What Happens If We Hit The Debt Ceiling ?

“Apologists for the GOP argue that using the debt ceiling as “leverage” to reshape fiscal policy isn’t dangerous brinksmanship.

They say that nobody is talking about “default” because even if the government couldn’t borrow anymore, there would still be plenty of revenue coming in for the government to make sure that our interest payments were made on time, assuring the full faith and credit of the United States were maintained.

But a new report from the Bipartisan Policy Center should make people think twice about being sanguine.

The basic gist is: If we hit the “X Date” (as they call it), when there were no more special measures that the Treasury could use to avoid hitting the debt ceiling, we would be in a situation of unprecedented legal and economic chaos.

Even if the Treasury could “prioritize” interest payments over other payments, you’d have a massive technical problem (you’d have about 100 million computerized payments that are scheduled to happen between February 15th and March 15th, you’d have a huge legal fight (various parties demanding that they’d get paid first) and you’d do huge economic damage, due to huge austerity and extreme financial market austerity.

You can see the full presentation here, but we wanted to isolate the part specifically about hitting the “X Date”.

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“The fiscal cliff deal reached in Washington proved to be a winner for the oil and gas industry on two counts.

First and foremost, the industry didn’t lose a dime of its billion-dollar subsidies. There was talk earlier in the year of maybe eliminating some of the lucrative tax breaks as a way to help reduce the budget deficit. Taxpayers for Common Sense estimates that oil companies will receive $78 billion in tax breaks and subsidies between 2012 and 2017. In March 2012 a majority of senators did vote in favor of the Repeal Big Oil Tax Subsidies Act, which would have eliminated $2.4 billion in deductions gained by the five biggest oil companies, but the bill needed 60 votes to pass.

 

By the end of the fiscal cliff negotiations, Republicans and Democrats left all of the subsidies in place.

 

“Trimming just a handful of these breaks for the big five companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—would’ve raised $24 billion over the next decade” for the U.S. Treasury, noted Andy Kroll at Mother Jones.

 

But the good news didn’t stop there for ExxonMobil and others. Once Congress and President Barack Obama agreed on a plan, oil prices on the stock market rose to their highest levels in nearly three months, making those in the petroleum business even richer.

 

In 2011, ExxonMobil made more than $73 billion, but paid only $1.5 billion in federal income taxes.”

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“It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn….”

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“Democrats say they want to raise as much as $1 trillion in new revenues through tax reform later this year to balance Republican demands to slash mandatory spending.

Democratic leaders have had little time to craft a new position for their party since passing a tax deal Tuesday that will raise $620 billion in revenue over the next 10 years.

The emerging consensus, however, is that the next installment of deficit reduction should reach $2 trillion and about half of it should come from higher taxes….”

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Got gutz…..then type 5 it…

“It is official Apple is one weak stock right now. It is supposed to be a tell when the market is up, and your down considerably to the tune of 3%. The Jim Cramer tax selling notion can now be dispelled as well. This is the new year, and for Apple shareholders the misery of the third quarter is repeating itself.

After a bump up with the entire market at the beginning of the year, a 300 point rally can lift a lot of boats; the sellers loved that entry point to reassert this stock on the downtrend it has been on since the 700 dollar level.

So what is really going on in Apple? What are the reasons for this Wall Street darling losing favor to such a degree? Where is this stock ultimately heading in regards to a price target? These are some of the things that I am seeing with the fundamentals of the Apple business model.

Apple doesn`t make the best phone anymore

Apple doesn`t unquestionably make the best smartphone anymore. The Galaxy3 by Samsung is at worst case on equal footing with regard to the Apple I-Phone 5 smartphone, and depending upon what features you covet in a smartphone, the Galaxy3 is even better for watching Netflix movies or playing games with its much bigger screen.

Timing really hurt Apple because the Galaxy3 came out 8 weeks earlier, and all those subscribers who could have looked at the I-Phone 5, went into their local Verizon or AT&T store and fell in love with the beautiful Samsung Galaxy3.

The Galaxy3 made all other phones, including all the latest offerings from the other brands look old and antiquated. It really stood out aesthetically by comparison. Yes it had the Apple ahh factor!

And once those subscribers bought the high end phone, they are locked up for at least 2 years with their new contract, and Samsung sold a lot of Galaxy3 smartphones, in fact they had a blowout quarter.

Rate of change …”

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“President Barack Obama nominated two new members to his administration on Monday, endorsing current counterterrorism advisor John Brennan and former Sen. Chuck Hagel to serve as CIA director and secretary of defense, respectively.

The president, who will be formally sworn in to begin his second term in office in just two weeks, announced his nominations Monday afternoon from the White House in Washington, DC.

“These two leaders have dedicates their lives to protecting our country,” said Pres. Obama. “I’m confident they will do an outstanding job.”

Both Brennan and Hagel have been rumored in recent days to take on new roles within the Obama administration, but only with Monday’s announcement from the president himself did the news become official. A confirmation battle in the Senate is expected to follow the choice for these key posts, although Pres. Obama asked lawmakers to confirm both men “as soon as possible” after making his announcement.

Hagel, a 66-year-old former Republican senator from Nebraska, will replace the current US Defense Secretary Leon Panetta at the Pentagon, if confirmed by the Senate. He will also be the first veteran of the Vietnam War to hold the post.

“To this day, Chuck bears the scars and the shrapnel” of service in Vietnam, the president said on Monday.

Accepting the nomination, Sen. Hagel replied, “I am grateful for this opportunity to serve our men and women in uniform again.”

Known as an outspoken critic of the US wars in Iraq and Afghanistan, as well as an opponent of the “Jewish lobby” in Washington and of the possible strike against Iran, Hagel has faced tough criticism for his remarks. On Monday, however, Pres. Obama saluted Sen. Hagel’s “willingness to speak his mind” in Congress, “even if it wasn’t popular.”

“That’s exactly the spirit I want on my national security team,” said the president…”

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“The Conference Board has released two more bits of data which may seem confusing compared to last week’s employment report from the Labor Department. The U.S. added only 155,000 payrolls in December and the official unemployment rate ticked back up 0.1% to 7.8% for the month. While the FOMC has set some triggers for policy being closer to 6.5% unemployment, the Conference Board’s two releases today look better than the report from the Labor Department.

The quarterly report called the Measure of CEO Confidence, improved in the fourth quarter of 2012 after dipping in the third quarter. It rose to 46, up four points from a reading of 42 in the third quarter. Our note of caution here is that it takes a reading above 50 to reflect more positive than negative responses.

We also saw some improvement in the employment picture in December. The Conference Board Employment Trends Index rose to 109.02 in December versus 108.19 in November, and that is actually 3.1% higher than a year ago….”

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“As discussed earlier (see post), US manufacturing sector has begun to recover. Manufacturing orders in the US as well as in Emerging Asia (see post) have diverged from other large economies. This trend is becoming reflected in the broader economic activity.

However according to JPMorgan, the result of the latest fiscal negotiations will soon create headwinds for this expansion and dampen GDP growth. The tax increases on  higher income households as well as the hike in payroll taxes will crate a drag on growth. That in turn will limit global economic activity….”

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“NEW YORK (MarketWatch) — Expect tepid earnings for the reporting season that kicks off Tuesday, say Wall Street analysts who have grown increasingly pessimistic over the past three months.

Fourth-quarter earnings for S&P 500 SPX -0.44%  companies are expected to grow 2.8% compared to the same period in 2011, according to Thomson Reuters data. But keep in mind that this estimate has dropped from 9.9% at the beginning of the quarter to 2.8% today.

In keeping with tradition, aluminum producer Alcoa Inc. AA -1.19%  will unofficially kick off earnings season with its results on Tuesday after the market closes. Alcoa’s results notwithstanding, a number of companies have actually already reported results in the so-called preseason.

And 62% of the 21 companies that have already reported fourth-quarter earnings to this point have topped analyst estimates, matching the long-term average beat rate, according to Thomson Reuters.

“If it should continue at the rate of 62%, the blended earnings growth estimate will likely improve slightly as more companies beat estimates than miss them,” Thomson Reuters analysts wrote in a report. “This would fit in with what analysts see as a slow emergence from the earnings trough in the third quarter, with single-digit earnings growth to finish out 2012 and during the first half of 2013…..”

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“The campaign to get around the debt ceiling by using a Trillion Dollar Platinum Coin has reached a new level of intensity today.

Earlier today, Paul Krugman hopped on board and said Obama must be ready to mint the coin if the GOP decides to try to force the country into defaulting on its obligations.

And now a US Congressman has come out against the coin idea and is proposing a law to ban it (via Matthew O’Brien). Ironically, this action actually legitimizes the coin option.

To take a step back, the US is about to hit the debt ceiling limit that Congress set in 2011, at which point it will be illegal for the country to issue more debt to pay its bills–unless the Congress agrees to hike the ceiling again….”

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“Egan-Jones, the independent ratings agency that cut the U.S. sovereign credit rating twice in 2012, has no plans of further downgrading the country’s rating in 2013.

“This latest round [of fiscal cliff negotiations] indicates a sign of health. You have a major ideological clash going on in Congress and many people uncomfortable with it, but it is part of democracy. The more positive light is that we actually have a deal and can move forward,” Sean Egan, managing director of Egan-Jones, told CNBC.

“We’ve gotten a lot more comfortable about the U.S., and we probably won’t take additional negative actions for the foreseeable future,” he added…”

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“Former Berkshire Hathaway executive David Sokol offered a strong tongue lashing to his former mentor Warren Buffett, after the Securities and Exchange Commission decided not to take action against him for allegations of insider trading.

Sokol told The Wall Street Journal that “he will never understand why Mr. Buffett chose to hurt my family … but given that he is rapidly approaching his judgement [sic] day, I will leave his verdict to a higher power.”

Sokol was the Berkshire subsidiary executive who many considered to be a front-runner to replace Buffett as CEO. In 2011, Sokol resigned in the wake of what appeared to be an insider trading scandal. Sokol bought shares in Lubrizol, a chemicals company, The Journal reported….”

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“Shares of Amazon.com (AMZN) were up nearly 3% in midday trading Monday, hitting an all-time high earlier in the session, after Morgan Stanley (MS) boosted its rating on the e-commerce leader, citing growth in that sector.

Morgan Stanley analyst Scott Devitt on Monday said in a report that he expects global e-commerce sales to top $1 trillion by 2016, up from $512 billion in 2012, according to Bloomberg.

Also in the report, Devitt estimates Amazon will have a 23.5% share of the global e-commerce market in 2016, up from his previous projection of 20.6%…”

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Netflix Inc. has made a deal with Warner Bros. Television Group that will bring “complete previous seasons” of current television shows to Netflix next year.

According to a release, the deal includes eight Warner Bros. shows and potential future shows. The eight include “Revolution,” “Political Animals,” “Longmire,” “666 Park Avenue,””The Following,” “Chuck,” “Fringe” and “The West Wing,” according to the release.

Terms of the deal were not disclosed.”

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“A fire has been reported in an empty airplane parked at a gate at Logan International Airport, a Massport spokesman said this morning.

The affected aircraft was a Japan Airlines Boeing 787 Dreamliner, spokesman Richard Walsh said. The 787 is used on a nonstop flight from Boston to Tokyo, which has been a pivotal part of Governor Deval Patrick’s efforts to expand trade between Massachusetts and Asia.

No smoke was showing from the plane late this morning, but it remained surrounded by fire engines.

A Federal Aviation Administration spokesman said the fire occurred while the plane was sitting at a gate. State Police said there were no crew and no passengers on the plane, which was sitting at Gate E8….”

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“Stocks have started 2013 on a positive note, closing at a five-year high on Friday.

So, are people feeling bullish?

Art Cashin, UBS Financial Services Director of Floor Operations, is a tad skeptical.

He points to some imbalances during end-of-day trading in this morning’s “Cashin’s Comments” …”

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“….Garthwaite warns clients in a new research note out this morning, “Many of our tactical indicators point to a consolidation phase in the equity markets, in the near-term.”

In the note, Garthwaite highlights nine charts that show how, just as the stock market has taken a turn upward since mid-November, investor sentiment toward stocks has soared higher in that short amount of time.

Many of the charts show sentiment indicators now at multi-year highs, suggesting elevated risk of a market selloff….”

Full article & indicators

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A digestion day after hitting five year highs…..

The story

Market update 

3 D heat map 

[youtube://http://www.youtube.com/watch?v=Um1lA9m4wL0 450 300]

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“Ten of the largest U.S. mortgage servicers will pay a combined $8.5 billion under an agreement that will end case-by-case reviews of foreclosure-abuse claims stemming from a 2011 deal with regulators.

Companies including JPMorgan Chase & Co., (JPM) Bank of America Corp. and Citigroup Inc. (C) must provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers, according to a settlement announced today by the Office of the Comptroller of the Currency and the Federal Reserve. They were among 14 servicers ordered to hire independent consultants to help clean up foreclosure practices amid claims that they improperly seized homes in the wake of the subprime mortgage crisis….”

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“Bill Ackman’s quest to expose Herbalife Ltd. (HLF) started with a tip from a friend. The call came from a reporter turned stock researcher, who had penned a book about the hedge fund manager’s last big short and was now telling him that Herbalife smelled like a pyramid scheme.

The discussion 18 months ago grew into a research project that pulled in much of Ackman’s team, two law firms and forensic accountants. On Dec. 20, Ackman, 46, went public with a three- hour presentation, accusing Herbalife of using inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

The shares plunged 32 percent in the next three days. Amid heated denials from the company, which is preparing to lay out its case at an investor conference in New York on Jan. 10, the shares had by Jan. 4 rebounded 42 percent from their post-Ackman closing low of $26.06. Ackman, an activist investor who has lobbied for shakeups at companies from Target Corp. (TGT) to Canadian Pacific Railway Ltd. (CP), is just getting started with Herbalife.

“We’re prepared to spend whatever it costs and do whatever is required to make sure that the world understands the facts about this company,” he said in a telephone interview. “We can’t imagine how the SEC or the Federal Trade Commission or any other relevant regulator will ignore what we have said.” Ackman said he would make all his information available to U.S. regulators.”

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