Posts Tagged ‘US Politics’

The market analyst in general are very blase’ about the potential of a technical default of the US (technical means that you are defaulting as you do not want to pay, not because you do not have money – as the US can print it!).

Everyone is very calm and convinced of a very last minute “as usual” deal. It is just a feeling born from over 13 years of market experience that when everyone agrees the market does completely the opposite of what is supposed to do.

It also is how the Congress work….now there is no pressure from the Tea Party support base onto their senators to make a deal as they are not suffering any economic pain.

Also the Volatility Index is still hovering around 20 (the last crisis, August 11, was double that number).

Logically there are word of dissent. Fidelity, one of the largest US investment manager, sold all of its US Treasury position due in October/November.

 

I think the most realistic view is the one of Potomac Research (one of the more politically conscious US Research House), after talking with the Tea Party senators. it estimates the chances of a US Default at 20%. If you think what is a US Default it is not such a low number.

Well today we have the first day of an extremely strong “end of rally” market signal. The SP500 broke its 50 days moving average. Now if tomorrow the market close under 1,670 (or DJ30 14,920)there is 80% chances we go and see at least 1,627 again -very fast.

The issue is as usual is the Tea Party in ┬áthe US Congress. The very big issue is that the political position of the two factions is even farther apart than in August 2011 and that the Republican Party is not anymore a cohesive structure with Boher at ransom of of the Tea Party “Taliban”.

The “Tea Party” is a far right accolade that is against the “big business” (including the share market, logically) as they see the 2008 “Mother of all bailout” a bailout of the culprits of the crisis (big business and banks) and let down of the normal people.

As you can see it yourself, they have a point as it was exactly that. But you can say you cannot save the normal people unless you save the institutions that make our economy work. Unless you want to change the system entirely.

I found this beautifully written article on The Game Theory and Washington, well worth a read and explain very well that, as in a proper US Movie, the countdown to financial apocalypse is 17 October. Will the US President save us. Probably so!

http://blogs.reuters.com/anatole-kaletsky/2013/10/03/game-theory-and-americas-budget-battle/