Financial Crisis - 2013 - ????

[Ryan Ruck]

The Credit Bubble Is Not Only Back, It Is 94% Bigger Than In 2007

September 23, 2013

If the Fed was worried about 'froth' in the markets earlier in the year, then this chart should have them panicking. Of course, as Jim Bullard noted Friday, there is no bubble because everyone knows there is no bubble but judging by the massive surge in covenant-lite loan issuance, there is a bubble in forced demand for leveraged loans. At $188.7 billion, the 2013 issuance of these highly unsafe loans (which have seen huge inflows since the Fed started talking taper back in May) is almost double that of the peak of the last credit bubble in 2007 and is five times the size of 2012 YTD issuance at this time. As Reuters notes, Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package. With corporate leverage at all-time highs, what could go wrong?

Demand for leveraged-loans is surging (as rate concerns rise)...



And where there is demand, supply rises to meet it - as the least lender-protected notes surge in issuance...




Via Reuters,

Huge demand for leveraged loans from billions of dollars flowing into U.S. loan funds pushed covenant-lite loan volume to a record $188.7 billion, far surpassing the record of 2007, and still going strong.

Unrelenting investor demand for higher-yielding assets and floating-rate exposure has enabled issuers to sell these loan products that allow for future acquisitions or aggressive credit policies, but offer less protection for investors.

Investors have poured money into floating-rate loans, fearing a rise in interest rates, and private equity firms have taken advantage of the demand to get looser debt structures.

...

Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package.

"Transactions with covenants these days can suggest other problems with the credit, maybe that it is new to the market, or exiting from bankruptcy," said Christina Padgett, senior vice president at Moody's Investors Service.

Covenant-lite has mainly been used by private equity firms, but non-sponsored issuers seeing the robust investor demand have begun seeking these financings.

...

"There's a tremendous amount of demand and only so much supply. When there's more demand than supply, you can certainly do things like get covenant-lite packages through," said one portfolio manager.
Via Reuters,

Huge demand for leveraged loans from billions of dollars flowing into U.S. loan funds pushed covenant-lite loan volume to a record $188.7 billion, far surpassing the record of 2007, and still going strong.

Unrelenting investor demand for higher-yielding assets and floating-rate exposure has enabled issuers to sell these loan products that allow for future acquisitions or aggressive credit policies, but offer less protection for investors.

Investors have poured money into floating-rate loans, fearing a rise in interest rates, and private equity firms have taken advantage of the demand to get looser debt structures.

...

Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package.

"Transactions with covenants these days can suggest other problems with the credit, maybe that it is new to the market, or exiting from bankruptcy," said Christina Padgett, senior vice president at Moody's Investors Service.

Covenant-lite has mainly been used by private equity firms, but non-sponsored issuers seeing the robust investor demand have begun seeking these financings.

...

"There's a tremendous amount of demand and only so much supply. When there's more demand than supply, you can certainly do things like get covenant-lite packages through," said one portfolio manager.

[Malsua]

And the markets continue to climb....Dow 30000!

[Avvakum]

The unreality of our economy, where people make real money off of magically creating money out of thin air, merely bits of info in a computer, nothing.

[American Patriot]

And you have a problem with capitalism too?

[American Patriot]

I just read something interesting and I thought I'd excerpt it here. No explanation, no other reason that I found it "interesting".

Make of it what you will.


The classic example of hyper-inflation, cited in
most economics textbooks, is that of Germany during
1923. Inflation was completely out of control due to the
post-war government's attempts to spend all the paper
money it could print. (There wasn't much in the treasury
following the German defeat in World War I.) The
German people were very alarmed about this inflation,
which was forcing prices to double every month during
the early part of the year. By the end of the year, prices
were doubling every week, and finally they began to
double every day. When the system finally collapsed, the
cost of living had risen to a point 700 million times the
pre-war level. Factories paid employees two or three
times a day so workers could hurry out to spend their
wages before the bills lost too much value. Some companies
paid their workers by giving them the merchandise
they produced. The workers would then spend the
evening trying to barter their goods for food. People on
fixed incomes or living on their savings were totally
unable to obtain goods and services. Between October
and December of 1923, there were over forty food riots
in major German cities. This pattern has been repeated
fifteen times in recorded history, and it has never been
successfully opposed. Some economists suspect that
there is no practical way to halt this inflationary spiral,
and that the United States dollar may soon go the way of
the mark. Time will tell.

Life After Doomsday, Pg 13, Bruce D. Clayton PHd.

[Avvakum]

And you have a problem with capitalism too?

No, not with real Capitalism. Speculation and a number of other practices, yes, capitalism no.

And then there's this aspect, from David Emory's 'spitfire list', with the well-known alliance between libertarian economics and Moslem capitalism, exemplified by Grover Norquist;

“Islam in Office” by Stephen Glain; Newsweek; 7/3–10/2006.
EXCERPT: Judeo-Christian scripture offers little economic instruction. The Book of Deuteronomy, for example, is loaded with edicts on how the faithful should pray, eat, bequeath, keep the holy festivals and treat slaves and spouses, but it is silent on trade and commerce. In Matthew, when Christ admonishes his followers to ‘give to the emperor the things that are the emperor’s,’ he is effectively conceding fiscal and monetary authority to pagan Rome. Islam is different. The prophet Muhammad—himself a trader—preached merchant honor, the only regulation that the borderless Levantine market knew. . . .
. . . In Muslim liturgy, the deals cut in the souk become a metaphor for the contract between God and the faithful. And the business model Muhammad prescribed, according to Muslim scholars and economists, is very much in the laissez-faire tradition later embraced by the West. Prices were to be set by God alone—anticipating by more than a millennium Adam Smith’s reference to the ‘invisible hand’ of market-based pricing. Merchants were not to cut deals outside the souk, an early attempt to thwart insider trading. . . . In the days of the caliphate, Islam developed the most sophisticated monetary system the world had yet known. Today, some economists cite Islamic banking as further evidence of an intrinsic Islamic pragmatism. Though still guided by a Qur’anic ban on riba, or interest, Islamic banking has adapted to the needs of a booming oil region for liquidity. In recent years, some 500 Islamic banks and investment firms holding $2 trillion in assets have emerged in the Gulf States, with more in Islamic communities of the West.
British Chancellor of the Exchequer Gordon Brown wants to make London a global center for Islamic finance—and elicits no howl of protest from fundamentalists. How Islamists might run a central bank is more problematic: scholars say they would manipulate currency reserves, not interest rates.
The Muslim Brotherhood hails 14th century philosopher Ibn Khaldun as its economic guide. Anticipating supply-side economics, Khaldun argued that cutting taxes raises production and tax revenues, and that state control should be limited to providing water, fire and free grazing land, the utilities of the ancient world. The World Bank has called Ibn Khaldun the first advocate of privatization. [Emphasis added.] His founding influence is a sign of moderation. If Islamists in power ever do clash with the West, it won’t be over commerce. . . .
“Chechnyan Power” by Mark Ames; nsfwcorp.com; 6/5/2013.
EXCERPT: . . . . Fuller comes from that faction of CIA Cold Warriors who believed (and still apparently believe) that fundamentalist Islam, even in its radical jihadi form, does not pose a threat to the West, for the simple reason that fundamentalist Islam is conservative, against social justice, against socialism and redistribution of wealth, and in favor of hierarchical socio-economic structures. Socialism is the common enemy to both capitalist America and to Wahhabi Islam, according to Fuller.
According to journalist Robert Dreyfuss’ book “Devil’s Game,” Fuller explained his attraction to radical Islam in neoliberal/libertarian terms:
“There is no mainstream Islamic organization...with radical social views,” he wrote. “Classical Islamic theory envisages the role of the state as limited to facilitating the well-being of markets and merchants rather than controlling them. Islamists have always powerfully objected to socialism and communism....Islam has never had problems with the idea that wealth is unevenly distributed.” . . . .

[vector7]

*Breaking: Panama Announces 5 Day Bank Holiday! Bail-in Imminent?

September 27, 2013 By The Doc 58 Comments

*Updated 4pm EST with notice to customers from National Bank of Panama’s website

This morning the National Bank of Panama announced that it was suspending all services until Tuesday the 1st of October.

The National Bank of Panama claims that the reason for the 5 day bank holiday is to upgrade systems.

The Clave (Debit Card) system has been taken offline. No wire transfers between banks and internationally until the 1st of October.

This system wide shutdown has country wide implications. The National Bank of Panama did not warn the people before making the announcement and shutting down the banks. The people do not have access to ATM’s either. We received word of this from family members first. This weekend is payday for people across Panama.

Is the next Cyprus-style bankster bail-in about to be implemented in Panama?

Submitted by Randy Hilarski:
I am active among the Gold and Silver investing community. We have been discussing at great length about the possibility of bank holidays in countries on the Dollar standard. Could Panama just be the first domino to fall in the banking system? Could this be more than just a system upgrade? Why not tell the people ahead of time to prepare for the closure of the banking system?


What are some reasons for a bank holiday? The National Bank of Panama says it is a system upgrade, I don’t believe it is that simple. Maybe a Dollar revaluation could be coming soon. Maybe it is something more serious like a banking crisis like we had in Indonesia back in 1997 or more recently in Cyprus. I am hoping for the best and preparing for the worst.


What are some things you can do to protect yourself if Panama is just the first signal of a pending banking crisis? First and foremost make sure to have some cash. Second buy the essentials for your family. Be frugal until the storm passes. I know this sounds simplistic, but those who are prepared will be fine.

I feel for the Panama families who live paycheck to paycheck. They were expecting to be paid tomorrow. This is the time that they go grocery shopping, put gas in their cars and pay the bills. This delay will have wide ranging affects on the people of Panama.
Do not be unprepared, you have it within your power to be ready for such a situation!
*Update:

The Clave (Debit Card) system has been taken offline. No wire transfers between banks and internationally until the 1st of October. Panamanians will be required to go to their local bank branch to take out cash.

Notice on the Bank of Panama’s website regarding suspension of service:



English translation:

The National Bank of Panama reports that next Friday September 27 branches across the country will be open only until 12:00 noon. Also, on Saturday 28 and Monday September 30 our branches will be closed.

Our ATM’s, debit card use Banconal of sales points and shops, in addition to banking services and infovoz Online will be unavailable on Saturday 28 and Sunday 29 September.

These suspensions of services are required to implement Phase 2 of the upgrade process of the technological platform of the entity.

Got PHYZZ??

[Malsua]

It really could be an upgrade to their systems.

[vector7]

Hope that is all it is.

[vector7]

US banks fearing default stock up on cash

By James Politi in Washington and Michael Mackenzie and Tom Braithwaite in New York

Last updated: October 3, 2013 10:33 pm
Financial Times of London

US banks were stocking cash machines with extra funds, investors dumping Treasury bills and US equity indices sinking on Thursday in a sign of mounting unease that Washington risks defaulting on its debt later this month.

On the third day of a government shutdown, policy makers and business leaders expressed increasing concern that Republicans and Democrats would not reach a deal before the October 17 deadline to raise the debt ceiling.

Christine Lagarde, managing director of the International Monetary Fund, gave warning of dire consequences for the rest of the world if the stalemate were not resolved. “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse,” she said. “It is ‘mission critical’ that this be resolved as soon as possible.”

John Boehner, the Republican speaker of the House of Representatives, has indicated to members of his party that he may be willing to rely on Democratic votes to pass an increase in the debt ceiling, suggesting a slightly more conciliatory position than that which triggered the shutdown.

But House Republican aides and members of Congress said they would still be seeking concessions from Barack Obama on deficit reduction – including cuts to popular pension and health programmes – in exchange for a debt ceiling increase. The White House and Democrats have said they are open to a big fiscal deal but increasing the country’s borrowing authority to pay America’s bills should not be the subject of negotiations.

Meanwhile, two of the country’s 10 biggest banks said they were putting into place a “playbook” used in August 2011 when the government last came close to breaching the debt ceiling.

One senior executive said his bank was delivering 20-30 per cent more cash than usual in case panicked customers tried to withdraw funds en masse.

The move to source extra cash is a precaution to deal with an unnecessary upturn in demand, banks said. The Federal Deposit Insurance Corporation insures deposits up to $250,000.

Banks are also holding daily emergency meetings to discuss other steps, including possible free overdrafts for customers reliant on social security payments from the government.

The US Treasury has said the US could run out of money as early as October 17 if there was no congressional deal.

“A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket,” the Treasury said in a report on Thursday, citing “negative spillover effects around the world”. It added: “There might be a financial crisis and recession that could echo the events of 2008 or worse.”

A daily economic confidence index produced by Gallup, the polling firm, fell further on Thursday to a reading of minus 32. A week ago, it was minus 22, raising worries that the shutdown could dampen Americans’ spending even if they are not directly affected by it.

Financial markets had remained relatively sanguine about the US fiscal stand-off before Thursday, when the S&P 500 closed 0.9 per cent lower in New York, its worst one-day performance since late August.

Premiums for insuring against a US sovereign default over the next year rose from around 30 to 54 basis points. Money market funds are big holders of Treasury bills, and these short-term securities are viewed as a substitute for holding cash as they are backed by the full credit of the US government.

But as the debt ceiling deadline looms in the absence of an accord in Washington, money funds are looking to lighten up on their holdings of October-dated bills, said traders.

As worries increased, President Barack Obama delivered a blistering speech attacking Republicans for insisting on delaying funding his healthcare reforms in return for their approval of the budget.

“There’s one way out of this reckless and damaging Republican shutdown,” he said. “Take a vote – stop this farce,” he added to applause.

Mr Obama also repeated that Republicans should unconditionally fund the government and raise the debt limit. “You don’t negotiate by putting a gun to the other person’s head,” he said. “The American people are not pawns in some political game ... you don’t get to demand ransom for doing your most basic job.” he added.

In only two weeks, the US government will be left with just $30bn to pay its bills, and it has given warning that on some days thereafter its actual obligations may exceed that total.

US Treasury officials have been reluctant to specify which bills would be paid – and at what point a default would be triggered. They have simply said there is no alternative to raising the borrowing authority and that prioritising certain payments over others – as suggested by many Republicans – is unworkable.

Mr Obama compared the US defaulting to a “deadbeat” who failed to pay his restaurant or mortgage bill. “The United States is the centre of the world economy, so if we screw up, everybody gets screwed up,” he said. “The whole world will have problems, which is why, generally, nobody’s ever thought to actually threaten not to pay our bills. It would be the height of irresponsibility,” he said.

[Ryan Ruck]

Blackstone: We're In An 'Epic Credit Bubble'

September 27, 2013

One of the world's largest investment firms believes the financial system is overly leveraged.

"We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven't seen in my career in private equity," Joseph Baratta, The Blackstone Group's global head of private equity, said Thursday night at the Dow Jones Private Equity Analyst Conference in New York City. "The cost of a high yield bond on an absolute coupon basis is as low as it's ever been."

Baratta said Blackstone is "bullish" on the U.S. economy, but the "valuations we have to pay relative to the growth prospects are out of whack right now."

Baratta said the U.S. still has "clear headwinds" and is "range bound" between 1 percent and 3 percent economic growth.

Blackstone, which manages $53 billion in private equity assets and $230 billion overall, is pursuing select investment opportunities in energy, transportation infrastructure, consumer finance, housing and construction, according to Baratta.

"We're not just levering up U.S. GDP into multiples today," Baratta said. "I do expect mean reversion to happen at some point on interest rates, on credit spreads, on the cost of some investment grade corporate credit."

The high valuation of many companies today makes it harder for them to grow. "The biggest risk to returns of this vintage is that exit multiples are depressed," Baratta said.

[Ryan Ruck]

Postal Service Defaults On $5.6 Billion Payment

October 1, 2013

The U.S. Postal Service has defaulted on a $5.6 billion payment for retiree health benefits that was due on Monday, just as the Postmaster General had warned it would.

"We have not made the required $5.6 billion Retiree Health Benefits prefunding payment due Sept. 30, 2013," wrote USPS spokeswomen Patricia Licata in an email to CNNMoney. She added that the default has absolutely nothing to do with the federal government shutdown. "We have been saying for several months that we will be defaulting on this payment. This is the third time we have [done so]," Licata wrote.

Postmaster General Patrick Donahue told the Senate Committee on Homeland Security and Government Affairs that the default was going to happen on Sept. 19.

At the time, he said the Postal Service was "in the midst of a financial disaster" and that it is "burdened by an outdated and inflexible business model" that prevents it from making payments.

Postal officials have long complained about a Congressional mandate that requires them to set aside billions of dollars for a retiree health care fund each year. The Postal Service also defaulted on these prefund payments last year. In fiscal year 2012, the Postal Service lost a total of $15.9 billion, including $11.1 billion in defaulted payments that it owes to prefund health benefits for retirees.

But Postal officials point out that other federal agencies aren't required to prefund for retirees this way.

In addtion, the Postal Service hit its debt limit last year, which means that it cannot borrow any more money from the U.S. Treasury.

The Postal Service plans to cut 150,000 workers through 2015, and recently proposed a price hike for stamps. But officials have said that the crisis won't go away until Congress makes the prefund requirement disappear.

"The Postal Service continues to be in a financial crisis," said Licata. "Without passage of comprehensive legislation as outlined in our Five-Year Business Plan, current projections indicate that we will have a dangerously low level of liquidity in the foreseeable future."

Unlike other federal agencies, the Postal Service isn't funded by taxpayers, and is intended to function like a private business.

[Ryan Ruck]

This Is What Keeps Retailers Up At Night

October 7, 2013

The government shutdown has removed key algo-dependent headline-making economic data from our daily lives such as incomes, spending and retail sales. However, we have anecdotal signals from trade industry data (pace of dining out has stalled and anyone but the hghest earners are seeing consumer comfort plunge) and from-the-horse's mouth we have CEO comments. Here is what is on the US retailers' mind...

Via Bloomberg's Ric Yamarone,

Chico’s FAS [CHS] Earnings Call 8/28/13:

“Traffic was our issue in quarter two. In a highly promotional and challenging environment, comparable sales result was a negative 2.6 percent on top of a positive 5.6 percent last year and a positive 12.8 percent in 2011.”


William-Sonoma [WSM] Earnings Call 8/28/13:
“The retail environment, it seems to indicate there’s still a lot of uncertainty out there, that the promotional environment has not gone away and that the retail environment in general continues to be choppy, especially with the recent earnings releases and this global unrest, and we just don’t want to get ahead of ourselves.”


Zale Corp [ZLC] Earnings Call 8/28/13:
“Overall, we continue to take a conservative view of market conditions in both the U.S. and in Canada. That being said, we do expect to continue to achieve positive top line growth. We expect store closures will impact our overall revenue growth for the year by about 250 basis points. It represents net closures of approximately 50 to 55 retail locations.”


DSW Inc. [DSW] Earnings Call 8/27/13:
“We did have a traffic decline in Q2, sort of similar to what just about every other retailer in America has reported.”


Guess? [GES] Earnings Call 8/28/13:
“The Korean business continued to be strong as revenue grew in the high single digits in local currency during the quarter. This was offset with the weakness from China, where we are seeing clear evidence of a pullback in consumer spending behavior because of the slowdown in the economy.”


Aeropostale [ARO] Earnings Call 8/22/13:
“Our business trends in the second quarter did not change materially from earlier in the year, which was disappointing given the level of change we registered with the brand. This performance in the third quarter outlook is being influenced by a challenging retail environment, with weak traffic trends and high levels of promotional activity.”


Dollar Tree Inc. [DLTR] Earnings Call 8/22/13:
“In our current economy with customers facing stubbornly high unemployment, unpredictable fuel prices and higher taxes people continue to look to Dollar Tree as a destination for a balanced mix of high value consumer products and a terrific assortment of fun, high value and high margin variety merchandise.”


Hormel Foods [HRL] Earnings Call 8/22/13:
“The weakness for Refrigerated Foods was clearly the most pronounced in the earlier part of the quarter, ending up prompting us to come out with our guidance adjustment that occurred mid-quarter. At that stage, we were seeing some continued weakness in processing margins, but the bigger culprit had been the spike in some of the raw material costs.”

and all of this before the government managed to shutdown the government and furlough hundreds of thousands of workers...

[Ryan Ruck]

It's Back With A Vengeance: Private Debt

October 12, 2013

As Washington is struggling with debt and all its political ramifications, American companies and consumers are embracing it, running up record amounts in 2013.

Whether it's corporate loans, all quality levels of bonds or simple consumer credit, the debt party is back on in the U.S., whether it's in the boardroom or the living room.

Amid the financial crisis of 2008, the U.S. went into what economists call a "debt deleveraging cycle"—akin to a credit hangover, where the party has ended and everyone there decides to quit drinking cold turkey.

Somebody has clearly turned the lights back on, though, and corporate and individual buying is soaring.

Consumer credit, for instance, surged past the $3 trillion mark in the second quarter of 2013 and continues on an upward trajectory, according to the most recent numbers from the Federal Reserve.

At $3.04 trillion, the total is up 22 percent over the past three years. Student loans are up a whopping 61 percent.

Total household debt, according to the Fed's flow of funds report, is at $13 trillion, nearly back to its pre-crisis level in 2007 and a shade below government debt of $15 trillion.

"We have not solved (anything) when it comes to the deleveraging myth," said Michael Pento, president of Pento Portfolio Strategies. "We have learned nothing."

While the specter of another debt crisis might seem scary, some economists tout it as a healthy sign of a recovery. "In a moment of crisis, that's going to come back to haunt you," said Peter Cardillo, chief market economist at Rockwell Global Capital. "As long as you can support that debt through growth, it's really not a major concern."

That's a big "if," and the prospects of rising interest rates could force borrowers back into their foxholes.

But with the U.S. economy growing at a steady, if unspectacular, 2.5 percent rate, economists are mostly dismissive about another debt crisis hitting.

Gluskin Sheff's noted bear, David Rosenberg, said the rebirth of leverage is actually a reason for optimism. A July analysis Rosenberg released on the topic marked a sharp change in tone for someone who only a few years ago saw an economy not in recession but rather depression.

"The building blocks for the consumer to grab the torch are being put together with each and every passing data point as of late," he said. "Don't fight it. Embrace it."

Companies have followed that advice.

On the corporate side, debt issuance has surged as well, thanks to some high-profile deals in which companies have been able to go to market and easily raise funds.

Through September, high-yield—or junk—bond issuance came in at $378.2 billion, a new record and a 27 percent surge for the same period in 2012, according to Dealogic.

Sprint notched a record last month, with a $6.5 billion high-yield bond issuance that was embraced by investors.

Top-quality, or investment-grade, debt has roared as well.

Though borrowing slowed in the third quarter as interest rates rose, September marked the sector's best month ever. Total investment-grade volume hit $148.1 billion—the highest month ever—thanks to Verizon's blockbuster $49 billion issuance on Sept. 11, marking the biggest single deal ever.

The debt deluge doesn't end there, either, with lots of loans being taken out as well by companies.

U.S. loan volume alone totaled $1.53 trillion through the first three quarters, a gaudy 25 percent higher than the same period in 2012.

Globally, syndicated marketed loans—put together by multiple parties for a single borrower—hit $2.93 trillion in the first three quarters, a 15 percent annualized gain, with average deal size of $458 million the highest since 2007, Dealogic reported.

High-risk leveraged loans hit a global volume of $1.23 trillion, passing the trillion barrier for the first time since 2007.

[American Patriot]

private debt. Whats that?

whats "debt"?

[Malsua]

Civil War Off. The EBTs will flow!
-----
http://www.cnn.com/2013/10/16/politi...3A+Politics%29


Sources: Senate reaches deal to end shutdown, avoid default
By Tom Cohen. Ben Brumfield and Greg Botelho, CNN
updated 11:51 AM EDT, Wed October 16, 2013
Watch this video
Warren Buffett: We can't play games
STORY HIGHLIGHTS

NEW: Formal announcment of the deal is expected at 12 noon ET
U.S. government's authority to borrow money to pay bills runs out on Thursday
House Speaker John Boehner may have to break Republican tradition to help end crisis
NEW: Wall Street optimistic impasse will be resolved as stocks soar

Washington (CNN) -- Senate leaders on Wednesday worked out a deal to reopen the government and avoid a potential U.S. default as soon as midnight, sources told CNN's Dana Bash and Ted Barrett.

Formal announcement of the agreement will come at 12 noon ET on the Senate floor, a Republican Senate aide told Bash.

Republican leaders convened the Senate's full GOP caucus in the morning, and Sen. Kelly Ayotte of New Hampshire said on her way in that the announcement would be coming.

"I understand that they've come to an agreement but I'm going to let the leader announce that," Ayotte said.

Exact details of the Senate plan were not known. Nor was it clear how the Senate and House would proceed in considering the measure.

Both chambers would have to take special steps to get the legislation passed and to President Barack Obama's desk before the government's ability to borrow money expires on Thursday.

Legislators dropped hints on their way home on Tuesday that Senate Majority Leader Harry Reid and his Republican counterpart, Mitch McConnell, would quickly finalize an agreement in the works all week.

U.S. stocks opened sharply higher on expectations Washington would end its partisan fiscal impasse. The benchmark Dow Jones Industrial Average jumped 200 points.

Short-term plan

According to sources, the Senate deal under discussion would reopen the government, funding it until January 15. It would also raise the debt limit until February 7 to avert a possible default on U.S. debt obligations for the first time.
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It also would set up budget negotiations between the House and Senate for a long-term spending plan, and would include a provision to strengthen verification measures for people seeking government subsidies under Obama's signature health care reforms.

The focus shifted to the Senate after House Republicans failed on Tuesday to come up with a plan their majority could support, stymied again by demands from tea party conservatives for outcomes unacceptable to Obama and Senate Democrats, as well as some fellow Republicans.

It remained unclear if the congressional tea party wing led by Sen. Ted Cruz of Texas would continue efforts to force its demands into a congressional deal, perhaps by trying to filibuster or otherwise delay Senate action.

"It's up to him. I would hope he wouldn't," Ayotte, who represents New Hampshire, told CNN's "New Day." "Senators can cause to you run out the clock, but what's he trying to gain at this point? I would hope that whatever comes forward, that we would allow a vote on it as soon as possible."

Cruz, despite being in the Senate, is credited with spearheading the House Republican effort to attach amendments that would dismantle or defund the health care reforms known as Obamacare to previous proposals intended to end the shutdown.

All were rejected by the Democratic-led Senate, and Obama also pledged to veto them, meaning there was no chance they ever would have succeeded.

Ayotte called the tactic of tying Obamacare to the shutdown legislation "an ill-conceived strategy from the beginning, not a winning strategy."

However, Republican Rep. Steve King of Iowa advocated continued brinksmanship to try to change Obamacare, which conservatives detest as a big-government overreach.

"If we're not willing to take a stand now, then when will we take this stand?" he told CNN's "New Day," adding that if "the conservative Republican plan had been implemented five years ago, say at the inception of what is now the Obama presidency, we would have far less debt and deficit."

Despite warnings by Obama and economists that a U.S. default would spike interest rates and could have catastrophic impacts at home and abroad, King said he's not too concerned if the government passes Thursday's deadline to raise the borrowing limit.

"It's just a date they picked on the calendar," he said, adding that the government will still be able to pay the interest on its debt. "I'm more concerned about market reaction than I am of default itself."

Thursday marks the day the Treasury Department will run out of special accounting maneuvers to keep the nation under the legal borrowing limit. From that point on, it will have to pay the country's incoming bills and other legal obligations with an estimated $30 billion in cash, plus whatever daily revenue comes in.

The expectation is that the Treasury will be able to pay bills in full for a short time after Thursday, but exactly how long remains unclear. According to the best outside estimates, the first day the government will run short of cash could come between October 22 and November 1.

Officials warn that an unknown is whether creditors such as foreign countries that traditionally roll over their U.S. bond holdings could decide to instead cash out, creating a potentially major payout that the government would lack funds to fulfill.
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What happens next?

A top GOP Senate aide said Wednesday that leaders in that chamber remain "optimistic an agreement can be reached," the same tone sounded Tuesday after lawmakers called it a night around 10 p.m. Senate staffers burned midnight oil to draft a framework bill.

A break from tradition

If the Senate passes an agreement, House Speaker John Boehner will probably face the decision of whether to allow a vote that he knows can only pass with virtually all Democrats and only a few of his fellow Republicans supporting it.

That would break a Republican tradition known as the Hastert rule. The informal tenet, named after former House Speaker Dennis Hastert, says that the House speaker does not introduce legislation unless a majority of Republicans say they will vote for it first.

It has served to keep proposals off the floor, even if they have the prospect of passing via the votes of Democrats combined with those of some moderate Republicans.

House Republicans have expected Boehner to uphold the rule, which asserts the party's interests in the chamber, and he has pledged to do so. However, Boehner has previously allowed votes on measures lacking full Republican support at times of similar brinksmanship, such as the fiscal cliff negotiations in late December and early January that raised tax rates on wealth Americans.

"I believe that John Boehner will likely be in a position, where he will have to essentially pass the bill that is negotiated between Sens. McConnell and Reid," said Republican Rep. Charlie Dent of Pennsylvania, who added that he would vote for the Senate plan.

About 20 Republicans would have to back the Senate plan for it to pass, assuming that virtually all of the chamber's 200 Democrats also would support it.

Rep. Charles Rangel compares tea party in House to 'confederates'

Slow process

Even so, it could take a day or two more for a deal to make it through the legislative process. By then, the nation will have run out of borrowing authority.

While tax revenues will continue to stream in, that money will be enough to pay only part of the government's obligations over time. The impact is unclear in the immediate short term, but over days and weeks, it would mean that government officials would have to pick and choose which bills to pay and which to leave for another day.

The prospect of the U.S. government running out of money to pay its bills and, eventually, finding it difficult to make payments on the debt itself, has economists around the world prophesying dire consequences.

Mutual funds, which are not allowed to hold defaulted securities, may have to dump masses of U.S. treasuries.

Ratings agency Fitch fired a warning shot Tuesday that it may downgrade the country's AAA credit rating to AA+ over the political brinksmanship and bickering in Washington that have brought the government to this point.

That could help raise interest rates on U.S. debt, putting the country deeper into the red.

Rating agency Standard & Poor's cut the U.S. credit rating from AAA to AA+ after the 2011 debt ceiling crisis. Moody's still has the U.S. rated AAA.

Investors around the world appeared to be sitting on the sidelines Wednesday waiting out the day's debate.

Asian markets ended with mixed results, European markets were down slightly Friday afternoon and U.S. stock futures -- frequently taken as an indicator for how U.S. markets will open -- were up marginally before trading began Wednesday.

Emergency brake?

Some scholars have suggested that the 14th Amendment to the Constitution gives Obama an emergency brake to stop the default by ignoring what Congress does and borrowing in spite of having reached the debt ceiling.

Section 4 of the amendment states: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

Obama has rejected such claims, the Congressional Research Service has said. And other scholars say that by invoking the 14th Amendment in this way, the President would risk breaking other laws.

But the same scholars who say this say they believe that section 4 was formulated to keep politicians from holding the debt hostage in order to impose their political will on the natio

Government dysfunction sparks doomsday fears

Muddled plan

Disarray among House Republicans caused confusion on Tuesday, with Boehner having to pull a proposed agreement from the floor because conservatives found it too weak.

The House proposal dropped some provisions on Obamacare but prohibited federal subsidies to the President and his administration officials as well as federal lawmakers and their staff receiving health insurance through the Affordable Care Act programs.

It also would have forbidden the Treasury from taking what it calls extraordinary measures to prevent the federal government from defaulting as cash runs low, in effect requiring hard deadlines to extend the federal debt ceiling.

House Democrats opposed the GOP proposal, which meant it couldn't pass without support from the 40 or so tea party conservatives, who wanted more spending cuts.

"It just kicks the can down the road another six weeks or two months," said Rep. Joe Barton, R-Texas.

Stocks: Prepare for a bumpy ride

Time running out

Obama will meet Wednesday with Treasury Secretary Jack Lew, who has been looking for creative ways to cover U.S. financial obligations as the debt ceiling comes down.

On Tuesday, Obama called for House Republicans to "do what's right" by reopening government and ensuring the United States can pay its bills. "We don't have a lot of time," he said.

But he acknowledged Boehner's difficulty in getting his fellow House Republicans on the same page.

"Negotiating with me isn't necessarily good for the extreme faction in his caucus," Obama said, referring to the tea party and its conservative allies. "It weakens him, so there have been repeated situations where we have agreements. Then he goes back, and it turns out that he can't control his caucus."

Has shutdown affected you? Share your story with CNN iReport.

CNN's Ashley Killough, Craig Broffman, Jim Acosta, Dana Bash, Deirdre Walsh, Mark Preston, Dan Merica, Brianna Keilar and Janet DiGiacomo contributed to this report.

[American Patriot]

Has the shutdown affected me?

Emotionally, yes. I'm pissed off at them blocking the memorials for ancient veterans of this country. Someone should be tarred and feathered over that.

Children and adults can't "recreate" in the National Parks - which by the BLOODY WAY are LAND MASSES with NO REASON TO PREVENT PEOPLE GOING THERE.

The Land belongs to US you morons!


LOL

[American Patriot]

11.22.13
by wkchild

Charles Schwab Warns “We Are In A Manipulated Market”

Editor’s Note: And herein lies the problem…



Submitted by Tyler Durden on 11/21/2013



While the world of mainstream media stock pundits would like investors to believe that there is a wall of money on the sidelines waiting anxiously to go all-in on stocks (bear in mind there’s a seller for every buyer and where does the cash on the sidelines go when it is handed over to the seller in return for his stock?), as none other than Charles Schwab notes in this brief Bloomberg TV clip, “investors are less rattled” than most believe, “and have stayed invested” in large part. “There hasn’t been a wholesale movement away from stocks,” he goes on, busting myths asunder, adding that “investors want to see market-driven conditions, not Fed manipulated ones.”



So perhaps – just perhaps – Schwab is right, if the Fed stepped away and let markets be markets once again, maybe real capital would flow once again?



Schwab goes on to discuss how the Fed’s policy has hurt the older generation – “it has been a terrible thing”



Beginning at around 50 seconds, Schwab calmly dismisses one of the biggest market myths and raises a few red flags – “we see the market go up or down depending on which Fed member is speaking…”



View Clip Here: zerohedge.com

[Ryan Ruck]

FNC just said consumers spent 3% less during this year's Black Friday weekend than last year's. That's a decent size drop.

[American Patriot]

That's because most people are now buying gift cards for family members, not shopping. No one wants to go out into the sea of fucking idiots out there who have to be "first in line" and knock old people down to take shit from them.

I was out and about on Friday, and again yesterday and Saturday.

My city ain't that big and people were acting like complete douche bags, or assholes.