Maybe Washington DC isn't as daft as is commonly assumed. For seemingly the first time in this already endless debate, House Speaker John Boehner and President Obama are actually talking numbers and compromise. As of this morning there's even a so-called "back-up plan" if a full deal does not happen.
Granted, the two sides are still miles apart and the peanut gallery is still in full throat, but the mere hint of a budging from the leadership on both sides is a marked improvement over what has been seen thus far.
Jeff Kilburg, founder & CEO of KKM Financial, is optimistic. "I think we have a deal," Kilburg says in the attached video. "We'll see if we can hash it out, but I'm really positive and I think the market reflects it."
Kilburg cites the significant rally in the S&P 500 since the November lows as evidence of growing optimism. While words like "optimistic" and "confident" are relative, Kilburg's targets are not. He's looking for another 5% to 10% rally to drag stocks well past multi-year highs made in mid-September.
He's got two ways to play the growing enthusiasm for stocks he anticipates, both related to the yield curve. The first is a straightforward bet on the longer time frame 10- and 30-year Treasuries to move lower, sending yields higher. Currently in the yielding 1.78%, Kilburg is looking for a move in the 10 year over 2% "in short order." The easiest way to play is getting long the Proshares Ultra Short +20 year ETF (TBT).
Also standing to benefit in a rising rate scenario are regional banks. While the big banks get all the attention and the hype, the regional banks more clearly benefit from a steep yield curve as it allows them to lend money with a larger margin of error in terms of their profit model. The trade is getting long SPDR KBW Regional Banking ETF (KRE).
It still remains to be seen whether or not we'll get a deal and if "good enough" will spark a rally. The point is that there is actual tangible progress being made in the fiscal cliff debate for the first time since the loathsome term was invented. That alone should be enough to spark some enthusiasm — if not from investors then certainly from the citizenry as a whole.