It's going to get old real soon. That's how I am starting to feel about this Washington situation. If neither side is choosing to negotiate in earnest on the "fiscal cliff" issues, then the market will have to reach a level where everyone has figured out there will be no earnest negotiation, and they aren't selling regardless.
Last week seemed incredibly confusing. On the one hand, there was plenty of talk about how a deal could be reached. I keep thinking about that comment from Goldman Sachs (GS) CEO Lloyd Blankfein in particular -- the one that said the sides were real close. How could he say that if it weren't at all true? Wasn't it based on something? How about all of those CEOs? Don't they make any difference? We thought they did last week.
On the other hand we have the perception that, if Washington was near a deal, something critical broke down -- because the positions got further apart over the weekend.
What happened in those intervening days, when the business leaders were hopeful and when President Obama went to the Pennsylvania toy factory? Did Treasury Secretary Timothy Geithner misjudge things and play too much hardball?
I am thinking like this because it is highly unusual to see a situation go from hope to no hope in three days without anything really changing.
I have to tell you that, behind the scenes, the presidents' people are very certain that there will be a deal -- so certain that it's a bit daunting. Maybe that's what the business leaders were imbibing.
To me, the important thing is how quickly the complete transformation was made. This went from last Wednesday's happy belief that a deal will be struck, to a harder line by both sides Friday, to a total collapse by Monday. That last stage was on the heels of a Republican offer that someone would put out only if they wanted to end talks. Sure, I am certain some people thought Monday's Republican gambit had some substance, but to me it was more of the same.
Get that "total collapse" offer into the market. Figure out where there is no hope -- and then the market will have some firmer footing, which is certainly lacking right now.