With Friday’s down market, the reality has sunk it that it may very well be left to Santa to find a few trillion in spending cuts. Volume was high with triple witching expiration, but the markets headed south after Boehner’s failed plan B Thursday night and then Congress’ departure for the holiday.
They will return on December 27th but this means that they have four days after the Christmas holiday to strike a deal.
What now seems likely is that we may get a “mini deal”. A “mini-deal’ is likely to include an extension of the Bush tax cuts for the majority of the American households and indexing the alternative minimum tax cut for inflation. It is also possible that it will include an extension of the emergency unemployment benefits, and a ‘doc-fix’ but not an extension of the payrolls tax cut or changes to the Budget Control Act’s sequestration. Such a deal is likely to be drafted by the Senate Democratic majority and pass the House with unanimous votes from the Democrats and support from the part of the House Republicans that would like to avert tax hikes for all Americans.
But this wasn’t really what was on our Christmas list. It’s like the kid who wanted an XBOX but got a dollar store video game.
Yes, a mini deal could ease the immediate blow until legislations on these issues is delayed until next year, when politicians will start a new round of negotiations ahead of the late February/early March deadline, when the debt ceiling becomes binding. Hence political uncertainty is set to remain high next year.
Merry Cliffmas too all!
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Founder & President- Trading Advantage
ES 1426.00 / 1419.00
YM 13134 / 13080
NQ 2658.00 / 2644.00