Futures Hammered but why?

Discussion in 'Trading' started by Joovenile Jatt, Jul 24, 2011.

  1. Can't see anything on the news, can't really see a reason for this.
  2. debt ceiling and fear for Asian open, since they hold 50% of US debt...
  3. Has there been any new news regarding the debt ceiling?

    The futures don't go down 1.5% on no news, very strange, it's not like they just realised there's a debt deadline looming.
  4. Summarily attributing the debt ceiling to the drop doesn't explain anything. Here is the reason as succinctly as I can phrase it:

    Boehner wants a shorter term resolution to the debt ceiling and in a Republican controlled house only will accept an increase if there is a dollar for dollar reduction in deficit spending along with a $500 billion down payment to debt in each plans. (This will probably be accomplished by retiring debt, or re-issuing debt securities the Fed has on its enormously inflated balance sheet).

    The market does not want a shorter term solution as it creates too much uncertainty in that this issue will rear its ugly head come election time. Democrats, and especially President Obama do not want this to be part of any political debates come election time. Since the market wants the longer term solution to reach out to the end of 2012, Tim Geithner has said that he believes this is preferrable for the same reason, namely, that this creates more certainty in the market.

    However, since nothing has gotten done today it is unlikely anything will get done monday, or for the rest of the week for that matter. This puts next Monday as the crunch time, and, if there isn't any vote this week, and we don't have one next week by monday, we will not only fail to raise the debt ceiling, but in many ways we are already in technical default with our sovereign credit rating most likely to be reduced, possibly to AA- by Fitch, or AA+ by S&P.

    Since there has been no resolution, republicans and the White House appear to be playing chicken with each other. Boehner wants cuts without tax increases, and Obama wants cuts with tax increases. Mr. Obama has said he will veto any resolution passed that is not a long term solution, and so you see the market crashing down because of this position on the part of the president.

    The market would prefer to stick this out to the end of 2012, but Boehner and the republicans will not allow this. Since the house is controlled by Republicans, it is likely to be a hotly contested issue come election year, but as the Senate is still controlled by Democrats, it may be that some sort of short term two vote resolution gets passed, and Obama would prefer a simple single vote to raise, then address deficit and entitlement spending at a later date around August or September. This isn't optimal, as merely raising the debt ceiling will not solve any of our fiscal problems, but will act as a temporary bandaid with a vicious scar left if we go this route.

    The market would like a long term fiscal solution so that it has certainty. Without it, you see what the market will do if there isn't any progress reported soon.
  5. Too bad Odumbo doesn't give a crap.
  6. bwolinsky some excellent points.

    I can't believe the market took this long to realise this isn't going to end pretty, but what else can be the reason for his dramatic open we've had?

    Obama wants more tax rises because unlike no other president in history he loves taking money from the poor to give to his beloved banks etc. Why the hell is he so popular there? Anyone in our business knows that he says exactly the opposite of what he means and fools 98% of the US population that isn't in our business to know that he is lying.

    This situation can't end pretty placing more band aids on the wound only increases the chance of a bigger infection. Yet Nasdaq makes new multi year highs last week and spoos rallies from 1300 to 1340. Very bizarre - almost untradeable at this point IMHO
  7. The equity indicies, in particular, aren't forward looking. They are like the retarded cousin in relation to every other market. Of course, some might argue that the market itself isn't really a "market" after all, but sort of a quasi-political index that provides cover for all the failed policies we've had to endure for at least the past decade.
  8. d138


    I think the market was pricing it properly. Though the earnings results were generally pretty positive, market was drifting down on the debt concerns.
  9. Boehner stated that they needed a deal to stave-off a sell-off when Asian opens. A better case of self-fulfilling prophecy I've never seen. Mkts would've been flat If Boehner had simply said they were "wokring on a deal".
  10. Pekelo


    Dude really, bloomberg or google (news) is your friend. There was a chance that they would make a deal over the weekend, thus futures closed were they did. Then on Sunday there was still no deal, thus we opened where we are right now.

    Had they made a deal today, futures were 1-1.5% UP, not down....

    Pretty simple....
    #10     Jul 24, 2011