Editor's Note: Combining his passions for the markets, humor and food, "What's cookin' with Kenny Polcari" is a blog published twice weekly on CNBC.com. With more than 30 years of experience on Wall Street, Polcari provides insight and analysis on the markets as well as a recipe du jour. Buon Appetito!
Here we go again.
The antics on Capitol Hill continue to capture the attention of Wall Street, including everything from the looming debt crisis to the threat of a government shutdown.
And hey, don't forget about the 21-hour quasi-filibuster propagated by Sen. Ted Cruz, R-Texas, whose remarks included a reading from the children's book "Green Eggs and Ham" by Dr. Seuss (hard to say whether he understands the moral of the story: compromise). I wonder if he would prefer potato and eggs on a soft Italian roll, but I'll get to my recipe for that later on.
(Read more: See It Again: Green Eggs and Ted Cruz)
We've seen this game of brinksmanship in Washington before. Recall the debt ceiling fight during August 2011, which was resolved in the 11th hour, but still led to a downgrade of the U.S. credit rating and volatility in the markets. In December 2012, the threat of going over the "fiscal cliff" and sequestration created market volatility, but was also addressed last minute. In both instances, these problems arose because policymakers continued to kick the can down the road instead of working together to address the nation's finances.
(Read more: Boehner tries to herd Republicans to avert shutdown)
The market has no real reason to rally at the moment. Why anyone thinks it should go substantially higher considering the state of affairs in this country is beyond me. Meantime, earnings seasons starts in two weeks. The financial sector is warning of a slowdown in revenues. Consumers are tapped out and the holiday shopping season has not yet begun, but Wal-Mart Stores and other retailers are already warning of slowing sales.
To prepare, some retailers are launching discount days and free coupons to "come shop." Are you kidding??? It is going to be a long quarter as analysts try to handicap the shopping season. Remember it usually kicks off on the Friday after Thanksgiving, but I bet we will be hearing about weekly "specials" starting next month. It's exhausting, but the analysts will tell us how great the shopping season was, especially when you add in an extra 54 days.
(Read more: Americans downbeat on economy ahead of DC battle)
Remember, the new fiscal budget year begins on Oct. 1, 2013, and as of Thursday, there is no funding in place, but the Senate did vote on a stop-gap measure on Wednesday to keep the government running until they can all play nice in the sandbox. Expect the show to go on in D.C. for a couple of more days, but in the end, neither side wants to be seen as being so incredibly shortsighted or uncompromising.
Assuming that we get some kind of a budget, then watch the antics as they address the $16.7 trillion debt ceiling, which we are about to breach within three weeks. Treasury Secretary Jack Lew is warning that we have until Oct. 17 to figure it out.
The sticking point? Obamacare (as if you were unaware). Republicans want to defund or at least get some cuts while the Democrats will have nothing of it. So expect them to dig in their heels until 11:59:59, when they will miraculously come to an agreement that lets both sides save face while those bozos just kick the can down the road some more.
(Read more: 8 things to know about Obamacare)
I say strip them all of their private congressional "Cadillac" health-care plan, lump them in with the masses and then see how fast they agree on the terms. And while we are at it, if they can't come up with a budget or figure out how to deal with the debt ceiling then they should be the first ones to have their paycheck held back. Better yet, why don't we "furlough" them too? Can you just see the headlines: "Obama furloughs Congress!"
I mean, at some point someone has to be held responsible, no? And while neither side wants to see a complete breakdown of the process, everyone will get plenty of TV time to make their case. All of this uncertainty will continue to weigh on the markets giving investors the opportunity to reprice risk.
The U.S. markets continue to feel a bit soft in the near term so I still am of the opinion that a test of the 50-day moving average has to happen. The weakness in the stock market has been in light of low volume, so the real test for the markets will be when volume picks up.
Fears over the Fed's inability to "control the yield curve" will prove to be one of the directional drivers as well as the debt ceiling, Obamacare, weak 3Q earnings, continued confusion over Fed tapering and leadership, and extreme political divisiveness.
This being said, if you are a long-term investor then remember, weakness in the market is opportunity and if you continue to believe that 2014 will be that "turnaround year" then do not expect any major break to the downside and watch as any dips will be well bought, particularly given the outlook for the bond market.
And now from the kitchen of Kenny Polcari, here's his recipe of the day!
Potato and eggs on an Italian hero:
So in keeping with the whole Dr. Seuss theme, forget "Green Eggs and Ham." Try the classic potatoes and eggs in an Italian hero instead! After all, potatoes and eggs are comfort food for an unsettling time. This is one of those basic, yet classic dishes that never goes out style and the best part is you can eat it for breakfast, lunch or dinner.
- 6-8 eggs
- Olive oil
- Fresh grated Parmegiana cheese
- A pinch of Italian seasoning
- A nice, soft freshly baked Italian hero
To start, preheat the broiler (oven) to high. Peel a couple of russet potatoes and then slice. Now toss into a pot of boiling water and blanch for 3-5 minutes. Remove, strain and set aside.
In a large bowl, crack 6 to 8 eggs. Beat well. Add a splash of whole milk, season with salt and pepper (and if you like, a pinch of the Italian seasoning). Add a handful of grated cheese. Mix well and set aside.
In a large oven-safe frying pan, melt a dab of butter, add a squirt of olive oil and heat. Now, add in chopped garlic and sauté. Next, add some sliced onions and sauté until soft and golden. Add back the potatoes and brown on both sides. Then, pour the egg mixture into the pan and allow to set. Twirl the pan to allow the egg to spread and cook. Once the edges begin to pull away, place the pan into the oven under the broiler. Watch as it quickly cooks the top of the "frittata." Remove and set aside.
Now take your fresh Italian roll and slice it open, but not all the way through. Place some of the potato and eggs in the roll and serve. You have to have a large glass of cold milk to finish this dish!
—By Kenny Polcari, director of NYSE floor operations, O'Neil Securities and CNBC contributor, often appearing on "Power Lunch." The author is not compensated by CNBC for this or any other written materials found on CNBC.com.
About Kenny: Kenny has more than 30 years of experience on Wall Street. Currently director of NYSE floor operations on behalf of O'Neil Securities, he has also worked for Icap and Salomon Brothers. You can follow Kenny on Twitter @kennypolcari and visit him at kennypolcari.com.
Disclosure: The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O'Neil Securities or its affiliates.