among thieves............
Golds holding steady, but its a 'slam dunk' sell according to Goldman because in fantasy land the economy recovers and the fed tapers. Also, unicorns will make gold go to $1000. It's also possible leprechauns will steal all the worlds gold and hide it.
and the bankers along with Warren Buffet will steal make a fortune from this also
The shut down doesn't bother me. I work for a living.
Don't be a mewling quim, son!!!! If the ceiling is not lifted, all hell will break loose. I for one don't want to see it lifted, instead we enact huge across the board cuts. Either way it will be painful.
Hell, pain is coming for all of us, whether you work or not.
So if the government doesn't keep spending and digging us deeper in debt, then Wall Street and the economy in general will suffer, do I have that right? Isn't that what Goldman and the MSM is telling us?
No really, what does that say for us as a nation, if our economy is conjoined to WS and absolutely dependent upon government spending and debt?
I think it says the parasites are winning and the productive workers are losing.
I just want someone to press the big reset button and let things play out.
My life may change radically, but I'm struggling with the insanity of the present system.
Fuck the bankster criminals.
God, I've been saying that for a long time, every day is a struggle, knowing what I know. Tick Tock, just gets louder every day.
The Tell-Tale Heart (of Bernanke)
Uhmmmmm somebody remind me what is shut down again please. Oh yeah those things that impact is. Don't worry Sqiddy this will give the Bernank plenty of cover to print.
Worst article ever....this wouldn't even fool a small child.
Fuk U, GS!
World War against Goldman Sachs.
Where are the generals?
I am not concerned.
Bullets solve everything.
So according to these people we clearly need more debt. Right?
Clearly.
http://politicalticker.blogs.cnn.com/2013/10/08/senior-house-gop-source-short-term-debt-ceiling-may-be-way-out/
Washington (CNN) – The door the White House appears to have opened to a short-term debt ceiling increase may be a temporary way out of the standoff, a senior House Republican told CNN.
The Republicans may be willing to go for a short-term debt ceiling increase as long as the president agrees to use that time to negotiate, the source told CNN Chief Congressional Correspondent Dana Bash.
How long is short term?
This GOP source said maybe four to six weeks.
Still, it’s unclear whether Republicans could even get that short-term bill through the House without even a tiny concession on spending cuts from Democrats.
When President Barack Obama was asked during Tuesday's news conference whether he would be open to a short-term debt ceiling increase, he responded “absolutely.”
“I mean, what I've said is that I will talk about anything. What will happen is, we won't agree on everything. I mean, the truth is, is that the parties are pretty divided on a whole bunch of big issues right now," Obama said. "Everybody understands that."
The House GOP source said that the president’s call to Republican House Speaker John Boehner on Tuesday was a good first step – and they have to keep talking.
CNN’s Chief Political Analyst Gloria Borger reported on Saturday that a senior House Republican said one idea being considered is a six-week extension of the continuing resolution to fund the government, and the debt ceiling, to allow for time for both sides to negotiate.
Only 17% of the government is shut down (but most will later get back pay). DC is full of self importance. In Texas we notice no change that is negative. The general feeling here is that DC and government IS the problem not the solution. If congress was turned into a halfway house for actors who overact it would be an improvement. To improve our government even more, the whitehouse should be turned into a catshelter for stray cats, and the senate office buildings should become a beekeeper breeding ranch. Then all lobbyists should be sentenced to caring for the cats and bees. Yea, I need to go to sleep, but I still like the image. I miss the old america where we were not the slaves of criminals, and our laws, ideals, and vision were real.