Enter the Matrix (AKA Debt Ceiling Delusions)

Most Matrix references revolve around the red/blue pill conundrum or Keanu Reeves annihilating cyborgs. Today’s debt crisis blog post, however, boasts a guest appearance from the affable Cypher of first installment lore. Despite knowing exactly what a life in the Matrix meant (we won’t spoil the movie for you if you haven’t seen it- which you should), Cypher bit into a piece of imaginary steak with great zeal, proclaiming, “Ignorance is bliss.”

Flash forward to a government at odds with itself and governmental debt piling up at our doorstep, and you’ll find that the ignorance longed for by Cypher is being aggressively embraced by the markets. There’s no debt deal on the table. Politicians are engaged in what amounts to a high-stakes staring contest, and both sides are good at what they do. The spectre of a government default is floating off of the silver screen and into our living rooms, but you wouldn’t know that looking at the markets, which are giving the best Cypher impression they’ve got.

  1. Stocks, although down slightly the past few days, remain up near two month highs
  2. U.S.  ten year notes are at close to 8 month highs.
  3. We were quoted secondary market 30 day Tbills today at negative rates, meaning they are beyond their theoretical highest possible price (where rate is zero). Yes, you read that correctly. You’d be paying the government to hold your money.
  4. FCMs are pretending like nothing will happen, with no notices or warnings for customers holding T-Bills in their accounts.
  5. The exchanges, whom the FCMs will take their cues from, are being vague. We called around the CME today, and got this stock answer:

“We closely monitor our markets and broad range of collateral on deposit, and will continue to monitor the liquidity environment and appropriate collateral haircuts as the U.S. approaches the debt ceiling.”

Everyone is moving right along like there isn’t the possibility that T-Bills held in their futures accounts would be worthless, or worth something less than whole. Are they embracing ignorance as bliss, or is it that they are the complete opposite of ignorant? Are they so certain (or at least are willing to bet their hard earned dollars as if they knew full well) that the US government will not allow a default, and all we’re seeing is political posturing? Time will tell.

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The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

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Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.