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We’ll Take 13-to-1 Odds Against a Weekend Deal

By Rick Ackerman Posted on July 29, 2011, 2:20 am EDT Last Updated August 1, 2011, 5:30 pm EDT

Bullion and the broad averages went their separate ways yesterday, each reflecting the failure of our elected leaders to break the deadlock over a debt ceiling. Perhaps we can save Wall Street’s speculators some anxiety by reminding them of what the outcome will be – i.e., a political compromise that will leave in place nearly all of the problems that the debate over America’s fiscal policy was supposed to settle. Given that nothing of substance is coming, we should expect stocks, gold and silver to resume the uptrends they were in before the news media started to confuse the picture with loose speculation about lowered credit ratings, a U.S. default, the curtailment of government services, massive public-sector layoffs and a whole bunch of other things that were never, ever going to happen.

About the only thing that remains uncertain at this point is whether the legislative sausage we should all expect will be extruded literally at the eleventh hour on Monday; over the weekend – most probably on Sunday; or perhaps at some later date by way of an “extension” (Now that’s something Democrats and Republicans can agree on!)  Our hunch is that the deal will be struck Sunday night, and if you want to bet on it you can get pretty good pass-line odds at InTrade.  As of around 8 p.m. EDT Thursday, wagering on the site implied there’s a 7.5 percent chance that Congress will increase the debt ceiling to at least $15.1 trillion before midnight Sunday. 13-to1 sound like a pretty good odds to us, but they seem to be getting juicier by the hour, and we wouldn’t be surprised to see them go to 20-to-1 or higher if there’s still no deal in place when the NYSE shuts down for the weekend today at 4:00 p.m.

How to Be a Hero

Having worked in a newsroom ourselves for seven years, we like the Sunday night ‘surprise’ scenario, since there is usually a dearth of hard news at this time.  In fact, so dire, usually, is the shortage of news on Sunday nights that we can offer the following tip to aspiring politicians: If you’re eager to look like a hero, try delivering your press release to the news desk of a morning newspaper around 4 p.m. EDT Sunday, since the editor will often be desperate and clueless at that time about what stories to feature on the front page. For the same reason, and especially if you live in a small town with a small-town newspaper, you should assiduously avoid doing anything that might land you on the police blotter.

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  • warren July 31, 2011, 7:36 pm

    The only “sausage” that will be extruded will be post digestive.

  • Mario cavolo July 30, 2011, 4:36 pm

    It’s so obvious that none of what they do will make any difference to the good of the people bynthe people or for the country.

    Meanwhile we must get over a perspective that continues to get us into acutely wrong thinking about reality; that Wall Street is somehow a reflection of American society; its life, liberty, stability, pursuit of happiness, employment, security…

    It is no such thing, and to think that it is or should be is delusional and costly. That the msm and politicians and elites want anyone to believe it is, is part of the big ruse they are foisting upon the world. It is their very big very profitable game they have shaped, devised and policy’d into place for their own benefit, for the benefit of their own increasingly elite, separate part of society, and obviously with little concern for the impact of such activities upon the rest of the society’s regular citizens.

    Cheers, Mario

  • Marc Authier July 30, 2011, 10:40 am

    Deal or no deal, it won’t make any difference.

  • Rick Ackerman July 30, 2011, 9:22 am

    Austere? Hardly. And although it would be wrong to blame Obama for a Second Great Depression that has been incubating for 30 years, he blew the chance to deal honestly and straightforwardly with the structural problems that will have caused it.

    • gary leibowitz July 30, 2011, 6:18 pm

      Honestly and straightforward? What exactly would you have him do had he had the chance to do over?

      No bailout? No additional health coverage?
      According to you and most on this board you would like less restrcitions, rules and bureaucracy. I would think lack of rules and enforcment was the main reason we got in this mess.

    • Jill July 30, 2011, 11:22 pm

      I don’t know how any president could have dealt with it, as our government works on a strict ROI model. The Special Interest Groups that “invest” in government through financing campagin get a handsome return on their investment– kind of like if you’d bough Google at $100 a share or so.

      Groups like Goldman Sachs, Fannie Mae, Freddie Mac etc. purchase legislation, or purchase the right to keep legislation from regulating them. The voters always get thrown under the bus, their crises and problems totally unaddressed.

      All voters get is to listen to corrupt politicians drone on and on about some popular political ideology– since that ideology ends up getting votes for the politician. Most politicians’ actual belief system, however, is simply a belief in feeding at the public trough.

  • gary leibowitz July 29, 2011, 10:32 pm

    The corporate insiders are not waiting for this debate to conclude.

    “In the week ending last Friday, according to the latest issue of the Vickers report, this sell-to-buy ratio stood at 6.43 to 1. This is higher than 95% of other weeks’ readings over the last decade.

    That’s ominous enough, but consider last week’s sell-to-buy ratio for just those issues listed on the NYSE or AMEX. That came in at 13.10 to 1, which is the highest reading for this ratio since when Vickers began collecting the data, which was October 1974.”

    I wonder just how large 14 trillion is? If my math is correct 10 trillion minus 14 trillion leaves only 4 trillion. Hmmm. Wasn’t that the 10 year tax break for the yacht owners? I guess 14 trillion isn’t that big a deal.

    The idea that the spending by Obama is the cause simply smacks against real data. In fact he has been downright austere given the state of this economy, and the spending spree by his predecessors.

    So, how to fix this problem? Make sure a weak economy driven today solely by corporate spending be allowed to hit the middle class, poor, and old with larger costs for these entitlement? Maybe. Do so with no give backs on corporate entitlements and loopholes? Sure.

    Imagine being Obama, given the lead to run a nation when the dam had already burst. Imagine still the high expectation that he could actually walk on water.

    I still expect no deal by August 2nd. There might be some sort of extention but in essence no deal. Status quo makes sense for the republicans who can than blame everything on the democrats come election.

    Where was this concern of out of control spending by the republicans in the 2 terms of Bush? Not only did they suspend their arguments they actually increased entitlements by a large margin. Way to go! I guess some will simply ignore these facts and pretend the austerity slogans attached to the republicans are true.

    • A. Rand Fan July 29, 2011, 11:07 pm

      “I wonder just how large 14 trillion is?” Maybe this will help. http://tinyurl.com/3j9o3rg

    • gary leibowitz July 30, 2011, 12:01 am

      And 10 trillion went for the tax cut. Did you see any of it?

  • Jill July 29, 2011, 10:26 pm

    Well, no lawyer has appeared yet, so I’ll just refer you to some legal arguments here. See 2nd to last section, entitled: Constitutionality of the debt ceiling

    http://en.wikipedia.org/wiki/2011_U.S._debt_ceiling_crisis

  • dave July 29, 2011, 7:03 pm

    I ask this, in all honestly, as a technical/legal question not as attempt to express “my side’ of the political debate– though in now am I pretending I don’t take sides.

    So.. my understanding is that the attempt to raise the debt ceiling is so that we can meet obligations incurred as a result of PAST appropriations — appropriations which are not being challenged as having been incurred through some illegal process (misguided, maybe..but that is a different question). So my question is whatever the debt-ceiling legislation is or says does it actually give the power to the current Congress to over-ride or negate the promises/obligations made by the former Congress because it or ‘they’ decide (arbitrarily? for ‘political’ reasons?) to tie deficit and spending conditions to any approval to raise the ceiling? What was the intent of the debt-ceiling legislation? Could this end up in the Courts if O unilaterally raises the debt ceiling without an “agreement” /congressional approval (sausage or otherwise)? Any lawyers out there who care to comment..

  • Jacques Redou July 29, 2011, 6:46 pm

    Quote Mr. Ackerman:

    “media started to confuse the picture with loose speculation about lowered credit ratings, a U.S. default, the curtailment of government services, massive public-sector layoffs and a whole bunch of other things that were never, ever going to happen.”

    Never, ever going to happen?
    Or, never, ever going to happpen right now?

    • Rick Ackerman July 30, 2011, 9:16 am

      Now. Later, is inevitable.

  • Jill July 29, 2011, 6:37 pm

    You crack me up, Robert. Thanks for the laughs!

  • Robert July 29, 2011, 6:20 pm

    I’ll tell ya, this whole debt ceiling reality TV dramedy reminds me of a Popeye cartoon. Simply replace:

    “I will gladly pay you Tuesday; for a hamburger today…”

    With:

    “We will gladly stop spending after next year’s election, for a few Trillion in extra credit today…”

    Or how about this one (directed to the Cashier behind the little window):

    You:
    “Look, I’m planning to leave the casino and fly home on Monday- all I need are enough chips to play through the rest of the weekend… and when I go back to work next week I’ll mail you a check for the marker… I PROMISE.”

    Cashier:
    “Sir- I need a credit card to secure the marker”

    You:
    “My credit cards are all maxed out, but I’m good for it- I SWEAR”

    Hysterical. I heard some radio bafoon this morning actually trying to coorelate the debt ceiling with unemployment. He said something to the effect of “If they don’t raise the debt ceiling, what’s that going to mean for the millions of unemployed Americans out there who really need their unemployment checks to survive?” – I thought my brain was gonna explode.

    I have never been so bullish on the global market for truth and factual information, yet so simultaneously bearish on the cognitive, rational and intellectual capacity of people to actually comprehend said truth and fact and differentiate it from the preponderance of lies.

    The second truth becomes scary, people scream for the comfort of lies- Enter the Politician.

    I keep yanking the little cable, and I keep hearing the bell ring, but the train just won’t stop…. I want OFF already.

  • mario cavolo July 29, 2011, 5:21 pm

    …when I was a boy I remember my grandfather going to the local butcher to buy the fresh pork butts and sausage skins to make fresh ground Italian sausages, the real deal boys, with fennel seeds, he stuffed the skins by hand.

    Pork butts….hits it right on the mark I’d say.

  • Euromoron July 29, 2011, 3:46 pm

    There is the quote from German Reichskanzler Bismarck, of ancient fame, who once said that, thank God, the public doesn’t know how laws are drafted in parliament and sausages produced by any German butcher, thereby comparing the two processes. Would I know what’s less appetizing?
    thank you Rick for reminding me!

    • A. Rand Fan July 29, 2011, 4:37 pm

      Marvelous stuff as usual Rick.
      This congress is giving sausage making a bad name! We may not care to know how sausage is made because the finished product is pretty tasty. But what congress makes is far from anything digestible.

    • Benjamin July 29, 2011, 9:15 pm

      I agree with Rand Fan. I mean, to turn all THAT into THAT? Sausage should be a high example of what human ingenuity is!

      Pie would be a more accurate description than sausage. Pie, made from a certain part of the cow that isn’t really part of the cow. We don’t want to know how it’s made and, frankly, we’d all rather pass!

  • Jeff July 29, 2011, 3:32 pm

    I expect the same EXACT scenario as Bill.

  • bill July 29, 2011, 2:45 pm

    Considering what passes for “normal” behavior from congress, Rick’s take on how this “debt crisis” will end makes perfect sense? The main problem with this line of thinking is we may be witnessing yet another power grab. Remember, just a few months ago our president engaged in a “kinetic action”; BYPASSING CONGRESS to invade a sovereign country for what appears to be little reason. What makes us think they will waste this “crisis”?? Bypassing congress to raise the debt ceiling would be a perfect use of this contrived crisis. In order to accomplish this grab they will need a lot more pain in the markets. A LOT MORE. Once lord Barry has the power to raise debt limits on his own….then they can blast the markets way higher showing the markets “approval” as a way of justifying what they did. WE will most likely know by Monday.

  • Dan July 29, 2011, 2:21 pm

    The 5 leading Dems are more dangerous to america that 50 Bin Ladens

    • mikeck July 29, 2011, 4:32 pm

      I agree and add that so are the five leading Republicans.

    • Deak July 29, 2011, 8:18 pm

      Ditto on both. different sides of the same adulterated coin.

  • Rick Ackerman July 29, 2011, 4:08 am

    Attributed to Otto von Bismarck:

    “Laws are like sausages. It’s better not to see them being made.”

    • fallingman July 29, 2011, 2:32 pm

      “But most everyone and their grandmother knows that government has been borrowing against the social security trust fund.”

      You mean it isn’t in a lock box?

      Golly, I feel I’ve been duped.

      By the way, since we’re talking about making bets today, I would wager that a rather large majority of Americans, if they know anything at all about social security, believe there is a trust fund with actual funds allocated in their individual names, bulging with the cash contributions they’ve made over the years, just waiting to be annuitized at age 65.

      Sorry folks, but thanks for playing just the same.

    • Benjamin July 29, 2011, 9:46 pm

      “Sorry folks, but thanks for playing just the same.”

      Yeah, that’s pretty much it. Well, assuming a random person off the street did in fact play (or played enough to justify what they receive). I mean, the chances are good that said person works for the government or lived for much longer than anyone imagined they would.

  • Benjamin July 29, 2011, 3:26 am

    There’s that word again… Sausage!

    I’ve looked up the meaning of this word (sayings, slang, idioms, etc) and I can only guess what ‘sausage’ means in this context. I give up! What do you mean by sausage, Rick?

    • Benjamin July 29, 2011, 5:55 am

      I see. I was thinking it meant “loaded with pork” (pork being the common sausage meat).

      Anyway, I’d like to use today’s topic to try and make this whole thing clearer. Maybe someone can help me sort this out…

      The main point I draw my conclusions from is the oft-mentioned line about social security checks being cut off (and how much it will be the fault of republicans if that happens). From American Thinker to Reason Online, I’ve been reading that the dems are just bluffing about the sudden death of social security checks. Many commentators I’ve read insist that SS checks will continue to be mailed.

      But most everyone and their grandmother knows that government has been borrowing against the social security trust fund. I just don’t think there is any bluffing about that realities of what will happen to SS (re)payments. But it’s very questionable whether increased indebtedness would actually be used for such purpose of paying back the people forced to put in, all these years!

      To forum: Have I got the right of things, so far? I mean, since it would seem that social security is really going to default without a raise, is it so inconceivable that a deal will be hammered out?


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