I had shorts on every day and I would marvel at the lack of discipline other shorts had before the closing bell and, believe me, many of those buyers were closing out shorts. The longs tend not to be that injudicious.
Why does it happen? Because shorts totally fear the midnight deal. They always think that someone's talking to someone else in these crises, whether it be with Iraq in 1990 or again on the eve of the war in the new millennium or with the debt deal in 2011 -- remember the Grand Bargain -- or with the fiscal cliff last year. They always have conviction when there's no reason to have it. Yes, these buyers always made the business so hard. The only time I was ever one of these buyers was in 1990 when I was bringing in my banking shorts, not because I expected anything good to happen over the weekend, but because I didn't want to give up my gains. Maybe some of these buyers are like that. But it doesn't make me like them. I have always felt that the key to this kind of market is wait until you know the pain is extreme in Washington because only EXTREME pain allows for a deal. Everyone digs in their heels at a certain point and we are JUST NOW getting to that point.
We need some concrete sign that someone outside the beltway cares. Hasn't happened yet. So, sure, maybe tomorrow the secret talks come out of the closet. Maybe tomorrow the Democrats and Republicans agree that for the good of the country they will set aside their differences and compromise. But frankly, right now, doesn't that totally commonsensical bit of hope seem entirely fanciful? Well, not to the buyers. And they were the only ones who mattered going into the bell.