Budget talks: This is getting nasty

FYI, S&P 500 futures down after opening, but haven't totally bottomed out yet, and actually taking a small run back upward, so stock market will open up down tomorrow, and it looks like people are jittery, but not in full panic mode or anything.

I was really curious how things would open tonight. The two days to digest (why they did that showmanship on a Friday after the markets closed) have buffered the overreaction it would have gotten if there was trading going on somewhere in the world.

Bond futures are all down, but as I said earlier, I just don't get it. Yields should be through the roof, but with Europe sitting as the other main option, our bonds are kind of shrugging this all off when you consider that we are a week away from a stated date of a selective default. It blows me away.

Gold futures got up to $1624 an ounce, but now trading between $1613 and $1616. Those are record prices for the last decade on an inflation-adjusted basis.

The dollar is actually trading up against an index of other currencies. The Eurozone just announced that their solution to the debt problems in all those countries is more debt, so the dollar is actually holding strong relative to the euro.

Uhe U.S. is sitting in the context of how ugly the rest of the world is, and it's why our markets are somewhat insulated despite the fact that they are taking a selective default down to the 11th hour.

 

No debt ceiling does not mean we default on our bonds. But we default on something, so it is a selective default or a technical default, or whatever made up term you choose to use to describe the incidence of the U.S. not paying a bill. As long as the U.S. does not make good on SOME financial obligations -- even if it is a single medicare payment or one government worker salary -- it is in a technical or selective default. And if that happens, the rating agencies have all already made it clear that our credit rating is going from AAA to something below AAA.

 

Not sure what day you are talking about. The one day the stock market got totally blindsided was when everyone was assuming that Hank Paulson had pushed Congress to do a bailout bill, and then the bill got voted down by the House because John McCain decided to fly in from campaigning and throw himself into the negotiations and everything that had been agreed to was thrown out the window.

That day there was genuine panic and the Dow dropped 600 points as the voting was going on and it became apparent the bill was going to fail. The stock market had traded that whole day on the assumption that it was a done deal.