Government Shutdown/Debt Limit - Issues and Timelines for Investors

[Norse]

Futures are down 1% right now. That is what the markets should have been doing on Thursday and Friday, i.e. tanking. If the markets had continued tanking hard all last week then we would have had a resolution to this mess by now.

But since they are sitting close to all time highs, the politicians now think that they can take this one all the way to the wire. I wouldn't be surprised to see the markets tank until we actually get a deal (or very close to a deal). At some point a rumor of a deal will not be enough, and we will have to see it to believe it.

I was thinking of buying some puts on Friday, and that would have been the right thing to do. I had faith in the politicians so I didn't buy any (I don't like "wasting" money on insurance), but as it turns out I was too naive. If the markets go down 5% tomorrow then it might get the politician's attention; this will not happen though. A 1% or 2% drop will not be enough to get the pols motivated.

Unfortunately, the politicians have no idea that the world economy is about to implode because they do not have backgrounds in economics. My understanding is that most of them are lawyers.

Im really not optimistic here. I do not think anything happens before the market tanks big. I wish I sold all my positions friday, to buy back later. I did not do that since I was at the pub, and since I atleast thought there would be big romours going into monday. That theres not to much that, makes me think the markets will tank bigtime. However I do have mostly LEAPS, so I think I am safe, but it would be better to buy on a big dip that I expect to come this week.

When Ryan Paul says that a default is not that bad im pretty sure were screwed.

 

[kenliles]

Im really not optimistic here. I do not think anything happens before the market tanks big. I wish I sold all my positions friday, to buy back later. I did not do that since I was at the pub, and since I atleast thought there would be big romours going into monday. That theres not to much that, makes me think the markets will tank bigtime. However I do have mostly LEAPS, so I think I am safe, but it would be better to buy on a big dip that I expect to come this week.

You're better off at the pub! I'm currently in your position with LEAPS for the same reason It's a nice position actually rather than having to guess. The Jan15 LEAPS will likely just recover from any sell off and he extra cash (vs stock) allows for pickup of a few more on the Big Dipper. If I was there, I would be at the pub with you without worries. Instead I'll have a drink at my pub to our positions and your good health

 

[FluxCap]

This is binary guys. Either doom, or resumption of our normal, slow economic recovery trend. This is why we have not seen a "dip" in the market beyond relatively minimal amount that institutions were able to engineer last week. If the market really priced in default, we would be nearing Dow 1000 and mass panic.

If you are "not optimistic" then sell everything, buy physical gold, canned goods and survival gear, and sit in a bunker. Otherwise, any minor dips this week could be solid buying opportunities.

I maintain that the likelihood of default is extremely low because of the nuclear consequences to global commerce. I also maintain that there is nothing you can realistically do to protect yourself from financial armageddon of this kind short of going off the grid into survival mode.

And with due respect, I am quite experienced in Washington politics. I was born here. have seen the machinations of this town come and go. This will either pass, or it will be the beginning of the end of our nation. You decide which is more likely when men with power are staring down their own doom.

 

[sleepyhead]

This is binary guys. Either doom, or resumption of our normal, slow economic recovery trend. This is why we have not seen a "dip" in the market beyond relatively minimal amount that institutions were able to engineer last week. If the market really priced in default, we would be nearing Dow 1000 and mass panic.

If you are "not optimistic" then sell everything, buy physical gold, canned goods and survival gear, and sit in a bunker. Otherwise, any minor dips this week could be solid buying opportunities.

I maintain that the likelihood of default is extremely low because of the nuclear consequences to global commerce. I also maintain that there is nothing you can realistically do to protect yourself from financial armageddon of this kind short of going off the grid into survival mode.

And with due respect, I am quite experienced in Washington politics. I was born here. have seen the machinations of this town come and go. This will either pass, or it will be the beginning of the end of our nation. You decide which is more likely when men with power are staring down their own doom.

I pretty much agree with this, and placed my bets that some kind of deal will get done.

We simply can't default. Default is not an option. I have no idea what I will do if a default happens, but it will probably start by buying guns and Dobermans (both for protection).

 

[Norse]

This is binary guys. Either doom, or resumption of our normal, slow economic recovery trend. This is why we have not seen a "dip" in the market beyond relatively minimal amount that institutions were able to engineer last week. If the market really priced in default, we would be nearing Dow 1000 and mass panic.

If you are "not optimistic" then sell everything, buy physical gold, canned goods and survival gear, and sit in a bunker. Otherwise, any minor dips this week could be solid buying opportunities.

I maintain that the likelihood of default is extremely low because of the nuclear consequences to global commerce. I also maintain that there is nothing you can realistically do to protect yourself from financial armageddon of this kind short of going off the grid into survival mode.

And with due respect, I am quite experienced in Washington politics. I was born here. have seen the machinations of this town come and go. This will either pass, or it will be the beginning of the end of our nation. You decide which is more likely when men with power are staring down their own doom.

Obviously when they realise they will doom us the will deal, but im sceptical to the fact that alot of people dont see default as nuclear.

 

[Palpatine]

They will just pass a 2-3 week debt ceiling increase on Wednesday or Thursday if there is nothing else ready
to be agreed on. Just my prediction.

 

[kenliles]

I pretty much agree with this, and placed my bets that some kind of deal will get done.

We simply can't default. Default is not an option. I have no idea what I will do if a default happens, but it will probably start by buying guns and Dobermans (both for protection).

Yep pretty much agree. I've positioned LEAPS (tracking at my stock position) as if all will be fine but swapped the stock for LEAPS so freeing cash in case the market reacts poorly and provides opportunity. Best of both sides, but agree the odds favor some sort of resolution or deferral to same

 

[Norse]

They will just pass a 2-3 week debt ceiling increase on Wednesday or Thursday if there is nothing else ready
to be agreed on. Just my prediction.

I would not consider that as good news, neighter do I think Obama will accept that. I am not optimistic regarding the debt ceiling, however I am extremly optimistic about the world economy in atleast a 3 year timeframe. If the politicians agree, Im gonna loan money to buy more stocks and options. That is why I have not sold anything. Nothing in my life would change much if the markets tanks xx% this week. If it does I will get capital to buy cheaper.

 

[Cameron]

This is binary guys. Either doom, or resumption of our normal, slow economic recovery trend. This is why we have not seen a "dip" in the market beyond relatively minimal amount that institutions were able to engineer last week. If the market really priced in default, we would be nearing Dow 1000 and mass panic.

If you are "not optimistic" then sell everything, buy physical gold, canned goods and survival gear, and sit in a bunker. Otherwise, any minor dips this week could be solid buying opportunities.

I maintain that the likelihood of default is extremely low because of the nuclear consequences to global commerce. I also maintain that there is nothing you can realistically do to protect yourself from financial armageddon of this kind short of going off the grid into survival mode.

And with due respect, I am quite experienced in Washington politics. I was born here. have seen the machinations of this town come and go. This will either pass, or it will be the beginning of the end of our nation. You decide which is more likely when men with power are staring down their own doom.

Good post. More people need to see this!

 

[Palpatine]

I would not consider that as good news, neighter do I think Obama will accept that. I am not optimistic regarding the debt ceiling, however I am extremly optimistic about the world economy in atleast a 3 year timeframe. If the politicians agree, Im gonna loan money to buy more stocks and options. That is why I have not sold anything. Nothing in my life would change much if the markets tanks xx% this week. If it does I will get capital to buy cheaper.

I don't think Obama is foolish enough to refuse to sign a 2-3 week debt ceiling if that is all they can agree on by Wednesday. If Obama refused, then it is all on him with this goes south on Friday/Monday with the government running on only daily tax inflows.

 

[CapitalistOppressor]

CO,
Daily Kos and Ezra Klein? Seriously? That is like reporting DNC talking points.
The fact that the GOP House and Obama totally bailed on any deal means that they don't have the votes in the house for a "clean" anything.

I linked Erick Erickson from RedState first, and I linked the Daily Kos piece to give more perspective from the Democratic side. However, the Daily Kos piece was more of a news piece, with relatively little Democratic cheerleading.

As to Ezra, if you had read his piece he was basically advocating that Democrats make deals to end the sequester, without relying on additional revenues. Essentially he was backing the position of Paul Ryan -

Paul Ryan - "Most of us agree that gradual, structural reforms are better than sudden, arbitrary cuts," he wrote in the Wall Street Journal. "For my Democratic colleagues, the discretionary spending levels in the Budget Control Act are a major concern. And the truth is, there's a better way to cut spending. We could provide relief from the discretionary spending levels in the Budget Control Act in exchange for structural reforms to entitlement programs."

Or, as the House GOP aide put it: "It's trading sequester cuts which everyone hates for cuts that people hate less."

and

But a deal like that would be a tough sell with the Democratic base -- not to mention the Democrats on the Hill. It would mean Democrats essentially admit they've lost on sequestration: The policy will lead to entitlement cuts but not to a grand bargain that includes taxes.

and then Ezra says -

Of course, Democrats actually have lost on sequestration: It's not going to lead to a grand bargain that includes taxes. If Democrats don't replace sequestration with cuts they prefer, sequestration is likely to simply persist.

Ezra's post was chock full of news, and he seems to advocate a position similar to yours. He certainly spent no time advocating for clean resolutions, and his only mention of such is when he is reporting on the position of Democrats.

- - - Updated - - -

As to news heading into the market opening, its pretty obvious that there isn't a deal right now. The Democrats want a shorter CR (Republicans are offering ~6 months, Dems want more like 2 months) and a longer Debt Limit (R's = 3 months, D's want ~6 or more).

Both sides are trying to win a better position for the negotiations that will occur after they do a deal. Republicans want a shorter Debt Limit to increase their leverage, while the Dem's want it longer for the same reason. In the case of the CR, the Republicans want it to be longer, because it will lock in Sequestration level spending for most of the next fiscal year with their plan, while the Dems want the CR shorter so they can negotiate the current spending levels.

All very basic when you get down to it. As to the politics, the Dem's seem to think they are winning. Republican leadership seems to think they are losing, but are trying to draw a line and get some concessions. Republican activists are still hammering on the conference to focus on Obamacare.

All of the news organizations seem to be all caught up, but here is Politico in case you need it -

Senate remains at an impasse - Manu Raju and Seung Min Kim - POLITICO.com

 

[Mario Kadastik]

Some fun rant about this mess:

News Anchor Completely Loses It For The Best Possible Reason

 

[gene]

Some fun rant about this mess:

News Anchor Completely Loses It For The Best Possible Reason

And he is "right-on" about the funding of congressional elections. See here: Americans for Campaign Reform | Our future depends on it

 

[emupilot]

At this point, is the Senate even capable of passing a debt limit extension before the 18th even if there were 60 votes for it? As long as there is at least token opposition (which Sen. Cruz will provide), doesn't it take the Senate about 3 days to pass anything?

On edit: I found an article discussing just such a scenario. Even if a bill were introduced this afternoon, it would take until Friday to pass it through the Senate as long as at least one senator wants to slow it down. http://www.businessweek.com/articles/2013-10-14/ted-cruz-could-force-a-debt-default-all-by-himself

 

[CapitalistOppressor]

At this point, is the Senate even capable of passing a debt limit extension before the 18th even if there were 60 votes for it? As long as there is at least token opposition (which Sen. Cruz will provide), doesn't it take the Senate about 3 days to pass anything?

On edit: I found an article discussing just such a scenario. Even if a bill were introduced this afternoon, it would take until Friday to pass it through the Senate as long as at least one senator wants to slow it down. http://www.businessweek.com/articles/2013-10-14/ted-cruz-could-force-a-debt-default-all-by-himself

There have been some (less than clear) signals that Cruz won't block the deal being negotiated, though he'll vote against it. Still though we don't know for certain. In any case, the government certainly won't default on anything by Friday.

- - - Updated - - -

Here is Politico with a description of the legislation that is being drafted. My understanding is that the final draft is being worked on right now.

REID MAKES BUDGET OFFER TO MCCONNELL | POLITICO

 

[FluxCap]

Via the Washington Post at 2:37pm EST:

Here’s a quick primer on what you need to know about today’s movement in the ongoing talks over the government shutdown and debt ceiling.
1. The Harry and Mitch Show goes on. All eyes are still on the talks between Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.). They don’t have a deal yet. But the rhetoric they are using makes it sound like they are close. One framework under consideration, according to a Senate source, is a deal that would fund the government until Jan. 15 and raise the debt limit until Feb. 15.
2. Another White House huddle is upcoming. Reid and McConnell, along with House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.), are headed to the White House for a 3 p.m. meeting with President Obama. The press will be allowed in at the top of the meeting.
3. A possible House backup plan. House Republicans are reportedly considering a fresh debt limit plan of their own if the McConnell/Reid talks don’t produce anything. But judging by the provisions floated for that potential package, it doesn’t sound like Senate Democrats would approve it.

 

[borat99]

2. Another White House huddle is upcoming. Reid and McConnell, along with House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.), are headed to the White House for a 3 p.m. meeting with President Obama. The press will be allowed in at the top of the meeting.

Looks like the meeting has been postponed.

Obama, leaders meeting on hold as talks go on - MarketWatch

 

[Jhall118]

Ughhh, I told myself this morning that I would cash out most my calls if no deal was negotiated today. I am worried about another credit downgrade.

Now, I am not so sure. I really want to believe that a last minute deal will be brokered, but I can't envision how it's going to happen without the market tanking first.

 

[arashlzy]

I have been hearing some discussion that at this point a debt deal is already priced into the market.. What do you guys think, might we sell on an annoucement of a deal?

 

[Norse]

I have been hearing some discussion that at this point a debt deal is already priced into the market.. What do you guys think, might we sell on an annoucement of a deal?

I also heard that on CNBC, Im pretty sure thats not the fact, as Im pretty sure there is alot of people with money waiting for a deal. If I also thought it would be a "sell on the news" I would sell now and buy when the shutdown is over. Doesnt make much sence does it.