According to the Washington Post, Obama has thrown the sick and the elderly under the balance-the-frickin-budget bus. At least, that's how some will paint it. Others will assert that Boehner has abandoned his peeps (the rich) in order to reach an unacceptable compromise.
As always, reality is somewhere in the middle (and it's far from a done deal.) We certainly must reduce our skyrocketing debt -- especially before interest rates increase and it takes 482% of GDP to make interest payments alone. But, we also need to increase our revenues -- easier said than done in the midst of a Recession/Depression.
I don't know what to expect of the markets tomorrow. Futures are uniformly positive at the moment, with equities, gold and oil all positive (SPX is up 6.75 at 1342.50) The USD is off a little, but is still trending up. So, this is good news, right?
My initial reaction is "so what?" I mean, was there any doubt that some sort of accommodation would be reached? If you buy that, then the question is "how does this accommodation compare to expectations?" Most of us expected that each side would give some ground in order to reach a deal. From what I've read, this agreement looks fairly neutral; i.e., it should piss off both sides pretty well.
Bottom line, I don't see it having much of an impact. The real question is "will the deal, if it is in fact reached, make enough of a difference to prevent a financial meltdown?" The market's recent rise has occurred in spite of obvious long-term and structural problems with our economy: our competitive disadvantages (labor costs, currency, etc.), corrupt, incompetent and ineffective financial oversight, politicians whose sole aim is serving their donors/masters, a tax system that encourages multinationals to stiff the IRS, and massive levels of unsecured debt.
These problems won't be fixed by Obama and Boehner becoming golf buddies. In my opinion, the only real solution to our problems is a massive marking to market of debt and equity in all markets across the board. Debt investors will have to recognize the losses they've already sustained. Equity investors will suffer even worse. But, again, when valuations are contingent on the Fed's continued willingness to pump hundreds of billions into worthless instruments, the losses are already there. They just haven't been booked, yet.
Our trading partners will kick and scream, but they won't have a choice. They'll simply be booking the losses they've already sustained. And, where else would they go to sell their stuff? The dollar will get sketchy for a while but, again, what are the alternatives? The Euro is dead currency walking, and China has its own problems.
We've pumped trillions into preventing a depression. It didn't work. It won't work. Only when the debt goes away can we get back to a sustainable growth model that doesn't rely on financial trickery. When/if that happens, I'll turn bullish. Until then, not only is this announcement isn't really "good news." It's not even news.