Wall Street Positions for Debt Ceiling or Bargain

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Oct. 11 (Bloomberg) -- Strategas Research Partners' Daniel Clifton, Renaissance Macro's Neil Dutta and JPMorgan's Andres Garcia-Amaya discuss the U.S. government shutdown and debt ceiling with Trish Regan on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Have begun.

That is sending the s&p up above pre-shutdown levels.

Are we about to get a deal?

We want to bring in our panel.

We have dan clifton, neil, and our closer from jpmorgan.

Very quiet today.

What might we be able to read into that?

I think there are talks going on behind closed doors.

That is productive.

We started this week with people worried about default risks.

That has largely gone by the wayside.

They were worried about the government shutdown lasting through november 2. that seems to be buying out now that the house republican plan will open the government.

We are now in touring -- e ntering the third and final stage where they have to negotiate what will be in the package.

He gets volatile as we go through the process.

I think there is a turf for developing between house republicans and the senate.

They will be in a race to see who has leverage.

It could get messy, but we have knocked out the real challenge is to get a deal.

What kind of plan do you think we might see?

The six week extension on the debt ceiling?

Both plans involve a temporary debt ceiling increase.

I wish they would not go for the temporary increase and go for the larger package.

They are trying to set up a bridge for larger fiscal negotiations.

Republicans are offering to give up sequestration cuts in favor of long-term liabilities cuts.

I think the democrats want some tax increases.

Then you work your way to smaller packages where you're talking about the medical devices.

Maybe we get something temporary.

What is the effect really on the economy?

A lot of people are not being paid because they are involved in the government shutdown.

Some are going to work and not being paid.

Maybe they have time off and are not being paid.

One would think that would crimp their spending.

Is there a macro effect on the economy?

They are also being told they will get that pay.

-- backpay.

They do not know when that is coming.

It is coming soon.

It will come before the end of the quarter.

If it comes before the end of the quarter, this will be a wash.

I think three or four months from now we will be looking at this as an afterthought.

The economy will do a lot of heavy lifting on the deficit for us.

The deficit is narrowing.

The economy is expanding.

Turface -- receipts are flowing into the economy.

I am feeling good about the economy's this time next year.

Can you put some numbers to that?

What sort of gdp or growth rate we will see?

We will see 3% gdp growth.

That is well above where we have been for a long time.

Over the first four years of the recovery, we were growing at 2.2%. the government has been shut down even when it has been open he cuts it has been shaving about 30 basis points off gdp growth each quarter for the last three years.

The question is, the housing market showing signs of improvement.

We are in the later stages of debt deleveraging.

Spending relative to income will pick up.

It is a matter of time.

The onus is not so much on the balls to tell you why growth will go up.

It is on the bears to tell you why it will be stuck at 2%. the dip kind of came and went.

We're now one point five percentage points from the all- time high.

Did people miss the opportunity?

There have been a lot of those where people say i missed my chance.

I totally agree that the graduate -- economy is gradually showing signs of improvement.

Economic circumstances and the market dictate policy.

We forget that because washington headlines are reminding us of the noise.

If the economy gradually improves, the fed will have to raise interest rates.

Washington will be reminded they have to get their act together.

The economy will force them.

We have seen the result of that the last couple of hours of this week.

Dan clifton, we quote your research a lot on "street smart." one of the charts you have put together is the uncertainty index.

It is at about a five-year low.

Help the viewers understand how it is at a five-year low.

It is starting to creep up in light of everything that has happened.

You start to see a disconnect between the relationship between the s&p 500 and policy uncertainty.

There used to be an inverse relationship.

You start to see that breakaway with quantitative easing.

If you think about the fiscal cliff, you had a higher degree of policy uncertainty and the s&p 500 rallied through that as you got global easing in the u.s. and japan at the same time.

There has to be a distinction between fiscal and monetary policy.

Right now we have a lot of fiscal policy uncertainty.

I think the fed is on hold through 2014 and dumping liquidity while the politicians fight in washington.

When you say through 2014, they will not mess with raising it until 2015? rates are different.

At least pulling back quantitative easing will not happen until 2014. what are the odds we get something real before monday?

I think the odds are good.

The deadline is october 17. if we wake up on october 18, the world will not end.

The treasury will have enough money until october 31. politicians are in a rush to end this impasse.

If you can get something out by the end of the weekend, you can have it voted on by the october 17 deadline.

Nothing focuses the people in washington like a good deadline, and we are right up against it.

I have said that many times before.

A deal this weekend?

More probable than it was earlier this week.

Most likely.

My time horizon is longer than everyone on the panel.

If it is measured in quarters and years, there is substantial upside to the economy and equity lineup.

Whether we get a deal this weekend or otherwise.


One of the reasons the policy uncertainty index does not create big spikes in the vix is because participants are trained for ongoing legislative squandering -- squabbling.

I am not that worried.

I think this is a sideshow.

We will leave it there.

Be sure to tune in to bloomberg

This text has been automatically generated. It may not be 100% accurate.


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