The infamous plan ” B ” proposed by John Boehner leader of the GOP last night was rejected by the Republicans themselves. Big JB has now disbanded the house until after Christmas. After yesterday saw the US print a pretty decent GDP figure of 3% and showed a pick up in employment trends its starting to look like the US could well be snatching defeat from the hands of victory.
I cant tell right now if this is just another political stunt or not to apply more pressure to Obama, but as it stands it now looks more likely we head over the fiscal cliff, something that most people with common sense assumed would not happen due to the severity of the problem and the consequences of such.
We have seen actions like this before, the first TARP bill back in 2008 to propose a bailout package to rescue the financial system from collapsing under its own weight was also rejected only to find consensus but a few days later.
I do feel this is some rather amateur dramatics on behalf of the Republicans as I just fail to believe that something this serious would not be getting full attention from every congressman/woman regardless of which political bench they sit on.
Just as a little reminder, what it means if the two parties do not come to some agreement on spending reforms and tax hikes is that an automatic austerity regime will be imposed that will enact strict measures regardless of what either party wants. Lets for now call it PLAN ” F .” F for failure and also after this stunt perhaps we will need to go back and forth with a plan C,D & E before anything actually does happen.
What this means for markets can be illustrated quite easily on below graph. Upon this news the S&P500 sold off in a straight line South about 36 points (which is alot ) 3% or thereabout move lower. It didn’t help that it was during the night and liquidity was poor and has recovered somewhat from it for now. Europe is not looking to healthy at the moment either….and boy does it have its own problems, it certainly does not need the US to go into another recession especially at the hands of their own politicians.
Today should be a very volatile day. Throw this uncertainty in with the last option expiry of the year also known as triple witching and I am expecting some fireworks. I am also expecting some tough talk from Obama as I dont think he will be impressed with these dramatics or for that matter panicked.