We had a little fun earlier commenting on the "supercommittee" as a potential Halloween costume alternative for you and 11 of your closest friends.
But it is no laughing matter when it comes to the deadlines being faced. Be forewarned that as much as you might have been sick of hearing about the Slovakia vote, that may be nothing compared to the next three weeks of "supercommittee" headlines.
The 12-member panel has technically until November 23rd to come up with a plan to avoid $1.2 trillion in budget cuts which will kick in automatically in the absence of a plan.
But what is not widely reported is the fact that the Congressional Budget Office (CBO) is insisting on a November 1st deadline for a first draft or outline so that they can start running some numbers.
According to the New York Post, in quoting USC law professor and former gov't official Ed Kleinbard, "The supercommittee needs an agreement in principle this week so the CBO can do their modeling."
Kleinbard goes on to point out that if a deal is not ultimately reached, "There will be a triple-witching in January 2013 when the automatic cuts are triggered, tax breaks expire and discretionary cuts from the August debt-ceiling deal take effect. In addition, the debt ceiling will be hit again. It will be a fiscal crisis of biblical proportions."
Now, January 2013 seems a long way off but Nov. 1 and Nov. 23 are not. Traders certainly should not forget that the impasse over the "debt ceiling debate" was arguably one of the root causes of the August/September market decline (along with Eurozone concerns and weak economic numbers).
Therefore, please be aware that a new set of headline risks, both to the upside and the downside, come into play starting this week and extending at least into Nov. 23.
Good Trading!
David W. (aka The Underground Trader)
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