It may "not be some damn game", but this sure is some damn summary of all the latest news and developments. Via Bloomberg:
- House Democrats will attempt to use discharge petition to force House to vote on clean stopgap spending bill; 17 House Republicans would need to back the measure and 20 House Republicans have said they’d vote for a clean bill
- House in session tomorrow 10am
- White House supports House bill to retroactively pay govt staff, says Obama would veto House piecemeal spending bills
- House Speaker John Boehner says he won’t offer a clean debt limit bill, says shutdown "isn’t some damn game"
- Tea Party-backed Rep. Dennis Ross, R-Fla., says he’s in favor of spending deal that doesn’t include changes to Obamacare
This chart from Citi's Matt King pretty much sums it up.
The dump into last night's close marked the lows of the last 24 hours as US equities decided that worrying about government shutdowns, near-record negative earnings pre-announcements, disappointing job growth, debt-ceiling dynamics that are increasingly feared in money markets, and a reversal in the key "soft" survey data was not enough to stop them BTFATH (thanks to confused banter from several Fed heads). Sell Gold, Sell Bonds, Buy Stocks - sure why not!
Secular bull markets are great parties. Investors arrive from secular bears really wanting to take the edge off. As the bull proceeds, above-average returns become intoxicating. By the time it is over, the past decade or two has delivered bountiful returns. In contrast, secular bears seem like hangovers. They are awakenings that strip away the intoxication, leaving a sobering need for an understanding of what has happened. If history is a guide, the inflation rate will at some point trend away from the present price stability. The result will be a significant declining trend in P/E. If this occurs over a few years, the market losses will be dramatic. These processes take many years. Be careful not to let hope for the next secular bull mask the reality of the current secular bear.
Woodrow Wilson signed the Income Tax into law one hundred years ago today. As direct taxation of Americans was prohibited by the Constitution, a constitutional amendment was necessary before what would become the Revenue Act of 1913 could be legally imposed. The income tax, and the enabling amendment, were sold to the voters as necessary for a tax on rich people that would mean lower taxes and cheaper goods (due to lowered tariffs) for everyone else. Only one percent of the population was subject to the tax then, and the tax rate was one percent. The voters need not worry, they were told, because regular people would never ever pay the income tax.
The most likely outcome of the current fiscal dispute, in Goldman's opinion, is an agreement that combines an increase in the debt limit and a "continuing resolution" that reopens the federal government. Unlike the November T-Bill market traders, Goldman expects this to pass; but no earlier than the end of next week (i.e., October 11-12) and more likely sometime around the Treasury's projected deadline of October 17. Other outcomes are possible, but Goldman believes they have lower probabilities.
Be it BBQ judging, investing, picking out an outfit, or even choosing whether or not you’re going to show up for work tomorrow – ConvergEx's Nick Colas notes that there’s a decision making process occurring. Quite simply, decision making is the cognitive process resulting in the selection of a final choice among several alternative scenarios. Final choices can be opinions (as in “This brisket is an 8”) or actions (such as “I will invest in tech stocks”), and decisions are both conscious and unconscious. For investors, financial decisions and how we tend to arrive at them are of particular importance. The following is a cautionary tale of the 'Top 10' common biases that creep into the decision making process. Recognizing and eliminating these biases from your financial choices will make you a sharper and smarter investor... or BBQ judge... or whatever it is that you do.
Trading Halt - Extraordinary Event Halt
"Trading is halted because FINRA has determined that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security or the security underlying an OTC ADR or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process."
The EUR is dumping as EURUSD cracks back to unchanged relative the "shutdown" level from 09/30/13 midnight. Treasury yields are above those levels as are stocks with gold below as it appears (for now) that hope of a weekend deal in DC is priced into markets. Of course, the USD strength could actually be a safe-haven repatriation on fears this goes on longer but when the algos are in charge a rise in AUDJPY is all that is needed to levitate stocks...
Billionaires and political lackeys alike have been falling all over themselves in the rush to praise the Federal Reserve's unprecedented monetary intervention since 2008. That billionaires and political hacks, apparatchiks and toadies cannot laud the Fed's Cargo Cult enough is no surprise: the billionaires and the government that feeds them both gained handsomely from the Fed's policies. As the Fed-induced asset bubbles in stocks, bonds and real estate follow the inevitable Supernova track to implosion, that we've reached Peak Federal Reserve will be obvious - in hindsight.
Berlusconi's bye-bye (and hope from Draghi) seems to have trumped all else as European macro data continues to slide but stocks and sovereign bonds surge higher amid the US turbulence. EUR jumped 0.65% on the week as it seems anxiety sent hot money into the highest beta muppetry in Europe. Greek stocks +3.6% on the week, Italian stocks +3.7%, Spain +2%... Germany -0.6%. Bunds bid - outperforming Treasuries by 4bps on the week but the "safe havens" of Portugal (-50bps - the 3rd best week of the year), Spain (-21bps), and Italy (-20bps) saw heavy bids. Amid all this exuberance, Europe's VIX rose 16% to 19.6%.