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Raging Boehner Punctures Rally

It was all going so well... restating the same old news that Boehner would not end the world was working for a few more points every time and managed to get the S&P up to "shutdown" levels to run the stops. But then, reality hit...


And sure enough stocks start to tumble...

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RANsquawk - Weekly Wrap - 4th October 2013

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Relentless Boehner: "This Isn't Some Damn Game" - Live Webcast



Riddle us that...

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Berlusconi Expelled, Senate Panel Decides

The long-delayed vote has finally come:

  • Italy Senate Panel Recommends Berlusconi Expulsion
  • Italy Senate panel head Stefano speaks in Rome.
  • Panel decision follows Berlusconi’s definitive conviction for tax fraud in August; the former premier has always denied any wrongdoing

So unless Sylvio has some other card up his sleeve, it may be a final goodbye for Italy's legendary ex-leader.

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Congress At Work: Reid On Boehner: "He's A Coward", Boehner Responds: "Bullshit"

If one wants to see what it looks like when the Federal Reserve has enabled the US government to become completely irrelevant in a world in which fiscal policy is completely meaningless and all that matters is how high the S&P500 is on any given day courtesy of trillions in monetary policy injections stimulating "confidence" and the wealth effect, then look no further than this article by Politico recapping the bad blood in Congress among the four feuding leaders.

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What Radioshack's 5-Second 10% Spike Looked Like To The Machines

News yesterday that Radioshack was planning to seek new debt financing in order to give suppliers more confidence - which in itself is kind of ironic that suppliers would find an even-more-levered company a better credit risk - sent the stock spiking higher by 10% in mere seconds as the machines took the headline and ran with it. Sanity was restored moments later as the stock hit the exchange limits and was instantly reverted back to unchanged. While the firm faces its own fireworks over employees punching customers "for being sarcastic," the stunning charts below show the real fireworks that the machines started...

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A Debt Ceiling Fight Stretching Into November? Bond Traders Increasingly Say Yes

Until yesterday, all the action in T-Bills - that was creating anxiety in the credit markets - was focused on the end-of-October bills. But now, despite the Boehner restatement of his desire not to end-the-world yesterday that realistically said nothing new, the mid-November Bills are starting to blow higher in yield. It seems confidence in a short-term solution to the shutdown/CR/Debt-Ceiling debacle is not expected. The 11/14/13 bill is up 8.5bps to 13.5bps this morning...

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Someone Is Getting Nervous-est

Another day, another shut government and 1-month T-Bills have surged another 6bps to 18.5bps. Those who read our suggestion from Sept 26 to hedge the political stupidity and debt ceiling debate and put on the 1M1Y flattener have seen the fastest plunge and inversion (to negative!) in the curve since early 2009. Despite the relative calm in repo markets, which is likely due to expectations that any technical default will be for a minim al length, the short-term bills most likely to be affected (the 10/31/13 T-Bills) are seeing the largest daily deterioration yet as traders exit and price in the possibility of missed payment. 1Y USA CDS has spiked by a massive 26bps to 65bps, higher than during the Lehman crisis and second only to Summer 2011.

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Less Than 1% Of Exchange Visitors Are Signing Up For Obamacare

Yesterday we noted the little-white-lie that California had told by exaggerating the traffic to the Obamacare exchange by a factor 8. Well, it turns out that there is another somewhat exaggerated "fact" that appears to have permeated the mainstream media - that significant numbers of Americans have signed up for healthcare already. The absolutely dismal fact is, as The Daily Mail reports, from states such as California, Connecticut, and Vermont, less than 1% of exchange visitors are signing up for Obamacare.

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Gold Slammed Down... Er, Up Again: Another BLS "Leak"?

UPDATE: Sure enough, just as we joked, the entire slide has been recovered and now gold is surging. There is, of course, no news in what is apparently just your garden variety HFT-sponsored stop hunt.

Just as we predicted over an hour ago, when we said that "just like on day when Europe is closed we still get a ramp into the European close, expect at least several vacuum tube algos to jump the gun at 8:29:59:999 and try to generate some upward momentum ignition in stocks and downward momentum in gold" it seems the algos who are the only ones trading in the liquidity-free hour decided that the non-existent non-farm payrolls data that otherwise would have hit in 15 minutes should have been better-than-expected and produced a Taper-On reaction from the Fed. Just as we see oh-so-many times in the pre-London-fixing period, precious metals are being slammed lower out of nowhere on no news. The machines, it would appear, caught the signal and decided US equities deserved a modest haircut on that un-news also... of course, as usual with the payrolls data, we would expect this kneejerk reaction to be rapidly reverted.

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America's Budget Problem In One Chart

In a country in which the aging population wants their (10,000 kcal) cake, and the diabetes treatment for free too, the chart below is what happens.

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Frontrunning: October 4

  • Troops Forage for Food While Golfers Play On in Shutdown (BBG)
  • Police suspect dental hygienist Miriam Carey was behind the wheel of Capitol chase (WaPo)
  • Italian Senate committee starts Berlusconi expulsion process (Reuters)
  • Swiss Regulator Probing Banks Over Foreign-Exchange Manipulation (WSJ)
  • GOP Begins Search for Broad Deal on Budget (WSJ)
  • No Jobs Report Means Economists Chew on Football Instead of Data (BBG)
  • U.S. default seems unthinkable but investors have options (Reuters)
  • Citigroup fined $30 million after analyst sent report to SAC, others (Reuters)
  • FBI Snags Silk Road Boss With Own Methods (BBG)
  • Recession Warnings Found in Asset Price Falls (BBG)
  • Bank of Japan warns of severe global impact from U.S. fiscal standoff (Reuters)
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No Farm Payrolls

With the government shutdown stretching into an improbable 4th day (and with every additional day added on, the likelihood that the impasse continues even longer and hit the debt ceiling X-Date of October 17 becomes greater), today's monthly Non-Farm Payroll data has quickly become No-Farm Payroll. However, just like on day when Europe is closed we still get a ramp into the European close, expect at least several vacuum tube algos to jump the gun at 8:29:59:999 and try to generate some upward momentum ignition in stocks and downward momentum in gold. In addition to no economic data released in the US, President Obama announced last night he has cancelled his trip to Bali, Indonesia, to attend the APEC conference and instead to focus on budget negotiations back at home - which is ironic because his latest story is that he will not negotiate, so why not just not negotiate from Asia? Ah, the optics of shutdown.

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US Banks Stuffing ATMs With 20-30% More Cash In Case Of Panicked Withdrawals

Even as the fearmongering over the debt ceiling hits proportions not seen since 2011 (when however it was the 20% drop in the market that catalyzed a resolution in the final minutes - a scenario likely to be repeated again), some banks are taking things more seriously, and being well-aware that when it comes to banks, any initial panic merely perpetuates more panic, have taken some radical steps. The FT reports that "two of the country’s 10 biggest banks said they were putting into place a “playbook” used in August 2011 when the government last came close to breaching the debt ceiling. One senior executive said his bank was delivering 20-30 per cent more cash than usual in case panicked customers tried to withdraw funds en masse. Banks are also holding daily emergency meetings to discuss other steps, including possible free overdrafts for customers reliant on social security payments from the government.

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Jim Rogers Warns US Stock Investors "Be Careful... You're In A Fool's Paradise"

"We may well have had a big, big rally in the U.S. stock market, but it's not based on reality.

I would encourage investors to know you're in a fool's paradise, be careful, and when people start singing praises, say, 'I've been to this party before, and I know know it's time to leave.'"

-Jim Rogers

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