Wall Street: Odds of U.S. default close to zero

[jsr]

http://www.usatoday.com/story/money/markets/2013/10/03/wall-street-stares-down-us-default/2916643/

Wall Street: Odds of U.S. default close to zero
Adam Shell, USA TODAY

NEW YORK — As fights go, Wall Street views the slugfest between Democrats and Republicans over the government shutdown as the undercard event. The main bout is the coming showdown over raising the debt ceiling and making sure the U.S. has enough cash to pay its bills and avoid the unthinkable: defaulting on its debt...

Still, there's a belief on Wall Street that the consequences of the U.S. not meeting its financial obligations would be so devastating to the economy and markets that there's virtually no way Congress will allow the first-ever U.S. default.

The U.S. not making timely interest and principal payments to holders of U.S. government debt is "the single most bearish scenario," says Adam Parker, chief U.S. equity strategist at Morgan Stanley. And Congress knows that.

"There is a 0% chance that the U.S. will default," Parker says.

[gopiscrap]

1. don't kid yourself

[flamingdem]

6. +1 exactly. We can no longer trust the "sense" of

Wallstreet. They are often so busy counting their duckets that they fall asleep and miss what's under their noses.

[gopiscrap]

7. Yup, exactly Wall Street is the one who hatched these tea bagging idiots.

[Cerridwen]

2. morgan stanley says "0% chance that the U.S. will default."

I feel better.

No, really, I do, I feel much better.

[russspeakeasy]

4. I think they also said they were "100 % honest and above board".

I didn't believe them then either.

[Cerridwen]

5. Thank you for catching my tone even without the smiley.

What a nice change.

[longship]

15. Me, too. Waiting for JPMorganChase and GoldmaSachs to chime in.

Of course, the rest of the criminals who brought down the global economic system did not survive -- in the business sense. They still have their multi-million dollar homes. They may take fewer private helicopters to work every day, but they make do with the bonuses and stock options they earned when they quit, or were forced out.

Too bad about that property on Long Island, though. I liked summering there. I guess I'll have to settle for the south of France.

[ffr]

3. I used to think so, but I think introductions are in order

Tea-hadist party, meet Wall Street

Wall Street, meet Tea-hadists.

Wall Street, these are the people whose goal it is to destroy our government. The want to erase this president's legacy and will not waver until they have accomplished their goal. They are in gerrymandered districts and cannot lose any future election. They are the X-men of congress. Good luck with what you were saying about zero chance.

[regnaD kciN]

8. The Tea-liban can be defeated, but…

…it's going to take tons of pressure from those very Wall Street-ers on the slightly-less-loony Republicans and, in particular, Boehner to get them to go against their brethren -- part of which, no doubt, would be copious amounts of campaign money to fight off any primary challenges. It would be a genuine "Clash of the Titans" with the "masters of the universe" and the Kochs vying to outspend each other for the soul of the Republican Party. (Imagine that -- a contest over a nonexistent thing!)

[2naSalit]

28. Like that scenario

Mr. 3rd eye!

[PM Martin]

9. Tell that to the terrorist tea party.

[Rex]

10. Always playing those odds.

Wall Street just sees chum in the water.

[bhikkhu]

11. I wonder how many repugs in congress bet the other way

and have all the motivation for making it so.

[joshcryer]

21. It's on Boehner.

He may be beholden to the 30 or so teaparty thugs because of his fairly rigid adherence to the Hastert rule, but he'll ignore that "rule" when it comes to the debt ceiling. If he doesn't, well, he'll have destroyed the Republican party. For decades, if not forever.

[dkf]

12. Of course they have to say that. They aren't stupid.

[A HERETIC I AM]

13. This subject and DU'ers responses to it always amuse the fuck out of me.

Or at least MOST DU'ers that tend to respond to threads on this subject amuse the fuck out of me.

Why?

Because it is alarming how uninformed some of you are about how this government issues debt, what it means to the international financial markets, why it is important and just exactly how catastrophic it could and will be if the US defaults on a, or any series of, US Treasury Bonds.

It always seems to me that the responses to this sort of information display a cavalier attitude to the Treasury Bond market, as if it has nothing to do with their daily lives, even though they have participated in it, if not in some small way, most of their lives.

If the posters above actually think that "Wall Street" can just shrug off a default of US Treasury debt paper, then you are all seriously mistaken.

Now I realize that the above posts are quite frankly, all over the map when it comes to understanding. The "Don't bet on it" crowd vs. the "they are getting what they deserve" crowd and I'm sure, opinions from all points in between.

But please allow me to clear something up for you. The reliability of the United States to pay interest in a timely manner on bonds it issues and to redeem those bonds when they mature is.....


Read this carefully....


THE FUCKING FOUNDATION OF THE ENTIRE WORLD ECONOMY.

Yup. In caps, bold italics and underlined. Because it is true.

If the US Treasury is unable to make a coupon payment or redeem a series upon maturity as a result of this dopey fucking bullshit that is going on in Washington, trust me when I say this....


It will make 2009-2011 look like a fucking cakewalk.

[steve2470]

16. agreed

When you have Lloyd Blankfein going to the White House and making public statements to the effect that this is a really bad fucking idea....they are dead serious. From everything I've read, it would trigger either the most severe recession possible (worse than 2008) or a depression. It's very very serious stuff.

[Cerridwen]

17. What you're amused by, is non-"experts" who knew what the fucking "experts"

didn't say until after the fact.

In short, we live it...every.day.

And the "experts" deny it and play the players every.day and the players fall for it while we sit back and wonder why the players don't know their "experts" are bought, paid for, and play the players every day.

The world wide economy is in the hands of scum. And the players lap it up.

Keep laughing.

[A HERETIC I AM]

18. Try that again.

This time, try to not be so damned clever and put together sentences that make sense.

Please.

The situation is what it is, but if you think it will be no big deal if this country defaults because ....

BTW, I am not laughing. Not by any stretch. Amused, yes.

Laughing?


Not a bit.

[Cerridwen]

19. You said amused. I made the mistake of thinking that involved laughter.

My bad.

Try reading comprehension.

I'm not dumbing down so you can catch up.

Let me know when you choose between the power bill and the water bill or the rent.

Until then, keep being amused.

[A HERETIC I AM]

20. Oh, jesus christ on your mailbox

Try reading comprehension.

I could say the same for you, smartass.


a·mused, a·mus·ing, a·mus·es
1. To occupy in an agreeable, pleasing, or entertaining fashion.
2. To cause to laugh or smile by giving pleasure: I was not amused by his jokes.
3. Archaic To delude or deceive.

Please don't dumb down, not for me, I insist.

Wouldn't want you straining yourself putting together another witty post that makes sense only to you.

[Cerridwen]

22. As you request.

[joshcryer]

23. They could absorb one round or so of it.

Liquidating US assets, selling military shit at bargain bin prices, pilfering the social security money (which is no longer sequestered but sits in the general fund for accounting purposes). There's a lot of crap the US could do to satisfy bond debt. In round one.

But it would be goddamn insane, so I'm not disagreeing with you, I'm just sayin'.

[A HERETIC I AM]

24. The "one round or so" has serious consequences.

But I won't go into it. It is late.

Just watch this page in the coming days if this keeps going until the 17th. If things get real bad, the yields on all those bonds will shoot up.

[joshcryer]

25. Fair enough.

I'd have enjoyed a discussion on bond yields and their relation to the crisis though.

[A HERETIC I AM]

26. Well, quickly before I hit the rack....

If you're familiar with how bonds work then you know that as yields rise, bond prices fall.


The biggest threat is if the NY Fed is restricted or otherwise unable to operate the normal auction schedule for Treasuries after the 17th. OR if there is a coupon payment due on any series out there currently that comes due between now and then (or after if there is no resolution) that can not be made. Failure to pay a coupon payment will be VERY bad and prices for bonds traded will plummet and yields will skyrocket. That means the next auction for the bonds that pay coupons - the 2, 5, 10 & 30 year paper will see higher coupons demanded by bidders. If the rest of the world decides it can't take owning US debt paper and a wholesale sell-off begins, THEN we're fucked. Not just us, however, but the entire world. The thing is, we have it pretty good right now when it comes to borrowing money from the world via Treasury bonds sales. The 30 year has a coupon of a mere 3.625% and 90 day paper is basically free. One million dollars worth of 90 day T-Bills currently pays FIVE DOLLARS if held for a year. (To get that you would have to roll them 3 times after the initial purchase and not have the rate change. Yields on maturities of less than a year are still quoted as a yearly yield, and the yield on the 90 day is 0.005%) -

The New York Branch of the Federal Reserve Bank is the one charged with conducting the auctions of US Treasury Securities, in case you weren't aware.

All that relates to every other interest rate on the planet, from your mortgage to car loans, credit cards and how much a skyscraper in Hong Kong will cost to be built.

We have NEVER defaulted in any significant way in this country.

Never. It needs to stay that way.

The volume of the bond market makes the volume of the stock market look like child's play in comparison.

Edited to add this;

In the worst of the worst times in recent years, the yield on 30 day Treasury paper actually went negative twice, both for relatively short periods, as in less than a day. What that meant was, even though the stock market was falling like a badly autorotating helicopter, demand for short term, US Debt paper was incredibly high. So much so that traders were willing to take a small loss in order to have a safe place to put their money.

If we default, the radical opposite will be the case.

[joshcryer]

27. Thanks, sounds about what I thought. I also found some links.

These links corroborate what you have said:

http://www.ft.com/intl/cms/s/0/3356696a-2c37-11e3-acf4-00144feab7de.html

http://www.marketwatch.com/story/one-month-treasury-yield-jumps-long-end-steady-2013-10-03

Have a good sleep.

[2naSalit]

29. What scares me

is that I don't think the zealots who are pulling this crap are smart enough to get that with their, "let 'em eat shit" attitude. Seems all they care about is getting their way and they don't appear to have enough grasp on reality to see beyond getting the lollipop after the tantrum... no matter how long they have to scream. I can imagine they somehow anticipate that it will be good for the privatization plan without realizing they have cut off their heads to spite their face.

[NealK]

30. Right said Fred.

[yuiyoshida]

14. This is too close to call...

I would not bet on it.. I do not trust Stupid Tea Bag Republicans. They would rather see the place burn down around them than allow the Democrats anything.

[Trekologer]

31. That assumes the tea partiers aren't crazy

Unfortunately for all of us, they are very crazy.

[AlinPA]

32. Boehner is working on it and he is leading the crazies. He has the votes to cause the default.