By Courtney Comstock
That explains why everyone we've asked says they're not concerned about the debt ceiling -- they just assume it's all politics and it'll work out. (But in the accompanying interview below, Rep. Ron Paul tells Yahoo! Finance's Dan Gross that markets -- especially the bond market -- don't realize just yet how bad any sort of default or debt downgrade could be.)
This sums up what we're hearing from people on the street when we ask about the debt ceiling (we ask questions like, Are you concerned that the U.S. will hit the debt ceiling without a deal? Are you preparing for the possibility that it will?):
"Nah, it's all [political] posturing." -- Hedge fund manager
"No concerns on debt ceiling. US market is stable on a relative basis. US Treasury bonds are still bid with 10-year yields back to near YTD lows at $2.91." -- Quant from Credit Suisse
"I don't have much clever to add to that area other than the obvious cliche response." -- Hedge fund manager
"Obama is very disingenuous continuing to engage in class warfare and attempting to scare the public into thinking that extending the government's blank check is vital to our future financial security." -- Economics professor
"Everyone thinks it's gonna get raised. I do too but it's scary when everyone thinks the same thing." -- Fund of funds manager
Whether or not Wall Street believes the U.S. might default, Megan McArdle and Business Insider's Joe Weisethal explain that Wall Street is assuming a level of rationality among politicians that just is not there. They assume that politicians are as rational as the market, which is telling them: it's already raised. But politicians are just worrying about how to get re-elected.
Dimon on the other hand, spoke to the importance on [Thursday's] quarterly earnings call. He said:
"It's imperative that the U.S. raise the debt ceiling."
"No debt resolution will cause severe market reaction."
"It is irresponsible to take a chance on a U.S. default."
Another interesting thing Dimon said on JPMorgan's quarterly earnings call: "We have tons of liquidity." Translation: Screw higher capital requirements. (Of course you remember this.)
- Hedge fund manager
- Wall Street