This page has been archived and commenting is disabled.

BofAML Warns Hope For The Best; Prepare For The Worst

Tyler Durden's picture




 

A plausible debt ceiling agreement is finally on the table, but BofAML doesn'tt expect a deal until next week or later.

 

Via BofAML,

Hope springs eternal

After a long period of inaction in Washington, politicians are finally coming out of their stupor. Yesterday, House Speaker John Boehner met with members of the House Republican Conference to propose a six-week extension of the debt ceiling. While the text of the legislation is not yet available as we go to print, the bill would reportedly suspend the debt ceiling until November 22 and prohibit the Treasury Department from using extraordinary measures to extend debt payments beyond that time. It also would create a process for budget negotiations between the two parties. Separately, the president is also in the process of meeting with groups from both the Senate and the House. While these meetings raise hopes of a quick deal — and caused a 2% jump in the stock market — we believe a deal is more likely next week (or later) than this week.

The devil’s in the details

As in past budget negotiations, there are usually a number of false starts before an actual deal is done. With these bills, the devil is always in the details. The president is unlikely to quickly agree to a short-term extension, in our view, and will likely instead hold out for a 6- or 12-month extension. He is also unlikely to support a bill that creates a new deadline and thereby by another potential brinkmanship moment.

A clean bill of health?

From the other side of the aisle, a relatively clean bill could violate not one, but two Republican rules:

  • The Boehner Rule — any increase in the debt ceiling must be matched by an equal cut in spending over the next 10 years.
  • The Hassert rule — the Speaker will not allow a vote on a bill unless a majority of the majority party supports it.

Comments by conservative leader Representative Steve Scalese (R-LA), suggest conservative resistance to the Boehner proposal. Thus the bill may split the Republicans and require heavy support from Democrats.

Why do now what you can put off until later?

The other challenge is that little seems to get done until the last minute in Washington these days. October 17 is a soft deadline: the Treasury will still have plenty of cash. As we note in this week’s Macro viewpoint, the real deadlines are later when cash runs out. This creates a risk of a long-delayed agreement. It also means a high risk of miscalculation where “last minute” suddenly becomes “too late” and the government defaults on a payment of some sort.

Extending the debt ceiling for a significant period of time would be an important step forward, removing the more important of the two shutdown threats. However, efforts to fund and reopen the government have been put on the back burner and could stay there until the debt ceiling is resolved.

Our motto: hope for the best; prepare for the worst.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 10/11/2013 - 08:35 | 4044396 I am more equal...
I am more equal than others's picture

Don't go limp Boehner

Fri, 10/11/2013 - 08:43 | 4044416 slotmouth
slotmouth's picture

Everytime I load a page on ZH today, I get a giant Chase takeover ad.  It looks like they really know their audience.

Fri, 10/11/2013 - 08:48 | 4044432 WonderDawg
WonderDawg's picture

Those fucking ads where the volume comes on out of the blue are really on my last fucking nerve.

Fri, 10/11/2013 - 08:55 | 4044467 earnyermoney
earnyermoney's picture

What ads?

 

http://www.ghostery.com

 

 

Fri, 10/11/2013 - 09:00 | 4044502 redpill
redpill's picture

" It alsomeans a high risk of miscalculation where “last minute” suddenly becomes “too late” and the government defaults on a payment of some sort."

 

Total FUD bullshit, the federal government brings in plenty of tax revenue, there is NO REASON they would be forced to default.  Rather they would only be forced to cut SPENDING elsewhere, which is what they need to do anyway. 

Fri, 10/11/2013 - 09:02 | 4044503 Max Hunter
Max Hunter's picture

I don't think the fraud in our system has ever been more transparent from the top level to the boobs on TV selling it.. It's comical.

Fri, 10/11/2013 - 09:03 | 4044508 negative rates
negative rates's picture

Who says there is plenty of cash? Get that widow on the set, we need dirty laundry.

Fri, 10/11/2013 - 09:18 | 4044595 superflex
superflex's picture

Adblock Plus is your friend.

Fri, 10/11/2013 - 10:32 | 4045017 prains
prains's picture

It's almost like they're practicing for a future default and running a training program now to gauge reaction

Fri, 10/11/2013 - 08:37 | 4044400 Sudden Debt
Sudden Debt's picture

great...

any increase in the debt ceiling must be matched by an equal cut in spending over the next 10 years...

SOMEBODY ELSE WILL CLEAN UP THIS MESS BUT NOT US tactics...

alias...

KICK CAN!! YES WE CAN!!!

Fri, 10/11/2013 - 08:56 | 4044459 SheepDog-One
SheepDog-One's picture

Politicians have been saying this crap for decades, since Reagan....'OK we'll pass this spending, but in 10 years and you guys better cut! I'm seriously!'....of course it never happens, why should it? 

Fri, 10/11/2013 - 08:38 | 4044402 Disenchanted
Disenchanted's picture
BofAML Hopeless...
Fri, 10/11/2013 - 08:38 | 4044407 uncle_vito
uncle_vito's picture

Market rally Thursday was totally unjustified.

Fri, 10/11/2013 - 08:50 | 4044431 GetZeeGold
GetZeeGold's picture

 

 

Things are so bad.....it's bullish. Welcome to the paradox market.

Fri, 10/11/2013 - 08:52 | 4044446 SheepDog-One
SheepDog-One's picture

We'll wake to record high markets one day, with a currency that wouldn't buy a sack of groceries if you had a briefcase full of it.

 

Fri, 10/11/2013 - 08:38 | 4044408 Grande Tetons
Grande Tetons's picture

If the market goes down after the deal is reached much like it did after the no taper back in September, this may be a sign of risk aversion gaining a stronger footing. 

Fri, 10/11/2013 - 08:39 | 4044409 thismarketisrigged
thismarketisrigged's picture
''BofAML Warns Hope For The Best; Prepare For The Worst''

 

best- every single fucking banker and hedgefund manager, and our president fucking die.

 

worst- the above does not happen.

 

unfortunately, i am prepraring for the worst in this case.

Fri, 10/11/2013 - 08:40 | 4044414 fonzannoon
fonzannoon's picture

does anyone else get all misty eyed and nostalgic when they think back to the good old days when BAC was telling us to expect a disorderly selloff on the 10yr to 3.5%

Fri, 10/11/2013 - 08:47 | 4044430 Grande Tetons
Grande Tetons's picture

PMs are getting pouded this AM.  Ouch! 

Fri, 10/11/2013 - 08:55 | 4044471 fonzannoon
fonzannoon's picture

You know for the life of me I can't figure out why 90% of the people on here are not long stocks and short (paper gold, especially the miners) and essentially let the bernak give them the profits to fund their phyz purchases.

Fri, 10/11/2013 - 09:01 | 4044494 Grande Tetons
Grande Tetons's picture

Forex to phyz for me. Same idea, though.  

 

 

Fri, 10/11/2013 - 09:03 | 4044520 fonzannoon
fonzannoon's picture

Fair enough. Good for you. 

Notice in this historical war documentary that the only way to beat the giant was to jump on it's back.

http://www.youtube.com/watch?v=EE2TZAdoaS8

Fri, 10/11/2013 - 08:46 | 4044433 Its_the_economy...
Its_the_economy_stupid's picture

BofAML is more focused on off-loading onto or buying from the uninformed than they are in informing (even if they had a clue).

Fri, 10/11/2013 - 08:50 | 4044443 jubber
jubber's picture

another blatent metals smash, as Yellen is so bullish for PM;s eh?

Fri, 10/11/2013 - 08:53 | 4044449 SheepDog-One
SheepDog-One's picture

A bit of a can-kick for a month is being mulled over....that's not a solution to anything.

Fri, 10/11/2013 - 08:54 | 4044455 thismarketisrigged
thismarketisrigged's picture

of fucking course gold is getting whacked again.

we have the biggest fucking cunt as our new fed chair person who will increase qe, and gold fucking gets clobbered.

 

seems like one of those days where gold will prob fall like 80 or so.

 

its al fucking bullshit.

 

gold and silver pounded, s&p futures and dow futures green, and if the dow and s&p had lost as many pts as it had gained yesterday, futures would fucking skyrocket today, and we would here this bullshit of how its a relief rally.

 

 

Fri, 10/11/2013 - 09:00 | 4044460 Bastiat
Bastiat's picture

 Thismarketisrigged beat me to it.

Fri, 10/11/2013 - 08:56 | 4044464 NuYawkFrankie
NuYawkFrankie's picture

Forget about Kicking the Can...

Hows about Kicking A Politician?

Fri, 10/11/2013 - 09:00 | 4044501 Falconsixone
Falconsixone's picture

Where's E. F. Hutton when you really need him? oh! Ask Chitigroup what they think about .......... (shhh)

Fri, 10/11/2013 - 09:04 | 4044521 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

FUCK YOU BOFAML!!!1!! Benjamin Disraeli said that!

"I am prepared for the worst, but hope for the best"

Fri, 10/11/2013 - 09:34 | 4044682 superflex
superflex's picture

You expect a banker to give credit where due?

They are all CUNTS.

 

Fri, 10/11/2013 - 11:40 | 4045251 NIHILIST CIPHER
NIHILIST CIPHER's picture

I have expected NOTHING BUT THE WORST since 2008      FU BOFAM

Fri, 10/11/2013 - 12:09 | 4045400 polo007
polo007's picture

http://www.marketwatch.com/story/why-america-needs-a-debt-default-2013-10-11

Why America needs a debt 'default'

Commentary: Is it time to hit the reset button?

By Anthony Mirhaydari

It's clear the fiscal fight in Washington isn't going to end anytime soon.

Sure, a short-extension to the debt ceiling is under discussion, according to reports, but that will only open the door to contentious budget talks over issues like entitlement reform and changes to the tax code. The two parties remain far apart: Republicans want to balance the budget in 10 years, while Democrats want another trillion in taxes and spending.

There's too much at stake and the choices are tough. But what if we didn't have to make it?

What if we took the easy way out that didn't require the sacrifices — such as higher taxes, lower spending, and fewer entitlement benefits — that Democrats and Republicans are playing hardball over in the first place?

What if we could avoid the nightmare that would be a debt-ceiling breech, which would force us to choose between ruining the Treasury's reputation as a risk-free investment but provide checks to seniors on Social Security, or leave grandma in the lurch but pay our creditors in Tokyo and Beijing?

The more I think about the extent of the problems facing this country, the more apparent it is that a hard reset is needed. I'm talking about a debt default, but not in the traditional sense. And the Federal Reserve would play a key role.

Do NOT follow this link or you will be banned from the site!