US Debt Ceiling Agreement according to Bank of America -update

Debt Ceiling Report. Positive for stocks

We are currently in a situation where strongly held political views are standing in the way of a "big deal".

It's not that the politicians don't want to resolve this situation but the barriers are the fundamental political views of the democrats and republican parties and neither is willing to budge.

The Republicans want the debt ceiling raised but don't want taxes raised. The Democrats want the debt ceiling raised but don't want entitlements touched and Independents want the ceiling raised and don't want either. This has left the Senate scrapping over "lowest common denominator" decision-making, making it very hard to arrive at the "big deal" that the market craves. Worryingly Senator Bayh thinks that it might actually take a "reaction" from the markets to make the politicians take the difficult decisions.

His most likely outcomes are (in order of likelihood)... 1. the debt ceiling is raised to allow room for manoeuvre until early 2012 and then a group of individual Senators are put onto a committee focused on coming up with a longer term fiscal debt reduction plan. This will aim to save the President some face while trying to convince the public / market that they have not forgotten the long term. The market will pick this apart and unless triggers mechanisms or reporting are very strict this will not be accepted. Credibility is key.

2. The debt ceiling is raised and a c2.7tr reduction plan is agreed but that a lot of this comes from "gimmicks" including 1tr saved from the wars in Afghanistan and Iraq, money which is currently factored into the Republicans plans and isn't in the Democrat's plans.

3. The plans pass the House but run up against objections in the Senate and we end up "on the verge of a true crisis". In this scenario a "stop gap" will get agreed but the market will not be satisfied. 4. The big deal - but this is very unlikely now. We all have to remember that you don't get credit for averting a crisis before it happens in politics. The rank and file don't think the way the markets do and actually a turbulent market makes it more likely that the trigger mechanism will be credible satisfy the markets. It's ironic but actually turbulence / crisis might herald the solution. Timing - It is still the plan that a package will be put together on Wednesday, whether or not it will have Senate backing. They are also still aiming to have this passed by August the 2nd. This is theoretically still possible but the protocol in Senate, if played well by those who object, could take this to the 3rd. Willem Buiter - Willem sees two crises in the US at the moment, the urgent one is raising the debt ceiling, the longer term issue is the long term deficit and that situation will not get resolved this week. The markets will run out of patience sooner or later and at the moment sooner looks likely.

Willem looks on at the spectacle in Washington with amazement, "sometimes it seems worse than Europe". If a default were to occur it would imply that the US can't be taken seriously financially any more and certainly not as a reserve currency. We would end up with a Global recession, centred in the US but global non the less. Willem's base case is that the "brinkmanship" will have a happy ending but that the political damage is tremendous. The "flirtation with a frivolous default" will also give the credit ratings the currency they need to go with their convictions so even if a package is agreed a downgrade is very likely. "It is very hard to see how they can meet the challenge of meeting the deadline and satisfy the market".

His scenarios are....

1. 5% likelihood. The ceiling isn't raised and we get a default. This would lead to a "severe recession" which would have severe implications around the world.

2. 66% likelihood. The ceiling is raised in time and there's a small fiscal package including the fabled "2 stage process" (the market will dismiss the second stage as a "cheap trick"). This will lead to an immediate downgrade to AA, the market won't be satisfied, the CDS rates would rise and the dollar would be weak. Growth would slow and QE3 would be necessary in 2012.

3. Less than 1% chance. The ceiling is raised in time and a large, front loaded tightening package is agreed. This would lead to a recession but a happy market.

4. 25% chance. The debt ceiling is raised and a $4tr package is agreed that is back end loaded and not credible. Triggers are weak, reporting is rhetoric and the markets "hate it". Rates rise the economy is weak and global political and financial credibility is significantly reduced.

5. 1% chance and this is the only one that is positive for US economic activity. The ceiling is raised, a large package is agreed which is backloaded but credible. The problem is Willem "just can't see how this rosy scenario happens". Which ever of these comes about it will be negative for US demand, activity and growth and will lead to an "almost certain downgrade of the US sovereign".

Fuente:Citigroup

Hola, no tengo ni idea de inglés pero espero que sean buenas noticias (lo dudo mucho) el caso es que tengo acciones compradas a 11,38 y no sé si darles la patada o esperar al "techo" este famoso que tanto circula por el foro.
Saludos y gracias por la gran labor que estais haciendo muchos como tú en orientar a descerebrados como yo.

A vosotros,

Si, tranquilo vendrán buenas noticias(sobre todo para Europa), no pueden permitir que el chiringuito se cierre.

Se buscará la solución menos dolorosa (mira opción 2)

-El primer artículo no es sobre BAC, lo emite BAC sobrel el techo de deuda.

Dan por sentado que habrá una bajada de rating en USA, y me pregunto yo ...y EN REINO UNIDO?:...)

Agradezco de corazón tu rápida respuesta y de verdad que te animo para que continúes (hasta que te canses) dando tu opinión en el foro.

Soy un pequeño admirador tuyo que lleva leyendote un par de meses desde la sombra y hoy por fin me he decidido a escribir.

Saludos.

Gracias , se agradecen mensajes de apoyo como el tuyo.

Respecto a BAC entró dinero en 9.60 (pero he de advertirte que no es el mejor banco en el que estar bajo mi humilde punto de vista).

De todas maneras si vas a largo plazo go ahead.

A mi también me has sorprendido gratamente, he de reconocer que cuando empecé a leer este foro, pensé que estabas un poco flipadillo, por los mensajes tan catastrofitas que ponias, pero conforme te he seguido, me he dado cuenta de cuanta razón tenias, y lo muy inteligente que eres, a ver si encuentras trabajo pronto, que es una pena que gente como tu esté en el paro...... ánimo

Gracias Lulita

Sigo siendo un flipadillo¡, pero he aprendido a ser más humilde que hace 4 años. El mercado te enseña a serlo.

El tema del curro está difícil pero no imposible. Es muy mal momento para que gestoras, hedge funds o bancos contraten para trading. Sólo quieren gente que les lleve pasta...puros "finders" y captadores y yo no soy rico, pero le pongo ganas a esto.

Es lo que hay,

He de dar gracias por todo lo que he vivido y todas las experiencias que he tenido,especialmente las malas a priori que me han ayudado a ser mejor persona y sobre todo madurar.

Ahora mandaré un mensaje a Botín para que me fiche¡:)pero está muy "focus" en Fernando Alonso¡