Compromise is in the air

Perhaps not a moment too soon this debt-ceiling issue has crossed Wall Street on to Main Street.

By Jim Cramer Oct 10, 2013 10:55AM

The StreetHandshake © CorbisCompromise is suddenly in the air, judging by the robust nature of the morning's markets. What's happened? I think the debate out of Washington somehow has gotten switched in the last 24 hours. It's gone from some faux handwringing about whether the Japanese or Chinese will still buy U.S. bonds to a recognition that the whole reliability of the U.S. -- as a provider to its people, and not just its debtholders -- must now be called into question.

 

In other words, finally, and perhaps not a moment too soon -- and maybe not soon enough if we don't see a thaw today -- this debt-ceiling issue has crossed Wall Street on to Main Street. That has even the most doctrinaire of elected leaders worried about losing their jobs.

 

How do we put this reliability quotient in perspective? Let's say Boeing (BA) had advertised that its planes work 100% of the time, and everyone had gotten used to that thinking, and we had grown comfortable with the reliability of the place.

 

Then imagine that, one day, Boeing had said its planes were guaranteed to work 95 percent of the time. Would you ever fly in a Boeing plane again?

 

Probably not.

 

That's pretty much the analogy that my old friend Chris Matthews laid on me last night when I invited him on "Mad Money" to explain to me what he thinks could happen if the country defaults on its debts. He thinks no one will ever trust the country again on anything financial. Social Security checks may not be in the mail next month, Medicare wouldn't be expected to pay doctors in a timely fashion and the Chinese would be sellers of our Treasuries, because the only reason they are buying our paper is its reliability.

 

You take away the reliability, you take away the reason for owning. Who needs Treasuries if the only reason you are buying them is that they had been 100% reliable, and now they no longer are?

 

It's because the possibilities are that grave that Chris believes something can happen by next Tuesday to break the logjam, and that the stirrings Thursday could be for real. The movement, he says, will ultimately come from the Senate. The White House can't afford to negotiate after President Obama's statement that he won't negotiate, and House Speaker John Boehner has said that if Obama's not negotiating, he's not going to negotiate. Chris believes that everything has gotten pushed along by Congressman Paul Ryan's reasoned piece in Wednesday's Wall Street Journal, which argues for some substantive dialogue on the budget and not hysterics about the debt ceiling.

 

But, to be sure, Matthews said he doesn't know if a deal will get done on time, and if it doesn't the reliability factor will then be gone.

 

Now, I know there are many consequences to a potential default besides reliability. Eighty million people get checks each month from the federal government. There's a huge number of different kinds of payments. Nobody knows how to prioritize, and that has been and remains Treasury Secretary Jack Lew's point as he testifies before Congress. You can't really just prioritize paying interest, because Treasuries doesn't pay out just interest. They pay out interest and principal the way you pay a mortgage, and it's difficult to separate the streams. So that whole argument's a bit of a non-starter.

 

So checks to contractors, to doctors, to veterans and so Social Security will most likely be delayed, not paid, until this is resolved. I think that's catastrophic on the face of it. No amount of prudence about future deficits would ever be able to make up for the chaos that delayed payments would cause -- and, make no mistake about it: Come November, everything will be delayed.

 

Chris waxed nostalgic for the days when House Speaker Tip O'Neill and former President Ronald Reagan, polar opposites, got things done -- which is the subject of his new book,Tip and the Gipper: When Politics Worked. It's is a terrific read, like all of his books are (and I don't just read them because Chris went to the school that was at the end of my block and we are both huge Philadelphia sports fans). He talks about how these two old pols, who were not friends but dueling opponents, had respect for each other and tackled the toughest issues, including a monumental deal to save the solvency of Social Security. That's unimaginable now.

 

But Chris did see the path, and he said we need to stay close to everything that goes on in the Senate. That's where the movement will be if there is to be movement, so don't give up hope for a deal if the White House's meeting with the House leadership produces more rancor this afternoon.

 

But if there isn't a deal by next Wednesday then, from my perch, a month from now it looks like the real checks really won't be in the mail.

 

Jim Cramer's headshotMore from TheStreet.com

102Comments
Oct 10, 2013 1:33PM
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It looks like they didn't read the budget for the ObamaCare computer enrolling either.
Oct 10, 2013 1:13PM
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The roll out of ObamaCare is looking less and less like Google every day.

Oct 10, 2013 11:20AM
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Once again, we're NOT going to default.  The US Treasury has plenty of money to pay all of it's debt obligations and then some. 

It seems like we are constantly being bombarded with "end of the world" type crises.  All the fear mongering is getting old and isn't effective anymore.  We survived the sequester just fine, and the shutdown has been a piece of cake for 95% of us.   It would have been even easier if we didn't have a POTUS that was taking calculated actions to cause as much inconvenience and discomfort as possible.
Oct 10, 2013 11:22AM
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Chris Matthews...what a joke ...thats like asking the magic 8-ball....LOL MSN.......
Oct 10, 2013 12:34PM
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My one word evaluation of the present political action.  RECKLESS on the parts of all of them!
Oct 10, 2013 2:50PM
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Lets call this rally what it is.  This is an exasperation rally!
Oct 10, 2013 11:12AM
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buy low, sell high. 

 

the big institutions saw stocks decline for a little bit.  so they buy.  then they sell high.  one of the goals of computer buying is to get the control system into predictable cycles.  then easily buy and sell on highs and lows. 

Oct 10, 2013 1:53PM
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Seen on a blog site:

 

"So, you dont' want to raise the debt ceiling?"  "Maybe we can return those wars and get our money back". 

Oct 10, 2013 11:42AM
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Washington, is it too much to ask you to put  your country ahead of party politics ... to put Americans first!!!  You will be held accountable
Oct 10, 2013 12:25PM
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We need an issue we call Sentiment.  Because sentiment is without question the New Investment Industry being created by geoecopolitics.  Wow sentiment is up 3 points today.  Golly Gee whiz lets get some.  This has got to be very similar to the Tulip Bulb markets in the Netherlands in the 1600's.  One person buying because they think the days developments will spur the other person to buy.  Isn't this called a circle jurk?
Oct 10, 2013 12:20PM
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Congressman 1 to Congressman 2 - "We need to make the market go up today I want to buy a new vacation house"...... Congressman 2 responds "We could set up a meeting with Obama and act like there is progress"...... Congressman 1 "Give Obama a heads up so he can get in on the run at the market"......... and on and on and on. Drop a note to Bobo to write a stupid article too...

Oct 10, 2013 12:20PM
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Perfect timing for a thaw in relations with the anencephalic crowd on the other side of the aisle.

 

Thanks to their 'leadership' I've been able to nibble on some small cap biotechs on the pull back yesterday. Cha-ching...

Oct 10, 2013 3:00PM
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First the 787 toilets don't work.  Now Tesoro has a 20,000 barrel oil spill in North Dakota.

 

Messy day all around.

 

 

Oct 10, 2013 11:41AM
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America has become a very funny place.  Wall Street celebrates more debt as Hollywood celebrates another illegitimate child.  "Too funny to figure".  But Chris Mathews?  The lunatic fringe is providing the new conscience?  I'm old and on my way out.  Thank the heavens.
Oct 10, 2013 11:50AM
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"GOP leaders (latest blurb) are offering a short term fix of Legislation.. Probably something Obama is going to agree with and sign."

In the book- Fiat Money Inflation in France by Andrew Dickson White... France tried that too, several times, each with exponential failure. The last time they even hammered the printing plates to stop the madness. It solved nothing. Only job recovery fixes this. 5 minutes after on-boarding skill sets where they came from, whistles would blow and Gen X losers would come sailing off the roofs of ivory towers nationwide. We truly have NO IDEA how badly they have sabotaged America with their dumb alumni collusion and superiority delusion. 
Oct 10, 2013 11:57AM
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Write a comment----what for ---its all bull****. Our Government is not our government.

Its a postering group of "me,me,me a pile of sh**,then you" political wrangling that will never stop

until we realize that the only short term solution is a whole new government .Use your voting power

to get a new senate and new house before these idiots destroy our country.

Oct 10, 2013 11:46AM
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"America has become a very funny place."

Not really. Absolutely the same as when your mom comes home and finds siblings cooperating and playing together in feigned harmony and peace... then trips over the body of your dead puppy riddled with GI Joe weapons and Barbie accessories. 
Oct 10, 2013 12:08PM
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Where's a dang meteor when you need one?
Oct 10, 2013 11:54AM
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Manipulators are always on the floor -- yes, they are -- and they made Wall Street a cesspool of corruption. 
Oct 10, 2013 12:36PM
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Anyone who goes into the voting booth next month and votes for an incumbent should have their head examined. We must rid politics of the corrupt, double-speaking crooks who are now "running" the show.Even if it means voting for the other party!
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