Markets Could Help Close the Deal

October 13th, 2013 at 10:53 pm

I’ll let you read about the latest machinations of the dysfunctionistas up on Capitol Hill.  The House melted down–turns out the Cruz strategy had some glitches–and the Senate has taken over (there’s a comforting thought).  D’s, to their credit, are trying to avoid locking in sequester-level budget cuts, while R’s are begging for some face-saving concession–“just cut a damn tax or whack some poor people and let’s get outta this mess!”

Sens Reid and McConnell are actively negotiating, but they appeared to be stalemated by the day’s end.

So here’s the question: I couldn’t remember if the financial markets were open tomorrow what with Columbus Day.  They are.  And there’s a real chance of a reverse of last week’s relief rally when it looked like a deal was coming together.

We’ll see.  Traders might decide that the grownups are talking, and figure they’ll resolve this sooner than later, certainly before Treasury’s cutoff on Thurs.  But if not, last week’s melt-up could become this week’s meltdown.

Not a good thing–such volatile swings are unsettling and disruptive.  But, like the 777 point decline when House R’s rejected the TARP, only to pass it a few days later, that may be what it takes to end this charade.

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One comment in reply to "Markets Could Help Close the Deal"

  1. foosion says:

    If you believe a big drop will provoke the Rs to do the right thing and therefore produce a rally, why would you trade down? What you really want is for others to trade down.

    On the other hand, if you believe a relatively steady market will provoke the Rs to hand tough and do something stupid, do you trade down? But in that case, you’re selling before the expected relief rally, which is not entirely sensible.