Options Trading News

October 15, 2013  Tue 8:11 AM CT

Either someone knows something about a deal in Washington or we are beyond complacency and have decided that, whatever happens to the bond market because of the debt talks, it doesn't matter.

How else could we not have given up the gains from the other day--gains based on a compromise that would have forestalled default?

Now, it is true that the senators are talking. But without the involvement of someone from the White House, you have to believe that nothing can get done. From what we can tell, President Obama's stance is that the debt ceiling must be raised, the government must be opened and that nothing has to be given up--that there's no give in order to get this.

To me, that's a statement that says the American people and the people of the world are being held hostage by the government, but that the president will be able to portray it as being held hostage by the minority of the Republicans, because the position on the other side of the trade--the Republican side--is too difficult to understand. The president will be able to say, "I want to send those Social Security checks out, but John Boehner and the radical Republicans won't let me."

TheStreet.com logoWhat's weird is that the market is acting as if, at the last minute, the Republicans will simply say, "We lose. We've accomplished nothing, and now we are all going to go back to being a minority party in the country even as we are the majority party in the House." The president is betting that the GOP will avoid the third rail or lose a huge number of seats next year, as he will say the GOP kept you from your check.

This is all about 2014, and not about the U.S. economy, which could go down for the count by next week.

I think that's way too cavalier of the president. The GOP has so far failed to take any stance that involves anything other than, "We will give you a couple of weeks and then we will do this again." That is a non-starter. I think the president has the upper hand because he doesn't care about the economy or the stock market--he just cares about unilateral victory--and it isn't as if the press is going to call him out on it.

After all, other than a few people at various Rupert Murdoch enterprises and a commentator here or there, I don't know a soul in the media who thinks the Tea Party is anything but the worst the American people have to offer.

So it is hard for me to envision a case in which the market shouldn't be down much more as we approach the debt-ceiling deadline. It should be falling at least as much as it gained, if not more so, because the downside is asymmetrical. The dip seems too shallow without more concrete information that I think no one actually knows.
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