Why a Wall Street drop may be needed to break poli
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Why a Wall Street drop may be needed to break political logjam
The markets are watching the politicians. The politicians are watching the markets. Sort of.
As opposed to the last time the U.S. was playing default brinkmanship, there seems to be little panic among some lawmakers this time. A fresh Reuters report finds many in the GOP don’t really believe a default is coming, ‘Hey, the U.S. doesn’t have to pay all of its bills on time,’ as a way of playing hard ball with the White House. Jack Lew, we aren’t afraid of you.
And maybe some politicians aren’t too scared of the markets either, at least they’re not showing it yet.
The S&P 500 SPX -0.83% sold off sharply during the last round of brinkmanship over a debt default (see chart). The index fell to a four-week low and the CBOE’s VIX VIX +4.17% “fear” gauge reached its highest levels since June on Monday, but things have not exactly been crazy since this whole mess started. BTIG’s Dan Greenhaus notes the S&P 500 is down in ten of its last 13 sessions, a drop of 2.9%, which he describes as “modest.”
Here’s a favorite saying these days among market players: “We’ve seen this movie before, we know how it ends.” So the markets are sure a deal will be reached, just as some politicians at least appear to feel no urgency.
But is it possible that maybe Wall Street needs to kick up a little more fuss to help get the ball rolling on Wall Street? Writing for New York Times’s Dealbook, Nathaniel Popper says some are worried the reaction among investors has been way too calm, and that the markets aren’t going to signal to politicians just how dangerous a debt ceiling breach is until it’s too late.
“The markets are sending this complacent message, and I think the politicians are interpreting it incorrectly and they have no sense of urgency,” said Douglas Kass, the owner of the hedge fund Seabreeze Partners Management.
So what’s the solution? A sell-off to kick those politicians into gear? http://blogs.marketwatch.com/capitolreport/20...al-logjam/
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