Verizon

In what can only be characterized as a stunning moment of transparency for the Obama administration, now 5 years into its reign of "unprecedented transparency" not to mention hope and change, US Health Secretary actually did the unthinkable: she took responsibility.  "Hold me accountable for the debacle," Sebelius said in response to accusations at a congressional hearing today that her deputies failed to do their jobs. "I’m responsible."

The first and last time a critical data center for Obamacare crashed this past Sunday night, leading to healthcare.gov becoming completely inaccessible and thus halting enrollment (assuming there had been any in the first place but of course allowing the government to blame any lack thereof on Verizon), we said "whether or not Verizon fixes the glitch any time soon, or merely lets it linger, one thing is becoming obvious: the Obamacare delay, which was hard fought by the Teaparty, and which was so opposed by the administration leading to the grotesque 16 day government shutdown, has all but become a reality with every passing day. Only instead of someone actually taking responsibility, said delay will be scapegoated on Verizon's data centers, faulty fiber-optic and copper cables, Cisco switches, Syrian hackers, millions of lines of faulty (Fortran?) code, inept contractors, end users who never read the Help.doc file, and everyone and everything else. Just never the government itself." Once again, we were proven correct when overnight the Connecticut state healthcare exchange, "Access Health CT", announced that the Obamacare data hub was "experiencing an outage" on Tuesday evening. The culprit - Verizon once again. Which answered our question: not Syrian hackers or Cisco but, conveniently, Verizon Terremark.

If Churchill were alive today, he would probably characterize the rollout of Obamacare as a humiliation, wrapped in an embarrassment, inside a mockery-punching bag injury. And overnight, in addition to all the other well-known gremlins that have plagued America's socialized healthcare from Day 1, insult was added injury, following a Reuters report that a "data center critical for allowing uninsured Americans to buy health coverage under President Barack Obama's healthcare law went down on Sunday, halting online enrollment for all 50 states." In other words, on top of and in addition to all the other bad coding and website processing issues that have been exposed and promptly scapegoated on other (you see Obama knew all about the successes, but nothing about the failures of Obamacare), now the internet itself is starting to glitch up. Which is hardly surprising considering Al Gore's involvement in the latter.

This week marked what we suspect will become an important inflection point when the world looks back at this debacle of a bubble. The Fed, having already warned in January of 'froth' in credit markets (and ths the fuel for 'hope' in stocks) proposed tougher underwriting standards for leveraged loans. Credit markets have underperformed since; but as Diapason Commodities' Sean Corrigan notes, the baleful impact of the central banks is still everywhere to be seen in the credit markets. From junk issuance to the rapid regrowth of the CDO business to the 'record' high multiples now being exchanged for LBOs; Central Banker's monomaniacal fixation on zero interest rates and artificial bond pricing is setting us up for the next, great disaster of misallocated capital and malinvested resources.

Update: As of 6:30 pm Eastern, the NSA's website has been down for 5 hours.

Following our earlier comments on the vulnerabilities of the Obamacare websites, the fact that the United States National Security Agency suddenly went offline Friday is still surprising. As RT reports, NSA.gov has been unavailable globally as of late Friday afternoon, and Twitter accounts belonging to people loosely affiliated with the Anonymous hacktivism movement have suggested they are responsible. It is perhaps not entirely coincidental that there is a major “Stop Watching Us” rally scheduled for Saturday in Washington, DC. We wonder if the 'hackers' had a German or French accent...?

When Jeremy Stein warned in February of "froth" in the credit markets, it was much discussed but little action'ed. However, today we start to see some actions:

• *FED SAID TO ISSUE WARNING ON LAX LEVERAGED LOAN UNDERWRITING

With cov-lite issuance at all-time record highs (as we explained here most recently and Moody's tried to ignore), Stein's bubble is even bigger and whether or not the Fed 'tapers' it is clear now by this signal that their concerns over bubbles are growing day by day.

• Republican Civil War Erupts: Business Groups v. Tea Party (BBG)
• Budget fight leaves Boehner 'damaged' but still standing (Reuters)
• Madoff Was Like a God, Wizard of Oz, Lawyers Tell Jury (BBG) - just like Bernanke
• Republicans press U.S. officials over Obamacare snags (Reuters)
• Brilliant: Fed Unlikely to Trim Bond Buying in October (Hilsenrath)
• More brilliant: Fed could taper as early as December (FT)
• Russia Roofing Billionaires Seen Among Country’s Youngest (BBG)
• Ford's Mulally won't dismiss Boeing, Microsoft speculation (Reuters)
• China reverses first-half slowdown (FT)
• NY Fed’s Fired Goldman Examiner Makes Weird Case (BBG)

If there is anything the market has shown in the past 16 days of government shutdown, which is set to reopen this morning in grandiose fashion following last night's 10 pm'th hour vote in the House, is that it no longer needs Washington not only to function but to ramp higher. All it needs is the Fed, which in turn needs an unlimited debt issuance capacity by the US Treasury which it can monetize indefinitely, which is why the debt ceiling was always the far more pressing issue. In other words, the good news is that the can has been kicked, and now the government workers (who will need about a week to get up to speed), can resume releasing various government data showing just how much 5 years of now-open ended QE have impaired the US economy, and why as a result, even more years of unlimited QE are in stock (because in a Keynesian world, what caused the problem is obviously what will fix it). The bad news: the whole charade will be repeated in three months. More importantly, with futures no longer having the hopium bogey on the horizon, namely the always last minute debt deal, they have finally sold off on the back of a weaker USD. It is unclear if the reason for this has more to do with climbing the wall of shorters which is now gone at least until February when the soap opera returns, or what for now, has been an absolutely abysmal Q3 earnings season. Luckily, in a centrally-planned world, plunging stocks is bullish for stocks, as it means even more Fed intervention, and so on ad inf.

• Spot the pattern: Senate Leaders Nearing a Deal (Politico), Senators say debt, shutdown deal is near (USA Today), Senate Leaders in Striking Distance of a Deal (WSJ), U.S. senators hint at possible fiscal deal on Tuesday (Reuters), Senate Debt-Limit Deal Emerging (BBG)
• U.S. debt ceiling crisis would start quiet, go downhill fast (Reuters)
• Uneasy Investors Sell Billions in Treasurys (WSJ)
• BOE’s Cunliffe Says U.K. Is Not in Grip of Housing-Market Bubble (BBG)
• Letta Mixes Tax Cut With Rigor in Post-Berlusconi Italian Budget (BBG)
• Japan Seeks to Export More High-End Food  (WSJ)
• Burberry names Bailey CEO as Ahrendts quits for Apple (Reuters)
• China’s Biggest Reserves Jump Since 2011 Shows Inflow (BBG)

• The ice breaks; fiscal talks set (The Hill); Ryan steps up to shape a deal (The Hill), as predicted here yesterday
• Republicans consider short-term U.S. debt ceiling increase (Reuters)
• Shutdown Standoff Shows Signs of a Thaw (WSJ)
• JPMorgan Clients in Cash as Schwab’s Options Hedge Default (BBG)
• Mitch McConnell, Senate GOP search for way out (Politico)
• Meredith Whitney Winds Down Brokerage Unit After Setting Up Fund (BBG)
• Washington Budget Chaos Keeps Fed Rates Low for Longer (BBG)
• Chinese Premier Outlines US Debt Concerns (FT)
• Saudis brace for 'nightmare' of U.S.-Iran rapprochement (Reuters)
• Obama Urges Action on Yellen’s Fed Nomination (Reuters)
• Libyan Prime Minister Ali Zidan Freed After Kidnap (WSJ)

For all expectations of a big jump in US futures overnight on the largely priced in Janet Yellen nomination announcement which is due at 3 pm today, the move so far has been very much contained, as expected, with a modest 90 minute halflife, as the markets' prevailing concern continues to be whether the debt ceiling negotiation will be concluded by the October 17 deadline or if it would stretch further forcing the government to prioritize payments. There is however some hope with Bloomberg reporting that some possible paths out of the debt impasse are starting to emerge with less than a week before U.S. borrowing authority lapses after Obama said he could accept a short-term debt-limit increase without policy conditions that set the terms for future talks. Whether this materializes or just leads to more empty posturing and televized press conferences is unclear, although as Politico reports, the stakes for republicans are getting increasingly nebulous with some saying they are "losing" the fight, while the core GDP constituency is actually liking the government shutdown.

This morning's media blitz by Carl iCahn - demanding that AAPL's Tim Cook, borrow money cheap, lever-up, and gift it all back to shareholders through buybacks - reminded us of our previous post on the record high levels of leverage in US corporations. To a point, firms can add debt as earnings and equity value increase - leaving leverage and credit risk somewhat constant. However, the last few years, in spite of Maria Bartiromo's constant drivel of cash on the balance sheets, companies have increased debt faster than EBITDA, leverage is at record levels, and credit markets appear to have peaked (as they did in 2007).

• The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
• Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
• Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
• JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
• Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
• Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
• Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
• Hezbollah gambles all in Syria (Reuters)
• Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
• Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)

The best summary of what has (not) been going on in the downward drifting equity markets comes from DB's Jim Reid, quoting: "Markets are in non-panicky limbo at the moment ahead of the upcoming US budget debate. US equities fell for the 5th day in row (S&P 500 -0.27%) and although this is the worst run since the Christmas/New Year’s Eve period of 2012 (due to the fiscal cliff debacle), the cumulative fall is only -1.9% over this decline. Meanwhile Treasuries hit a 7-week low in yield as they recorded their 12th decline in the last 14 days." As has been the case over the past week, stocks in Asia have generally traded lower with the exception of the Nikkei225 which day after day continues to do its insane penny stock thing, first dropping -1.5% only to close up 1.2% on absolutely no news, but some chatter the Abe administration would raise the sales tax on October 1, only to offset the fiscal benefit by lowering corporate tax.  How this has any net impact is beyond us. Proceeding to Europe, stocks failed to sustain the initial higher open and moved into negative territory, with Italian asset classes underperforming, as market participants digested reports citing Italian MP Gasparri saying that PdL lawmakers are ready to quit if Berlusconi is ousted. This in turn saw a number of Italian banking stocks come under intense selling pressure, with the Italian/German yield spread widening in spite of supportive reinvestment flows that are due this week.

It has been a quiet start to Quadruple Witching Friday (expiration of stock index futures, stock index options, stock options and single stock futures) but expect that to change, as erratic price action is a recurring hallmark of Quad Witches, especially with persistent low volume and markets that tend to shut down for no reason. So far stocks have traded steady in Europe this morning, credit spreads widened and Bunds traded in positive territory as market participants positioned for the much-anticipated German elections which are to be held on Sunday, with exit polls to be made available after the close of polling stations at 6pm local time. Ahead of that, and as reported here previously, Germany’s AfD Eurosceptic party could win enough support in the general election on Sunday to gain seats in the German Bundestag, an opinion poll published for a leading newspaper has forecast for the first time. Basic materials and utilities underperformed in Europe, with RWE trading sharply lower in Germany after the company announced plans to cut its dividend by half (and with the Adidas fiasco yesterday, one wonders just how bad things in Europe really are).