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Goldman: "2013 Is Different: For The Second Time The Expectation Of A Last Minute Deal Was Incorrect"
The main reason for last week's massive market surge on nothing but hope, if no actual deal, is due to the market's now habituated response that no matter what happens in Congress, there will always be a last minute deal. After all this was the pattern with the 2011 government shutdown and debt ceiling deal, and the 2012 fiscal cliff solution: surely enough points to make a pattern. However, as Goldman's Alec Phillips points out, 2013 may be different: "First, Congress allowed sequestration to take effect on March 1, despite the expectation among many observers earlier in the year that the cuts would be pushed off in light of the predicted the negative practical and economic effects that might result. Then, two weeks ago, Congress allowed the government to shut down. For the second time this year, the expectation of a last-minute deal turned out to be incorrect."
More from Goldman:
Since 2011, split control of Congress has led to greater policy uncertainty, but fiscal deadlines always seemed to end with a last-minute resolution. For example, in early 2011, amid a dispute over spending levels and after several short-term extensions of spending authority, Congress nearly allowed spending authority to lapse. This would have resulted in a government shutdown, but it was avoided at the last minute (agreement was reached at 11:15 pm, just short of the midnight deadline). Over the following two years, Congress avoided several possible shutdowns by passing another eight “continuing resolutions” to extend spending authority. The “fiscal cliff” was also averted following a last-minute deal, as was the 2011 debt ceiling debate.
This year has been different. First, Congress allowed sequestration to take effect on March 1, despite the expectation among many observers earlier in the year that the cuts would be pushed off in light of the predicted the negative practical and economic effects that might result. Then, two weeks ago, Congress allowed the government to shut down. For the second time this year, the expectation of a last-minute deal turned out to be incorrect.
After reaching agreement ahead of (or slightly after) so many deadlines over the last couple of years, the failure to address sequestration and the government shutdown could be interpreted to suggest that conventional wisdom that Congress always reaches a last minute agreement is now broken. This interpretation is likely behind the market reaction ahead of the debt limit deadline.
While there is an element of truth to this—some lawmakers have begun to shrug off the warnings of negative consequences from missing fiscal deadlines—we believe the shutdown occurred and the sequester took effect possibly because Republican leaders viewed it as necessary in order to ensure an increase in the debt limit. This is why we have held the view that while the shutdown was a negative development in its own right, it did not imply greater risk to the debt ceiling hike, and might have even reduced the risk.
So what does this mean for the path ahead? We interpret the events over the last year to mean that while Congress has become increasingly willing to allow more incrementally negative policy outcomes like the shutdown and the sequester, the debt limit still represents a line that Congress is not willing to cross.
Maybe. Then again, if the increasingly prevalent thought that the US can shoulder a prioritization of payments without actually defaulting by satisying interest payments if not non-critical payments that are not supported by incoming tax revenues, the debt ceiling deadline could mean the third time is the hardly the charm when it comes to crossing critical D-Day headlines. Very much to what would be the market's complete shock and horror.
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ZH's "Sathington Willoughby" had it right last thread:
"Dog barks at pony. Pony kicks at dog. Dog wears tutu. Pony runs around the ring. The crowd loves it."
^-- High level poetry there.
Bearing comment: We're doomed, at least for now.
Wallstreet could never make all that money if the government passed a budget in july. Fuctardz
2013 is different. We have not had one since, well, the last 2013 (Atlantis Time)
Impeach Obama. That will make most things in the world better. My dog and glodfish will be happier. The greatest enemy of the United States of America will have been exhiled. My Toyota will get better gas mileage and so on.
Impeach THE ENTIRE GOVERNMENT, BANKING SECTOR/WALL STREET AND MILITARY INDUSTRIAL COMPLEX. That will make most things in the world better. My dog and glodfish will be happier. The greatest enemy of the United States of America will have been exhiled. My Toyota will get better gas mileage and so on.
I fixed that for you.
Well, if there's one thing we need, it's happier glodfishes.
Glod, bitchez!
The sad thing is, they use our tax dollars to pay the goons who keep us in line. It follows, that the only way to really hurt them, is to go galt.
A government shutdown is one thing, but until we shut the doors on the Federal Reserve the life after “the deal” will still be Leviathan government and debt slavery for Americans.
Dr. Ron Paul said this week that “Many will make a big deal about the nomination of Janet Yellen to be the next Fed Chair, but the reality is, as long as we tolerate the Federal Reserve System and its flawed monetary policy, there will be no policy change at the Federal Reserve.
“Notably absent from the discussion surrounding the debt ceiling and the government shutdown is the fact that the federal government would not be able to borrow the money it needs to finance its wars, bailouts, and entitlement programs if the Federal Reserve did not continue to buy government debt,” he continued.
“Until the issue of the Federal Reserve is addressed, I am not optimistic we will see any true spending reform in Washington. Thankfully, the American people are waking up to what the Federal Reserve has been doing to our money and our economy,” he said.
Says The New American: “A poll conducted last year reveals that Paul’s take on the opinion of Americans regarding the Federal Reserve is right.”
According to economist and former Assistant Secretary of the Treasury Dr. Paul Craig Roberts, “The Federal Reserve also has the power to prevent a government shutdown. If banks are too big to fail, so is the federal government. If the Federal Reserve on its own authority can issue more than $16 trillion in loans to US and European banks in order to prevent their failure, the Federal Reserve can issue a loan to the US government.”
I suspect we will need to pay attention to Dr. Roberts, it would be the last card played in an Executive coup on America.
Dup.
I suspect that if the markets don't react to what Congress is doing in such a way that their gang's day trading off of this crisis is profitable, they will do something drastic. So, all Friday Obama was saying no. But stocks rallied. So now they have to come out and say "NO DEAL". If the markets continue to rally, they will go full retard and default. Because that is all this is really about--Politicans getting paid to set up trades.
When a building is on fire. Walking from the 2nd floor up to the 20th floor to jump out window is going to hurt alot more. Point being, That extra 500 points is going to hurt more.
this is clearly bullish, market buy order as soon as futures open sunday of course
The last minute is still minutes away.
Maybe we should look at this like a guy with a $2,000 credit card balance, a $20,000 auto loan and $200,000 mortgage. He can't pay all three because he doesn't have the income. If you hold the car loan you'd rather him not pay that. If you hold the mortgage you'd rather him not pay the car loan. So some triage is going to have to be applied to this man to get his income in line with his debt obligations. I think telling the credit card company to go pound sand makes sense both for the debtor and the creditor.
This is 2013.
12,000 credit card. $40,000 auto loan. $400,000 mortgage.
And the creditor is the same entity for all three ...
Coup d'etat by another name. Evolution will not be clawed out of old dead tools without individuals living it up and down.
That means gold is slam dunk buy, right?
We already bought it!
It's all a part of the grand plan. All those missed deadlines this have just crushed the markets, right?
(In other words) SO WHAT???
sunny