NC Renegades

Perception is reality

A lack of progress by U.S. lawmakers in budget and debt ceiling talks rattled investors on Monday, sending European shares to a four-month low and pushing the dollar and oil down.

U.S. stock index futures suggested Wall Street would also head lower later in the day after neither side in Congress offered any signs of a compromise over the weekend.

Trading remains relatively calm, suggesting confidence that a deal to end a partial government shutdown and raise the U.S. borrowing limit will emerge. But with only 10 days left to avoid a debt default, some investors are heading for the exit and few look to be making fresh bets.

“Until we get some sort of resolution, a lot of investors are standing back, keeping their money off the table just in case the unthinkable happens,” said Richard Hunter, head of equities at Hargreaves Lansdown.

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Overnight trading over the past week has been a bipolar affair based on algo sentiment about what is coming out of D.C. But while the last session was optimistic for some inexplicable reason that a deal on both the government shutdown and the debt ceiling out of DC was imminent, today any optimism is gone in the aftermath of the latest comments by Boehner on ABC, in which he implied that a US default is not unavoidable and that it would be used as more political capital, as it would be once again blamed on Obama for not resuming negotiations. As a result both global equities and US futures are down sharpy in overnight trading. And since the government shutdown, better known as a retroactively paid vacation, for everyone but the Pentagon (whose 400,000 workers have been recalled from furlough) continues it means zero government economic statistics in today’s session with the only macro data being the Fed-sourced consumer credit report at 3 pm. This week also marks the unofficial start of the Q3 reporting season in the US with Alcoa doing the usual opening hours after the US closing bell tomorrow. JPMorgan’s and Wells Fargo’s results on Friday are the other main ones to watch to see just how much in reserves are released to pretend that banks are still making money.

As usual, expect disinformation leaks that send the market sharply higher throughout the day, which however will only make the final outcome that much more painful, because as during every US government crisis in the past, stocks have to plunge so they can soar again.

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Things to watch closely:

1. The price of gold.

2. The price and volume of the market.

3. The market from 3:55 through 4:00 PM (EST). And then from 4:00 through 4:30 PM when after hour trades are placed.

4. The actions of state governments concerning federal retribution against the people during the shutdown.

5. The safety of your family.

David DeGerolamo

by Susanne Posel 

Christine Lagarde, director of the International Monetary Fund (IMF) spoke at George Washington University (GWU) and asserted that if the US Congress does not come to an accord to raise the debt ceiling, this “mission critical” could destroy America.

Consequences would affect not only the US, but the global economy.

President Obama made similar comments earlier in the week: “As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse.”

At the World Bank (WB)/IMF Spring Meeting in Washington, Lagarde admonished American politicians to “settle their differences” before the country falls into “technical default”.

Lagarde said: “I have said many times before that the US needs to slow down and hurry up – by that I mean less fiscal adjustment today and more tomorrow. The world’s biggest economy needed to put its finances in order, but favored back-loaded measures to raise revenues and limit entitlement spending such as Medicare that did not jeopardize short-term growth. In the midst of this fiscal challenge, the ongoing political uncertainty over the budget and the debt ceiling does not help. The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy.”

For the sake of global markets, Lagarde urged the 188 members of the IMF to “complete the process of financial repair deemed necessary by the near-collapse of the global banking sector five years ago.”

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httpv://www.youtube.com/watch?v=661pi6K-8WQ

I posted this when it first came out in March, 2011. Based on current events, I decided to repost it.

David DeGerolamo