Come on in Equity Market Vigilantes, the Water’s Fine!

And then this happened overnight…..S&P futures fell 50 points in a matter of moments as the “plan B” deal falls apart. Honestly, I don’t even have much to say about this.  The political back and forth is tiresome.  We don’t hire these people to bicker with one another.  We hire them to get things done.  And something needs to get done here.  The whole political circus in the USA is getting old.

But one thing’s certain.  Once a bunch of millionaire politicians see their bank accounts in a world of hurt because of their own ignorance, they seem to get their acts together.  So let’s embrace the equity market vigilantes since they seem to be the only people in the world who can make US politicians wake up to their own incompetence….


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • LVG

    Maybe this will get these assholes to finally do something.

  • Old Dog

    Plan B failing proves Plan A did not have a ghost of a chance of ever passing the house.

    Like it or not we are now in free fall.

    Don’t count to 10, pull your rip cord now.

  • George H

    Seems to me “we hire them to get things done” is a cliche. They are doing their job.

    To see this, we must realize we hire them precisely because their views. It is simplistic to think legislators do this just to keep their jobs. We are a democracy. If what they do is exactly the opposite of what the constituents desire, they can’t stay in the office.

    Instead, this stand-off is representation of the stand-off in the country. Keep in mind that the election had a clear winner, but not a landslide. The country is truly split.

    The truth is no one wants pain. Everyone is standing behind “austerity doesn’t work”, keep tax and keep spending. All the fight is between these two camps of PEOPLE using their representatives to keep the status quo while pretending some tough choice, i.e., fake tax increase and fake spending cuts.

  • Hammertime

    Let the stock market have its hissy fit. Who is in charge Congress or the market? Congress should give wall street the high sign for a change.

  • Cowpoke

    Our Nation should not be guided by the stock markets wims of HFT computers.
    Our country and it’s citizens are more than just a spread sheet of up & down ticks.

    I will be the contrarian here, I hope hope it all collapses. Goes to zero. Then what? I think we will all be just fine. I would love to not have to go to work and instead go out and just help my neighbor. I would love to not have to deal with taxes next month and just go volunteer instead.
    But alas, Let’s all be Scared to DEATH OH My the boogie man fiscal Cliff is going to get us with his Mayan Brother’s calender..
    Bah Humbug.. Let it Happen This same old debt celing end of world is getting old like an Elvira Movie Ending.

  • Pierce Inverarity

    Nothing is stopping you from going and helping your neighbor. Nothing is stopping you from going to Greece or Spain either to experience the effects of self-imposed austerity. It’s really easy to make these comments in a vacuum on the internet, but real people lose their jobs, go on the dole, and worse when politicians play games like these.

    I’ve seen you around here enough to know you are just winding us up, but I thought I’d throw it out there that there are real consequences to all this political back and forth. Frankly we shouldn’t put up with it any longer.

  • Cullen Roche

    I just don’t understand the charade. It’s like asking a group of employees to get something done and they procrastinate for a few weeks and ask you into meetings where they embarrass the other side in order to look good in front of the person who hired them. I don’t want you to lecture me about how incompetent the other side is. I want you to lock yourselves in a room and get things time in a timely fashion. What Congress is doing right now is a waste of time and effort. They’re not curing cancer. They’re a few billion dollars away from an agreement. If they wanted to get something done they could. But they’re more interested in putting on a show. It’s old.

  • Brian_Ripley

    Hey “Joey”

    You are in the wrong forum. If you want to advertise your circuit boards … go to a circuit board forum.


  • Cowpoke

    Kiss My ASS Pierce, You haven’t a clue. my household has pretty much contributed over a half million dollars towards our community in the last 15 Years so don’t condescend me in any way as i can back it up.

    “I’ve seen you around here enough to know you are just winding us up,”

    Haha, Go Bend your self over because all I have ever done is look for the truth. You seem looking for a fight. Well, so be it, put up your dukes, I am game because I do NOT think as you do that there are “real consequences to all this political back and forth.”

    You think there are consequences and you dis me.
    I DIS-agree.

  • Andrew P

    The clowns in the House are not the only ones putting on a show. So is the President. But they are not putting on this show for your benefit right now. Right now the country is split. This show is about getting reelected 2 years from now for the GOP members (mostly getting through the primaries so you can run for reelection at all) vs convincing the public that his side is right and Pelosi should be restored to power 2 years from now on the part of the President. Right now they are best ignored because something will come through the sausage maker sometime in Jan or Fed.

  • Stephen

    As Brit looking on,it just makes the US look silly. The quantitative arguments are ridiculous within the scale of the US economy when it comes to the spending cuts’ side of the equation.Likewise the differences in tax increases attached to different income levels is likewise peripheral. Hence,removing any worthwhile quantitative discussion really reveals it for what it is; a pubescent pissing contest that makes the US look like it is represented by clowns.We have a few of our own.

  • nick

    Do you think news makes the market or the market make the news. It seemed to me on Wednesday that there were issues that wouldn’t be resolved until next week or in January. But the market chose to take it on board late thursday. Why? Could it be that the market was very much above where a lot of open interest was in both the index and stock options. Lots of customers were in the money in theoir call options and probably linignin them selves up for a bigger turkey this year. Eh not anymore. As I scan the strikes of UK stocks that expire today, I see all the most stocks have pushed down to where the maximum pain would be for those who buy options. The Market makers, predominantly sellers are now back in pocket. Just an observation.

  • Nick

    Call me a cynic, but i am seeing a lot of stocks in the uk pull back to exactly where the most amount of open interest is. Those people who were just ordering the larger turkey will wake up this morning to find all that in the money call premium returned to makers who are normally the guys short option premium. A strange coincidence particularly as it was clear yesterday morning there wouldn’t be a deal. does the market make the news or the news make the market? Merry xmas.

  • Johnny Evers

    By ‘get things done,’ we mean borrow another coupla trillion dollars to avoid having to make sensible decision about our prioties, resources and economic reforms.

  • Hans

    Poke, you sure do not sound as if you are invested in the market. I am and do not like 4% drops in any index.

    The markets only reflects what the morons can or can not do in CONgress…Everything is settled daily in the market, what about CONgress?

    ” They’re a few billion dollars away from an agreement.” I guess I get my news from the Cartoon Channel…

    Good old Barry Frankk must read the Pragmatic Cap:

    The real cliff in the end, may be Bank Bernank himself…

  • http://pragcap Michael Schofield

    I hope this is as easy to resolve as you say, Cullen. These neocon/tea party nutcases honestly seem to believe that crashing the country is best if they can’t have their way. I’m not going to be a doom sayer here but this is a very dangerous, festering game and and sooner or later that attitude going to bite us in the ass…indexes down but I’m not going to do any selling just yet, other than my (hopefully) well-placed stops, this could be a big flush before a rally. 75% cash. Not an easy market.

  • Johnny Evers

    Peace, friends.
    It’s a policy and philosophical disagreement, not a personal spat.
    Both of you add to the debate in here, so hopefully this doesn’t spin out of control.

  • Johnny Evers

    As a ‘neocon/tea party nutcase,’ I honestly believe that present actions will result in far greater damage than any short-term dips while we make the grand bargain.
    I also feel that supporters of the status quo are using fear to advance their agenda.

  • jaymaster

    I suspect part of this is a year-end dump to lock in lower capital gains rates, since a lot of folks will be on holiday next week.

    I plan to do some “Christmas shopping” for myself later today, for a few stocks on my long term wish list.

  • Cowpoke

    Your right Johnny, Sorry Pierce for such a harsh rebuttal. I did though preface my views as simply taking the “contrarian” so I guess I should have simply restated that.
    A contrarian point of view is needed some times isn’t it?

  • Pierce Inverarity

    I wasn’t really trying to dis you, just counter your counter. I respect you Cowpoke, and give you the benefit of the doubt, so I apologize if it came across the wrong way. I just have a hard time with those like the Joker who “just want to see the world burn”. Which I know, ultimately, you don’t: case-in-point your giving back to the community.

    When I say we’ve seen you around here long enough, I feel like you understand that the accounting identities are real and have material impact on the daily lives of all of us: but they have especial impact on those living at the margins. The political back and forth really only impacts markets, which I’ll grant you aren’t the concern of the many. It’s when that political back and forth halts any real action that we have a problem and hits the pocketbooks of those that can least afford the hit.

  • Cowpoke

    Hans, I am vested about less thna half in the mkt. I cashed out most early this year to invest in business venture.

    Now to that article, couple things:

    “It’s important to reduce the deficit but the analogy between an individual entity and the federal government makes no sense.”

    Frank makes a valid MR point here then he goes on:

    Frank added that it is a “mistake” to only examine the costs of government projects and ignore their future benefits.

    “People say, well, what about the future? Well when we build a good transportation system, we’re helping the future,” Frank told “And to look only at the cost of that and not the benefits is a mistake and a form of recounting.”

    Here is where the divide is and it’s philosophical as well as pragmatic to both points of view.

    Take for example Public transportation, the big push is “Light Rail”. Democrats are constantly pushing light rail as the holy grail to mass transit and are willing to spend Billions into the economy for it.
    Most republicans think it’s a waste and would rather see the money spent elsewhere.

    Or a simple example is Tax Cuts or Deficit Spending.
    OH, and here is a big philosophical one. More money to groups like Planned Parenthood to provide for more abortions or to programs that help encourage marriage, family, and education.

  • http://pragcap Michael Schofield

    I don’t know why you’re so afraid of compromise; your theories are so discredited.

  • Cowpoke

    “I’m not concerned about the very poor. We have a safety net there.” —Mitt Romney (January 2012) :)

    Pierce, as the contrarian here I think it is very valuable to free people that their govt does not have such an easy time doing what ever it wants with ease.

    Now from a humanitarian point, I do have to take what Mitt said and think from my perspective and the context of what he was saying is that Yes, the poor do have a safety net and the rich will be fine.
    So if you are talking about those in the lower part of the middle class, Sure I am all for continuing the paltry 2% SS payroll tax cut. Heck I would like to see people to be able to have the full 14% or so for a year or two and then be able to move it into some investment vehicles.

    But alas my contrarian side rears itself when I know of people who are on the fringes that go to the local food shelf and yet find the money for Madonna Tickets, it pains me…

  • Johnny Evers

    Building an economy on borrowed money — consumer debt, mortgage debt, student loan debt and government debt — hasn’t been discredited?

  • http://pragcap Michael Schofield

    Nope. WWII debts were about the same and it pulled us out of a depression. Those debts are almost insignificant now and these will also pass. You’re telling us “just wait- I can see the future” but I think you’re imagining problems that will never exist.

  • Cowpoke

    It’s one thing to deficit spend on something that allows for a more productive society to function, like a Bridge to somewhere and quite another to just toss out dollars for failed or antiquated projects and concepts.

  • bart

    … and I was *so* looking forward to the implementation of Chained CPI.

    Social Security recipients have been getting *rich* with the inflation adjustments being and having been way too high.


  • Johnny Evers

    I think there are two problems with that.
    First, World War 2 did not end the Depression. There was economic recovery in place starting in 1940 and 1941, before the big ramp-up in spending. In addition, the standard of living did not rise during the war.
    Second, after the war government spending fell dramatically and taxes increased, leading, along with many other factors, in dramatic growth. Today’s increased spending and deficits have no exit date.

  • http://pragcap Michael Schofield

    Sure they have to end. But this isn’t the time. Ever hear of that Hoover guy?

  • Johnny Evers

    There is no ending point.
    We ramped up spending in WW2 to fight the Germans and Japanese. Our citizens also practiced austerity — saving and rationing.
    Today we are increasing spending to expand the welfare state and asking our citizens to spend more (borrowing.)
    Some in good faith might say that today’s deficits are meant to stimulate the economy, but for the governing class, the deficits are meant to expand the power of government.

  • Hans

    Poke, I wishing you the best in your new business venture…

    Personally, I am hoping for no agreement and the removal of the First Speaker (the cry baby)…

    Thank you for reading the link…It is very disconcerting, when a pure bread Socialist such as Frankk, begins to invoke MM Theory…Also note, his concern about the need to balance the budget but only way down the road, which of course is never taken.

    The only “future benefits” belongs to the governing
    gangs…Roads were built by us because of road fees; but most other “programs” provide little or no value unless your deity is the governing gangs…

    Taxation has the power to control and or destroy…

    BTW, if you have a Obama phone, you can call for your free Madonna tickets…

  • Paul Milenkovic

    Mr. Roche:

    I have been following your Web site for some time now and I think I am beginning to understand your MR theory and how “austerity” is arguably the wrong prescription for what is ailing the economy right now.

    I also understand that you have attempted to advocate for the MR theory and other of your ideas “outside of politics”, and maybe with enough provocation, one “let’s one’s guard down” and gets mired in politics just like to rest of us commenting on the Internet about the important social issues of the day. I also teach for a living and understand how an instructor can lose patience with a student who is “not getting” what appears to be a simple point.

    By reading your blog, I am to be persuaded of the correctness of the MR theory, something that goes against my indoctrination, life experience, and intuition about money, but I am defer to your deeper insights than I have with respect to how “money works.” On the other hand, your remarks “I just don’t understand the charade” and “They’re a few billion dollars away from an agreement” betrays a deep, deep misunderstanding of negotiating, political differences, and a naive view of human nature and of conflict resolution. I may not understand money they way you do, Mr. Roche, but I believe I understand people, and about people, you are very seriously wrong.

    In my understanding of people, you have frequently stated that you want to be “about money” and to be above or outside politics, and you have meticulously have avoided weighing in on the merits or demerits of Mr. Obama or of the Republican House of Representatives. Unlike C-SPAN’s Brian Lamb who tries to cover politics while doing much the same thing, I think you have “let slip” some of your sentiments, and yes, it is a free country and we are entitled to our political beliefs. You had cautioned about the economic damage to be done by a Romney Presidency practicing “economic austerity”, and your most recent remarks speak to shortcomings of “Congress”, which most of us take to mean the Republican-majority United States House of Representatives.

    If you privately and personally support President Obama, I can appreciate that, and I can respect that. Unlike many of Mr. Obama’s vocal supporters, however, I see that you are an independent thinker, and I believe that you would perhaps be more outspoken with respect to what Mr. Obama may be doing wrong, that is, if the legions of Obama-bots wouldn’t descend upon your gracious Web page. In the rare instances where you even ventured into Left-wing heresy of suggesting that Mr. Obama is doing some but not all things right, the Obama partisans descended upon you like the proverbial pile of bricks.

    You suggest that Congress is negotiating in bad faith. Would you consider Bob Woodward of Watergate fame to be someone who is non-partisan, or at least non-partisan with respect to being gentle with Republicans? Would you then consider from The Price of Politics that aside from ideology, that President Obama is a particularly inexperienced, naive, and inept negotiator?

    Would you consider the historical record, with respect to the President failing in negotiations on everything ranging from bringing the Olympics to Chicago, getting leaders in China to agree to anything meaningful in CO2 reduction to mitigate the pending impact on climate, on the quiet negotiations with the Taliban to exchange prisoners and ramp down the Afghan conflict, on getting the Iranian leaders to resolve the crisis of their pursuit of atomic weapons.

    So however “incompetent” the House Republicans, they appear to be at the bottom of a long list of people ranging from the International Olympic Committee, China, the Taliban, Iran, and maybe others that the President has demonstrated he has pressure little influence over.

    And I am supposed to “just trust you” about MR theory?

  • Cullen Roche


    I don’t say “just trust me”. I say “here’s how I think things work, if you don’t believe me, then don’t believe me”. I am not here twisting people’s arms to follow MR. I am simply using this platform to try to educate people as best I can. I believe I’ve displayed, in real-time, that my understanding and experience are fairly credible since I’ve not only explained how the system works (using credible sources), but many of the core pieces of that explanation have been confirmed by my accuracy in predicting various market movements. But you have to decide for yourself whether I am just another “shill” (as someone referred to me the other day) or someone who actually has a really solid grasp on how things work.

  • dr

    “.S&P futures fell 50 points in a matter of moments as the “plan B” deal falls apart.”

    HFT trading reacting to bot headlines, nothing more…

  • http://pragcap Michael Schofield

    Expand the welfare state and the power of government? So what do you say about the expansion of wealth in the top tier? The bottom 50% are making it on less than 15% of the nations wealth, so if you’re implying some kind of plot by the lower classes, it’s either failing miserably or you’re full of shit! That’s really funny stuff, Johnny. LOL!

  • http://pragcap Michael Schofield

    Right you are, dr. Always wait for the smoke to clear.

  • jaymaster

    I think you’re right about that.

    Especially since Harry Reid and a several other prominent Democrats in the Senate said 2 days ago that it didn’t matter if the House approved Plan B, or any other plan for that matter, the Senate wasn’t going to let it through.

    That’s why I had to scratch my head at all this uproar over the failure of the House to pass plan B. Like it really meant something that nobody knew a couple days before. .

  • Boston Larry

    The failure to pass Plan B means that there is a dis-connect between Boehner & Cantor and a significant number of rank & file Republicans in the House. It may mean that Boehner can’t deliver on any compromise deal he makes with Obama, and that is a big deal if true.

  • jaymaster

    That’s one interpretation.

    Another is that Harry Reid said, “Don’t waste your time agreeing to anything, because we’re going to shoot it down no matter what.”

    And the Repubs said, “He’s got a good point. Let’s go home for Christmas.”

  • MG

    In medical parlance, Plan B (emergency postcoital contraception) usually works….but not for Boehner and the House Republicans

  • Cowpoke

    “BTW, if you have a Obama phone, you can call for your free Madonna tickets…”

    Hans, That’s down right Funny.. :)

  • Geoff

    Right, Plan B won’t work because Boner is always looking for more coitus.

  • George H

    According to wsj,

    the two sides were way too far apart. So it wasn’t just a few billions.

  • hangemhi

    The Obama phone was a Bush program. Obama haters rarely deal with facts. They do love anecdotes like the Madonna tickets. Never mind that the rich keep pillaging the country while they fool most into thinking the problem is elsewhere

  • hangemhi

    There was economic recovery in place in the 1930’s but it was akin to today’s recovery – tepid and prone to any misstep like the fiscal cliff. The full recovery only happened when the US ramped up war spending which started before we actually entered the war (aide to Britain for example). Johnny you need to embrace MR and get access to separate gov vs private sector debt charts so you don’t let your bias rewrite history.