http://www.zerohedge.com/news/2013-10-07/obama-reiterates-will-only-negotiate-after-getting-everything-he-wants

Obama Reiterates - Will Only Negotiate After Getting Everything He Wants

Submitted by Tyler Durden on 10/07/2013 12:48 -0400

Debt Ceiling

It would appear that President Obama's comprehension of the meaning of the word "negotiate" is different from that taught in the new "common core". Speaking at an event at FEMA, he noted:

*OBAMA: WILL NEGOTIATE AFTER GOVT OPENS, DEBT CEILING RAISED
*OBAMA: WON'T NEGOTIATE UNDER 'THREAT OF ECONOMIC CATASTROPHE'
*OBAMA TELLS CONGRESS TO 'MOVE BEYOND THIS MANUFACTURED CRISIS'

But given his comments last week on the markets' need to see this as a crisis, perhaps the best word to use to describe this farce is "inconceivable."

http://www.zerohedge.com/news/2013-10-07/shut-down-debt-ceiling-round-all-latest-news-and-developments

Shut Down, Debt Ceiling Round Up: All The Latest News And Developments

Submitted by Tyler Durden on 10/07/2013 18:01 -0400

Feel like you have missed any of today's (non) developments in the week-long government shutdown debacle, or the countdown to the debt ceiling X-Date, which now is 10 days away (or 222 hours as dramatically inclined CNN helpfully points out), then this summary is for you. From Bloomberg:

President Obama calls on House Speaker John Boehner to vote today on "clean" CR to prove he doesn’t have votes to pass it, calls on Congress to raise debt limit next week
Obama backs Senate plan for 1-yr debt limit hike
White House National Economic Council Director Gene Sperling says a 2-3 week debt-limit extension is feasible, that Obama wants to set precedent of never negotiating when nation’s "full faith and credit" is on line
Treasury Sec. Lew says U.S. will lose its ability to borrow on Oct. 17th if Congress doesn’t act to raise debt limit
Lew set to testify before Senate Finance Cmte hearing on Oct. 10
Rep. Hoyer says as many as 160 Republicans in House think shutdown is irrational
Spokesman for Senate Majority Leader Harry Reid says Boehner has a "credibility problem"
Boehner’s spokesman says govt shutdown is because "Democrats refuse to negotiate"
Sen. Schumer says he thinks Boehner will break with the Tea Party on the debt ceiling
House deal to avoid default may come as late as Oct. 21, Bloomberg Industries says
Reid says Boehner has votes to open govt
ABC News/Washington Post poll finds Republicans are losing ground in "shutdown blame game"

So now you know.

http://www.zerohedge.com/news/2013-10-07/suddenly-nervous-china-tells-us-earnestly-take-steps-avoid-default

A Suddenly Nervous China Tells The US To "Earnestly Take Steps" To Avoid A Default

Submitted by Tyler Durden on 10/07/2013 10:16 -0400

While the world's largest hedge fund, the Fed, may not care about the performance of its "bad bank" assets, and thus is largely ambivalent if the US Treasury defaults on the $2 trillion in US paper held by Ben Bernanke, others don't have the luxury of merely printing away any incurred MTM losses. Such as America's largest foreign creditor China, which at last check held at least $1.277 trillion in US Treasurys, which after realizing with a substantial delay that the US Congress is not precisely a "rational actor" and its bonds may be materially impaired in the case of a technical default, is starting to panic. In an oped in the largest media publication, China Daily, vice finance minister Zhu Guangyao, warned that the "clock is ticking" to avoid a US default that could hurt China's interests and the global economy. Somehow we doubt Boehner or Obama are particularly concerned about what happens to "Chinese interests." Of course, if China so wishes, it can pen an Op-Ed in the NYT and tell the US just what will happen if $1.3 trillion in US Treasurys were suddenly to be dumped in a liquidation fire sale.

The Danger In Playing "Debt Ceiling Chicken": $440 Billion In Debt Maturing Before November 15

Submitted by Tyler Durden on 10/07/2013 15:00 -0400

With everyone's attention turning to the debt ceiling X-Date of October 17 (or sooner now that the Pentagon is once again spending money like a drunken sailor following the recall of 400,000 workers or half of the total number fuloughed), some are wondering why is the stock market not reacting more violently. The generic response that has formed is that despite all the feamongering by Obama and the Treasury, even crossing the X-Date will hardly result in the apocalyptic outcome that so many predict as the Treasury can "prioritze payments", i.e., paying some bills and not others, which as we explained before, means paying down debt obligations first, and everything else - whose non-payment does not constitute an event of default under US debt - last. In other words, if the US were to merely live within its means, it should have no problem remaining current on its interest expense even if that means slashing most other government programs.

While superficially this is correct, there is one issue that few are discussing, namely the mountain of short-term debt maturities between October 24 and November 15, which if unable to be rolled over - something that would hardly be able to happen in a time of quasi-technical default - would imply redemption and maturity of the debt without a subsequent rolling over.

The chart below lay outs the amount of Bill, Note and Bond maturities between October 18 and November 15: it totals a whopping $441 billion.

As the Bipartisan Policy Council assessed, correctly, before, the Treasury must roll over well over $370 bn (make that $441 billion per latest calculations) in debt that will mature this year during the Oct 18 – Nov 15 period.

When a Treasury security matures, Treasury must pay back the principal plus interest due. Under normal circumstances, Treasury would simply “roll over” the security.
As one security matures, the principal and interest for that security would be paid for with cash from the issuance of a new security.

In a post-X Date environment, this operation may not run as smoothly.

Two elements of market risk:

Treasury will have to pay higher interest rates to attract new buyers.
It is possible, if unlikely, that not enough bidders would appear, forcing Treasury to either use cash on hand to pay off securities that came due or, in a worst-case scenario default on the debt.

Actually, it is very much likely that if there is fear that one or more short-term funding acutions will not result in a prompt repayment, it is virtually assured that the Treasury will simply halt new Bill issuance to avoid the panic that would result from ultra-short term rates soaring and destroying the Fed's carefully crafted ZIRP (on the short-end) policy.

And according to our and the BPC's preliminary calculations, just focusing on simply paying down this debt in the all too likely case that the rollover machinery grinds to a halt, means that the Treasury would be about $180 billion short of paying down just the amounts due in the table above!

So sadly, no. Those who are trying to talk down the severity of even a quasi-technical default, in an attempt to explain why the algos are oblivious to what may happen in ten short days, they have it all wrong. Instead the only logic for the lack of a selloff, is that once again, everyone and the kitchen sink, is 100% certain that should a worst case scenario transpire, it will be the "Mr. Chairman" who once again "gets to work," and makes sure that nobody suffers any loss. After all, the New Normal is all about return; nothing about risk.

The view from Germany....

http://www.spiegel.de/international/germany/german-press-review-on-us-government-shutdown-a-925768.html

The illustration on the cover of German business daily Handelsblatt on Wednesday morning fairly well encapsulates the way the US federal government shutdown is being perceived across the Atlantic. The Statue of Liberty stands bound in chains, her torch hand hanging listlessly by her side. Across it reads the headline: "The Blocked World Power."

Many Germans have found it hard to understand American lawmakers' inability to resolve their budget disagreements in time to prevent a shutdown of all nonessential government services, which went into effect at midnight on Monday night. "What Washington currently offers up is a spectacle, but one in which the spectators feel more like crying," writes the conservative dailyFrankfurter Allgemeine Zeitung.

"Because Republicans and Democrats, House and Senate, Congress and president could not agree on a stop-gap budget, hundreds of thousands of federal employees were sent on involuntary leave and many agencies were forced to shut down," continues the editorial. "The main actors in this dispute, which brings together many factors, both ideological and political, took a huge risk and, unhindered, proceeded to validate everyone who ever accused the political establishment in Washington of being rotten to the core -- by driving the world power into a budgetary state of emergency. The public is left wondering how things could have been allowed to get to this point and why there is so much poison in the system."

Elsewhere, German commentators asked whether a similar government shutdown could happen in Berlin, where Chancellor Angela Merkel is currently embroiled in drawn-out talks over Germany's federal budget between her conservatives and their probable coalition partner, the center-left Social Democrats. "The American situation is not at all comparable with the Germans," Professor Henrik Enderlein, a Berlin-based expert on political economy, assured news agency DPA on Wednesday. The article went on to characterize the shutdown as a "specifically American problem," a sentiment echoed by other media outlets.

Yet it was clear to many that the fallout would be far-reaching. "The whole world pays for America's shutdown," reads a headline in the right-leaning daily Die Welt above an article about the consequences on the German economy. In the article, several prominent German economists registered disapproval. "If the Americans shoot themselves in the foot right now, it is highly dangerous for the entire global economy, and of course for the German export economy," warned Anton Böner, president of the Federal Association for German Wholesalers and Foreign Trade.

The 'Kamikaze Party'

The overwhelming consensus among the German press is that the Republicans are the most to blame for the gridlock. In a Tuesday commentary, SPIEGEL ONLINE's Gregor Peter Schmitz dubbed them the "kamikaze party." He attributed the gridlock to America's mercenary political culture -- where directly elected lawmakers run for re-election every two years and campaigns are privately financed -- as well as to the lack of party infrastructure compared to Germany's parliamentary model with its publicly funded campaigns.

"It's circumstances like these," writes Schmitz, "that explain why a brigade of Republicans conduct themselves like a bunch of Berlusconis -- as enemies of the state from within who want to cripple the country because that's the desire of their conservative voters at home."

When it came to the Tea Party wing of the Republican Party, the German press was not pulling any punches. "There are fundamentalists within the world's largest democracy: The hardline wing of the Republican Party are once more crippling the United States," writes Nuremberg's Nachrichten. The Tea Party movement, it concludes, "does not engage in democracy, but in dogmatism."

"Here are fundamentalists at work who hold up their country to ridicule to advance their pure doctrine," wrote a commentator in Collogne'sStadt-Anzeiger. "What a tragedy!"

'Self-Destruction' of a Democracy

Munich's national Süddeutsche Zeitung offers a slightly more depressing take, pointing blame at all sides. "What has already been apparent in America for a few years now is the self-destruction of one of the world's oldest democracies. And the great tragedy here is that this work of destruction isn't being wrought by enemies of democracy, greedy lobbyists or sinister major party donors. America's democracy is bring broken by the very people who are supposed to be carry and preserve it: the voters, the parties and the politicians."

The argument? The Republicans who have brought Washington to stillstand are repeatedly and democratically elected by voters and given a mandate to block. The parties themselves are fomenting an increasingly radicalized culture that deepens political, societal and geographic divisions in the country, argues the newspaper. And finally, there are few politicians in America who are willing or capable of thinking beyond their own electoral constituencies.

"At the moment, Washington is fighting over the budget and nobody knows if the county will still be solvent in three weeks," the paper concludes. "What is clear, though, is that America is already politically bankrupt."

http://hotair.com/archives/2013/10/07/spite-house-priorities-missing-kids-out-hydration-in/

( Keep an eye on what I predict will be rapidly falling Presidential approval numbers based on selective and facially spiteful closures.. )

Spite House priorities: Missing kids out, hydration in

POSTED AT 8:07 AM ON OCTOBER 7, 2013 BY ED MORRISSEY

After a week of inexplicable and expensive measures to deny access to memorials that have no barrier to entry and to physical sites that aren’t actually run by the National Parks Services. the Obama administration has earned the sobriquet “Spite House.” Over the weekend, NPS kicked out residents on Lake Mead, including an elderly couple who had 24 hours to clear out of their own home:

Joyce Spencer is 77-years-old and her husband Ralph is 80. They’ve been spending most of their time in the family ice cream store since going home isn’t an option.

The Spencers never expected to be forced out of their Lake Mead home, which they’ve owned since the 70s, but on Thursday, a park ranger said they had 24 hours to get out. …

Joyce Spencer said she’s alright in the meantime, staying with nearby family, but the move was a lot to handle as a senior citizen.

“I had to be sure and get his walker and his scooter that he has to go in,” Spencer said. “We’re not hurt in any way except it might cost me if I have to go buy more pants.”

As if that wasn’t bad enough, the effort then turned from physical sites to virtual sites. Despite having funds to run essential operations — which most would figure includes law enforcement operations, especially those involving the safety of children — the Department of Justice shut down the Amber Alert website system over the weekend:

The Amber alert system, the national missing-child warning program, has been shut off due to the government shutdown, according to the Department of Justice.

“Due to the lapse in federal funding, this Office of Justice Programs website is unavailable,” it says on amberalert.gov.

The Amber Alerts proper are still in operation, but the federal website served as an important central point of search on news of missing children. There is no reason to shut down a website that is already up and running, either. It doesn’t save money unless they’re turning off the servers, and they’re clearly not doing that. The website might not get updates if the staff running it is furloughed, but once up and running it should more or less run on its own — much like the World War II memorial does when NPS officials are not on duty.

So, missing kids? Non-essential. The Spite House scolding kids to hydrate? Totally essential, as Twitchy reports this morning:

Priorities.

http://www.zerohedge.com/news/2013-10-07/futures-sell-shutdown-enters-week-two

Futures Sell Off As Shutdown Enters Week Two

Submitted by Tyler Durden on 10/07/2013 06:59 -0400

Overnight trading over the past week has been a bipolar affair based on algo sentiment about what is coming out of D.C. But which the last session was optimistic for some inexplicable reason that a deal on both the government shutdown and the debt ceiling out of DC was imminent, today any optimism is gone in the aftermath of the latest comments by Boehner on ABC, in which he implied that a US default is not unavoidable and that it would be used as more political capital, as it would be once again blamed on Obama for not resuming negotiations. As a result both global equities and US futures are down sharpy in overnight trading. And since the government shutdown, better known as a retroactively paid vacation, for everyone but the Pentagon (whose 400,000 workers have been recalled from furlough) continues it means zero government economic statistics in today's session with the only macro data being the Fed-sourced consumer credit report at 3 pm. This week also marks the unofficial start of the Q3 reporting season in the US with Alcoa doing the usual opening honous after the US closing bell tomorrow. JPMorgan’s and Wells Fargo’s results on Friday are the other main ones to watch to see just how much in reserves are released to pretend that banks are still making money.

As usual, expect disinformation leaks that send the market sharply higher throughout the day, which however will only make the final outcome that much more painful, because as during every US government crisis in the past, stocks have to plunge so they can soar again.

Overnight news bulletin per Bloomberg and RanSquawk

Treasuries gain as U.S. House Speaker Boehner says he doesn’t have the votes for a clean debt limit increase and that the country could default if Obama doesn’t negotiate.
The Obama administration has said it won’t negotiate with Republicans
over funding the government or raising the debt ceiling; Treasury’s Jack
Lew says limit needs to be raised by Oct. 17 to avoid default
There has still been no deal reached between the Democratic-led Senate and Republican House and the US government remains in partial shutdown until a continuing resolution can be passed through Congress. Moody's said US may continue payments after debt cap reached and that debt payments would leave creditworthiness intact.
Crude futures trade negatively, both WTI and Brent see losses of around USD 1.00 as tropical storm Karen on the Gulf Coast dissipates into a depression and workers return to reopening platforms.
Moody’ said it sees a “very low” chance the U.S. will default on its debt payments
The World Bank lowered its forecasts for East Asia’s developing nations this year and next and said China may grow 7.5% this year, lower than an April forecast of 8.3%
Sovereign yields mostly lower, peripheral spreads tighter. Nikkei falls 1.22%, leading Asian markets other than China’s lower; European stocks and S&P 500 futures decline. WTI crude, copper fall; gold little changed
3:00pm: Consumer Credit, Aug., est. $12b (prior $10.437b) Supply
11:00am: Fed to purchase $2.75b-$3.5b in 2020-2023 sector
11:30am: U.S. to sell $35b 3M bills, $30b 6M bills

Market Re-Cap from Ran

Risk averse sentiment has been seen across asset classes with no deal in place in regards to the US government shutdown with stocks and energy trading in negative territory while both Bunds and T-notes have seen gains in the European morning.

The combination of unfavourable interest rate flows and the demand for safe haven assets saw USD/JPY make a test on the 200DMA, which also prompted liquidation in long-Nikkei 225 positions (settled down 1.2%). Heading into the North American open, stocks trade lower by around a per cent with defensive sectors, Utilities and Healthcare the best performers. The demand for the above mentioned sectors supports the view that there is limited appetite for risk and instead market participants are more than willing to benefit from relatively high and stable dividend yield.

Despite USD weakness the energy complex sees losses, as the tropical storm Karen, in the Gulf of Mexico, calms to a depression, energy markets see downside as workers begin returning to platforms.

While the US government shut-down will continue to be the main focus, market participants will also await the kick-off of the latest earnings season, with Alcoa due to report after the closing bell on Wall Street on Tuesday.

Asian Headlines

World Bank cuts China 2013 growth forecast to 7.5% from 8.3% and said that China must contain credit growth, tighten financial supervision and rationalize municipal finances.

The Japanese government is considering revising investment policy for public pension funds, allowing the Government Pension Investment Fund to step up investment in shares of growing Co.s.

EU & UK Headlines

Eurozone Q2 GDP revised down to -0.6% Y/Y vs. -0.5% Y/Y, according to Eurostat Greek 2014 draft budget sees economy shrinking by 4% in 2013

- Unemployment rate at avg. 27% in 2013.
- 2013 net revenues EUR 47bln, EUR 1.5bln short of target.
- Shows growth next year

Equities

After opening lower stocks in Europe have settled into range bound price action. In terms of individual sectors Utilities are the only stocks to trade positively, followed by healthcare which sees only minor losses, a reflection of the lack of risk appetite in the European morning.

BlackBerry is in talks with Cisco Systems, Google and German listed SAP about selling them all or parts of itself, according to sources. The sources added, it is unclear which parties will bid, if any, but the potential technology buyers have been especially interested in BlackBerry's secure server network and patent portfolio. In a notable broker move IBM was cut to equalweight from overweight at Barclays.

JPY and CHF benefited from the flight to quality which was observed this morning in Europe and during the overnight session in Asia. So much so that the move lower by the spot JPY rate saw the major pair make a test on the 200DMA line to the downside which is seen at 96.67. As a guide, option related flow may gather momentum in the second half of the session, especially since there are a number of large expiring options clustered around 96.75 mark.

Commodities

Crude futures trade negatively, both WTI and Brent see losses of around USD 1.00 as tropical storm Karen on the Gulf Coast dissipates into a depression and workers return to reopening platforms.

Goldman Sachs has adjusted its 2014 annual average WTI-Brent differential slightly wider to USD - 9.00bbl from USD - 8.50bbl previously.

Morgan Stanley lowers gold and silver price forecasts by 9-12% in 2015-17 and iron ore price forecasts reduced by 2-5% in 2015-17, UBS however changed its gold outlook to neutral from underweight.

India October-December gold imports are expected at 150 tons, according to All India Gems & Jewellery Trade Federation Chairman Soni.

* * *

Finally, the complete overnight market and news recap comes from DB's Jim Reid

As we enter week 2 of shutdown, the weekend news hasn't exactly encouraged hopes of an imminent compromise. House Speaker Boehner played hard ball on Sunday and said that the House would not back off in budget and debt ceiling discussions without concessions from the President on Obama-care. He also claimed that there are not enough votes in the House to pass a clean Continuing Resolution bill. This assessment, however, prompted a challenge from others, including Senator Charles Schumer, who believed that there are actually enough votes if the clean budget bill was put on the floor. There seems to be some support for this particular view as a Washington Post article overnight highlighted that 195 of the chamber’s 200 Democrats have signed a letter urging Boehner to allow a vote on a clean CR. This, combined with the 22 House Republicans who have signaled support for a clean resolution would give rise to 217 votes - just enough to win a majority vote in the 432 member chamber. Both houses of Congress will be back in session on Monday afternoon and developments on Capitol Hill will continue to dominate markets from here.

Turning to markets, the Asian session has kicked off the week on a softer tone overnight with major bourses down across the board. The Nikkei and the Hang Seng are down -1.1% and -0.7% respectively. S&P 500 Futures are also down by about -0.65%. Chinese and Australian markets are closed for holidays. Treasury yields are also a tad higher despite the softer risk tone with the 10yr up 1bps at 2.631% as we go to print. Asian credit spreads are trading slightly better with IG spreads generally 1-2bps tighter overnight although new issues will likely be the main focus this week as China emerges from its week long holiday tomorrow.

If one is trying to look for some good news it does seem that the longer this goes on, the less likely that the Fed are going to have enough 'clean' data to be confident enough to taper in December. However the December meeting is fairly late (17th and 18th) so there is some time for a successful resolution before it interferes with the data too much. We also have to consider whether the members of the FOMC have been scarred by the market reaction to the no September taper from some quarters and are perhaps more inclined to pull the trigger because of it. Nevertheless when everything is put in the mix, a December taper is more questionable than it was before the shutdown. On this theme it will be interesting to see this week's FOMC minutes (Wednesday) from the controversial September meeting. We should get more clarity on how close the call was which will give us some clues as to how they will vote in the future even if their opinions may have now been overtaken by events in Washington.

The Fed minutes aside there are over a handful of key US data releases expected this week although some of those might still end up being casualties of the partial government shutdown. The vulnerable reports include: US trade balance (Tue), JOLTs (Tue), Wholesale inventories (Wed), Monthly Federal budget (Thurs), Retail sales (Fri), PPI (Fri) and Business inventories (Fri). On the other hand, we should get reports released as per scheduled for the following: Consumer credit (today), NFIB (Tues), Mortgage Applications (Wed), Weekly jobless claims (Thur), and the UofM Consumer Confidence (Fri).

Away from the US, we may see some focus be on the annual IMF and World Bank Summit on Tuesday. On the same day will also see the IMF release its latest World Economic Outlook. It will be interesting to see if the shutdown and debt ceiling gets a mention in the IMF’s latest assessment of US growth outlook. In Europe, we can expect Germany’s exports and factory orders as well as French trade data on Tuesday. This is followed by industrial production data from other parts of Euroland over the remainder of the week.

Last but not least this week also marks the unofficial start of the Q3 reporting season in the US with Alcoa doing the usual opening honours after the US closing bell tomorrow. That aside, JPMorgan’s and Wells Fargo’s results on Friday are the other main ones to watch out for this week although these could easily be overshadowed by the US budget deadlock if political leaders in Washington fail to make meaningful progress before then.

Catharsis Ours

Monday, October 7, 2013

US government shutdown hits Day 7 with no end in sight presently ..... Overnight news , data and views on the current situation form Bloomberg News , Ransquawk and Jim Reid ( DB )