Here comes a default -- but don't worry

The key players in the budget drama are willing to risk a 1,000-point Dow decline if nothing is done this week, if only because there will be a resolution next week.

By Jim Cramer Oct 15, 2013 10:04AM

Arrow Up © Nicholas Monu, iStock Exclusive, Getty ImagesIs the market factoring in an impasse and just moving on? Do TheStreet.com logo stock traders actually expect one more failure and another round of Sunday talk show bashing? I think that has to be what's going on.

 

The pain of missing a rally this close to the end of the year after the rip-snorter we had last Thursday has become too great. The idea that you might be left behind after the inevitable initial rejection by Eric Cantor and John Boehner, despite the hideous poll tally for the GOP -- remember that includes all people, not just the Republicans who vote in the primary -- is just too great. The risk is worse than the reward.

 

Now, a default will be ugly -- for a couple of days. But can the leadership of the GOP, playing an endless game of chicken, survive if there is no default? If the president is willing to give in on what is basically a stance that there should be no more debt ceilings, does that really mean anything to what now seems like a majority of the Republicans in the House who clearly want government to be made smaller, no matter what the cost to the party in the long run?

 

What I think we are seeing in this market is a grudging recognition that we will go over the Oct. 17 deadline. But so what? That's what the rally in the banks and the retailers said Monday. Those are the two groups that will be hurt most when it comes to earnings.

 

Now the bond market is playing the same game as the stock market. It's saying, "Look, there will be a default, but after that, there will be a resolution and an end to QE2, so the bonds are going to sell off." I do not think this sell-off is a flight to safety, because there is no safety until we get a default and it is cured. Either that or the bond guys recognize that the October payments from income tax are going to be bigger than expected.

 

That's why things seem so sanguine. They really aren't! If we actually do get the House to agree with the Senate -- I see no reason that should happen until after the deadline -- then maybe we will have such a tidal wave of buying that it will leave no stock behind -- until, at least, we start talking taper again.

 

I believe after the furious runs of October 2011 and January 2013 (fiscal cliff) many participants are willing to risk what I think could be a 1,000-point Dow decline if nothing is done this week, if only because, come next week, there will be a resolution. If it is before then, many stocks that report good quarters will be off to the races and stocks like Wells Fargo (WFC), which reported a not-so-hot quarter, won't get hit as badly as they should otherwise.

 

Random musings: The Burberry appointment for Apple (AAPL) is very important because Angela Ahrendts was very pro-customer-relations-management and is a huge backer of Salesforce.com's (CRM) methods of staying close to retail customers.

 

Jim Cramer's headshot


Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long WFC and AAPL.





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939Comments
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Pretty much no matter what happens this is the end of the world as we know it as Americans.

 

It is clearly obvious that our economy is totally dead and supported only by the zero interest rates of the Fed and them buying $85 billion of assets a month.

 

We are on a Death Spiral of lost Jobs and an ever weaker and weaker economy. Over 15,000,000 $80,000 plus a year jobs lost replaced by 8,000,000 $10,000 (minimum wage at 29 hours a week) jobs over the last 5 years. With on end in sight for the downward spiral.

 

A reported GDP with about $8 trillion inflated or false income points -- $4 trillion alone in the fact that you rent out your house and receive that rent money as income and live somewhere else for free -- $1.8 trillion in the new add for having developed ideas in the past not even sure what this voodoo number comes from. Making our real debt to GDP at about 200 percent -- failure point.

 

Pretty much the retired people are taking more money out of the stock market than people are putting in hence the Fed buying $85 billion a month to keep it from collapsing. Next year it will be 10,000,000 extra retired people taking even more money in total out of the market then is being put into the market.

 

Government is beyond broke which is probably why they want to crash and burn it now rather than later.

 

China and the rest of the world is moving to trading in yuan and not the dollar as they know it is going to fail.

 

Why didn't the Federal Reserve do the right thing and rebuild American manufacturing and create $80,000 plus jobs a year instead of silly service jobs paying $10,000 a year???

 

China building manufacturing on the ascent America shipping manufacturing to China on the decline. It's not a hard picture to figure out folks we have been sold down the river.

 

All we have to do is put a 100,000 percent tariff on all manufactured goods coming into the US and force the business leaders here to bring jobs back to America and get our economy going again.

 

IT IS THAT SIMPLE FOLKS -- our leaders want us to fail and the US fall from being a super power.

Oct 15, 2013 12:42PM
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How convenient to leave out the Democrats role in this soap opera.
Oct 15, 2013 11:43AM
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for the people, by the people ?     What a joke !!!!
Oct 15, 2013 11:56AM
Oct 15, 2013 11:44AM
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Better to have a shutdown and default then to continue with uncontrolled spending and borrowing. No cuts no government. I'm sure the UN and the world can live without our (my) money for awhile.
Oct 15, 2013 1:40PM
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You are not entitled to Welfare; you are not entitled to Medicaid. You are not entitled to free legal care, an education, or a cell phone. Anything you get is a gift to you from those who pay your way through life and you should get down on your knees and be thankful. No one is entitled to something they did not earn. Welfare is to be a hand up, not a hand out. It is not meant to be forever, it is not meant to be a way of life. It is not a gift for, or to, your next generation. The world owes you nothing. I owe you nothing. This country owes you nothing except a return of what you have given; Nothing more. WHAT HAVE YOU GIVEN?

Oct 15, 2013 1:18PM
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Governments and businesses succeed or fail based on leadership from the top down.  We're doomed because in our feckless leader we have a small minded, name calling bully who has never led successfully in his entire life.
Oct 15, 2013 1:20PM
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Ladies and Gentlemen, We now are seeing what Corporate greed and Big Business can do to a country when allowed to run thing from afar, with all their billions of dollars and lobbyist running around telling everyone they know what this country needs.
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Just had a great idea ---

 

since the NSA is reading all of our emails before they send them on to us --

 

why don't we ask them to use a spam filter and send just the real emails to us and delete the spam ones????

 

At least we would be getting some of our money back that we spend on the NSA each year

Oct 15, 2013 11:41AM
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Syria was put in its place by Putin  while Obama sit there with egg on his face. Thanks Russia
Oct 15, 2013 10:45AM
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"What I think we are seeing in this market is a grudging recognition that we will go over the Oct. 17 deadline"

 

~ like the horrors of the sequestration.........  which hasn't seemed to bother us much?

 

cut DOD by 20% and we'll be just fine. 

 

then cut DOEnergy, DOEducation, etc

Oct 15, 2013 11:47AM
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Evaluate the issue forward and backward, up and down, then call it anything you like if it makes you feel better.  The result will be the same.  Kick the can, but with more drama please.  DA!
Oct 15, 2013 11:42AM
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BRENT


It is entirely understandable that Barack Obama's way of dealing with Syria in recent weeks should have elicited responses ranging from puzzlement to disgust. Even members of his own party are despairingly echoing in private the public denunciations of him as "incompetent," "bungling," "feckless," "amateurish" and "in over his head" coming from his political opponents on the right.

For how else to characterize a president who declares war against what he calls a great evil demanding immediate extirpation and in the next breath announces that he will postpone taking action for at least 10 days—and then goes off to play golf before embarking on a trip to another part of the world? As if this were not enough, he also assures the perpetrator of that great evil that the military action he will eventually take will last a very short time and will do hardly any damage. Unless, that is, he fails to get the unnecessary permission he has sought from Congress, in which case (according to an indiscreet member of his own staff) he might not take any military action after all.

Oct 15, 2013 11:32AM
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Boehner's press conference was held in front of 4 American flags ... supposedly to make Boehner look more patriotic.  Meanwhile, Reid neither Obama have said a word.  Get together, lock the doors, work it out. Do the right thing. Mr Obama, remember: "Yes we can"
Oct 15, 2013 12:39PM
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It's time for Boehner to grow a pair! He needs to get the vocal minority in line like great Speakers have done in the past for both parties. He is only afraid of losing the speakership, he doesn't care what is good for the Country. Bring the Senate bill to the floor untouched, fight the budget battle after the country is  working. Set up a joint panel to mediate the budgets already passed by both the House and Senate. Be adults!

Boehner should make a deal (behind closed doors) with the Demos in the house that they will support him in keeping the speakership it the Teabags try to through him out. Let them start their own caucus and see just how out of step they are with the people. We need a congress that is responsive to all Americans not just 24%.

Oct 15, 2013 11:06AM
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Happy belated Canadian thanksgiving, stuffed myself with 2 turkey diners on the weekend.  I see there is no change in the nonsense from Washington today, let's hope the insanity ends in time.
Oct 15, 2013 11:25AM
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Is the ObamaCare web site working like Google yet?
Oct 15, 2013 11:39AM
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Why are the baggers so concerned about this tax on medical devices? My understanding is they are marked up thousands of percent from manufacturer to hospital and then again by hospital to patient/insurance co so not sure how this has become such a hot potato(e) ........

Something is rotten in the state of dc ......
Oct 15, 2013 11:47AM
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Why did Boehner call a  Press Conference?  He had nothing to report.  It \was good news only for Wall Street.
Oct 15, 2013 10:46AM
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do we keep doing QE's while under defaut?  that seems like a weird plan.....
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