How much will the market tank on tax bill failure?
Since the odds never favored a deal, Boehner's Plan B failure isn't that surprising.
We're stuck with bad templates: TARP votes one and two and the Grand Bargain No Bargain moments of 2011.
These two Washington-orchestrated calamities caused the stock market to plummet each time, which then helped get a deal done.
Anyone who remembers the chaos after the failure of TARP to be passed knows that a 7% drop can occur when Congress chooses not to save the Republic's banks.
The failure to raise the debt ceiling or come up with anything responsible led to a 19% fall until we got something that worked then, but isn't working now. We were paralyzed by the possible ratings agency downgrades and when we got one we thought, somehow, it was the end of the Earth.
Bonds did the opposite of what we thought and staged a remarkable rally. In that sense the selloff was about nothing.
I think that these two analogies, which are being trotted out quickly Friday morning after the failure of Plan B, simply don't work.
First, the hated TARP came at a time when there was a run on the banks. You could argue that your ATM might not even have worked if that didn't pass. That one was huge.
Second, the debt ceiling deal turned out not to matter, at least when it came to the ratings agencies. It was, alas, almost much ado about nothing. This time around it would not shock me if the president just raised it himself and accepted a court challenge. Bills need to be paid, that's the law. One law -- that the Congress has to approve a debt ceiling raise -- conflicts with another. The payments that the federal government must pay on time.
Now I am reading that this failure of Boehner's Plan B is the equivalent of both. You can almost take an average of the two and arrive at what we are supposed to be done, call it 12%. And yes, those are precisely the numbers I am being told we will fall.
Now there are several things at work here. First, I don't know anyone who really thought the GOP would ever vote for a tax increase, period. Grover Norquist has made most Republicans sign a pledge. They will, according to Norquist, be challenged in the primary by Tea Party members. The pledge will not be broken.
I have thought, ever since I came back from Washington not that long ago, that it was clear this meant there could be no deal. We had hopes there would be another Grand Bargain driven this time by the president's big win, but these Republicans won regardless of the president. He means nothing to them. Nothing at all.
So, now we go over the cliff. I believe once Americans have seen their truncated paychecks -- both the people who are paid weekly and the ones paid monthly -- talks would begin in earnest to make some sort of deal to cut taxes with the Republicans actually leading that fight, urged on by Norquist. So Boehner's gambit was always a charade.
So, why should we sell off big on a charade? The Super Bowl plan is in effect. My take, the odds always favored no deal. We aren't going to get a deal. We fall of the cliff.
What gets repealed? The whole 7.5% gain since the November lows?
Nah, I think the gain from when there seemed to be a deal last week, call it about 2%-3%.
We always overdo it intraday, so it could be more. But the idea that "suddenly" there's no chance of a deal is pretty ludicrous.
The GOP will not vote to raise taxes, just to cut them. And I actually expect that to happen because Norquist will urge them to do so.
If it doesn't? Well, we won't know that for another month. And that's how it will go.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.
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Well with Hanukkah ending and onto Christmas, then maybe Kwansa ?
I hope all have/had nice Holidays....And Hopes for a better New Year...Cheers...
I like Next Time Up's statement: "The system is eating itself."
Cramer is turning into one of those the sky if falling let me help you crowd.
Beware when people tied to Washington tell us they have to do this for our own good...we always take it in the shorts and all of them walk away millionaires.
Obama is just another voted into office poor but now a millionaire politicians.....we keep giving them more money while they keep taking more for themselves....enough is enough..no more debt...no more borrowing...this is all the money you have now go deal with it.
Steve...Usually takes about a 200 point loss or 200pt. gain...To throw up the Red or Green banner.
Next time...Gonna add or take away a little bit about Gold, the Markets(major indices) Oil and the U$D.
Just about the time you get one or the other figured out, they go backwards on you...
Over the years in RECENT times many times Gold or other PGMs have disconnected from the Markets and worst yet sometimes even the US Greenback...Oil usually has a somewhat better correlation, but even then the unthinkable can happen....They are wierd ducks to follow...Don't always fly in a Vee.
Gold has been somewhat stagnant, bouncing off 1600+ lows for about 18 months now...
Then climbing slowly to close to 1800, maybe the most we see in day/week is 50 pts...Traders have settled into this game and is about all they expect anymore??...The days of making 25-40% gains in a short period, like 3-6 months has been eluding us for sometime now..Too many players.
So with the stagnating volitilty now, I just try and hook up some miner's stock for a 15-18% gain or the ugly word to be thrown around, along with maybe some crazy shidt to happen somewhere in the World....Even the Weddings and Celebrations in the Pacific Rim and India don't seem to have as much bearing anymore.?...Plus there is a helluva lot of scrap in the Marketplace to be melted into a cheaper product, especially in a World recession. ..Our day will come again.
WE the People are required to fix it.
[REIN IN BIG GOVERNMENT OVERREACH]
Poor foresight by all Americans regarding Washington legislation have created decades of inept policies. A simple, strategic, powerful fix to jump start the process:
28th constitutional amendment: Yearly Balanced Budget Required
Debt to GDP ratio
>35% = balanced
<35% = allow 10% extra yearly spending
This will not be easy to get congress to enact. The good news is we don’t need Washington to move this: The Constitution provides that an amendment may be proposed either by the Congress with a two-thirds majority vote in both the House of Representatives and the Senate or by a constitutional convention called for by two-thirds of the State legislatures.
It will take only one state to get the ball rolling!!!!!!! A STATE CONSTITUTIONAL CONVENTION!!!!!!!
The debt will not be paid down.
Waste and fraud will continue.
The Federal government will continue to spend money just like a drunken sailor on leave.
Now they want us to pay for their good time.
The GOP is collapsing!
Republican Retards, Teabagger Turds and Libertarian Lunatics arguing amongst themselves!
The Stock Market is crashing!
The Mayans we're right, Republican Armageddon has arrived and their pathetic lives are being destroyed,..... by themselves. LMAO
Boehner with an 11% approval rating!
LIFE JUST KEEPS GETTING BETTER! ;-)
Chris Van Hollen & Elizabeth Warren in 2016 & 2020!
MERRY CHRISTMAS AND GOD BLESS AMERICA!
Merry CHRISTmas,everybody ! ! ! !
PLAN B.....Was never a FAILURE....It was never a PLAN.
Buffoonery at it's best...
Mirage....You'd better be careful...You're really starting to LABEL YOURSELF...
Wanted to use one more you, but really didn't how I could fit it in....?
You have no further to look for piss poor Leadership, then the Republican Controlled House;
And I really "doubt" that leader will be in position within 60 days....
Too bad so many place fault in the wrong places, pure ignorance.
I don't read replies today, SO if you have the ballz to say anything, make sure everyone reads it.
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Stocks are facing some serious resistance as the bears tear into the market's respite.
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