Honeymoon Between Wall Street and Congress Holds...For Now

Just back after a few days off for Thanksgiving, and what was true last week is true this week as well: Stocks will hold up as long as we don't hear any commentary that suggests there will be a stalemate and no deal on the "fiscal cliff."

Honeymoon Between Wall Street and Congress Holds...For Now
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Still floating out there: The possibility of U.S. credit downgrades. All the rating agencies have said they are watching, and if no substantive deal is made there will be another ratings downgrade.

What about a mini-deal, a downpayment? Will that be enough to avoid a downgrade? A combination of tax increases and spending cuts, maybe $100 billion? It might be. But the ratings agencies need to believe there is a real second act coming.

That second act will include some indication of where they will go on Medicare — means test, age requirement? — as well as defense spending.


1) The Greek deal: A default in all but name. There is a deal on Greece, and this one, it seems to me, is a lot different than other deals. There is an extension of the loans made to Greece (both from the European Union, or the European Financial Stability Facility (EFSF), and bilateral loans) by 15 years AND a deferral of interest payments on the EFSF loans for 10 years, AND a reduction of interest payments.

We are talking about something like 245 billion of euros ($318 billion) in loans. They are getting all the tranches of aid, 43.7 billion euros ($566 billion) in all. (Read More: Merkel Did 'Bare Minimum' to Keep Greece Solvent: Analysts)

Huh? Let me get this straight: It's not going to pay any interest on the money from the EFSF for 10 years. They're extending the loans that are due by 15 years.

This will no doubt be phrased a "restructuring" by EU officials. It certainly is, but it's a lot more than that. If I had a 30-year mortgage, and suddenly was able to defer all interest payments for 10 years and restructure the loan so it was now a 45 year mortgage, AND pay less interest, would you say that was a pretty sweet deal? Would you call it a restructuring? How about a default in all but name?

Oh, it's good news, because it will likely take Greece off the table. For a while. But the simple fact is, Greece will never repay this money. It will be "forgiven" or restructured away. This is the first — necessary — step that is being taken to write off Greek debt by the public sector.

True, it is not technically a default. They are not directly engaging in debt forgiveness or debt writeoffs. But it's as close as you can get.

There is also a buyback. The Greek government will be given 10 billion euros ($13 billion), as part of the aid, to buy back debt ... at 35 cents on the dollar.

At some point down the road, there will be debt forgiveness. There will be changes in national laws, and at the EU level, that will allow debt forgiveness. That will be done over a longer period of time.

2) Home prices continue to improve: S&P futures gain about 1 point after S&P/Case-Shiller data show home prices rose for a sixth straight month in September, now up 3.6 percent for the third quarter year-over-year. (Read More: Housing Recovery Is Leaving Behind First-Time Buyers)

3) Special dividends: more press than reality. They get a lot of press, like the one Brown-Forman announced today and Las Vegas Sands announced last night, but it's still more of a trickle than a flood ... only a handful of major companies that are paying a special dividend to address fiscal cliff issues.

Moving the dividend payment into December from January, as Wal-Mart Stores did, is important, but not many have made the change either. In January this year, $21 billion was paid in dividends; of that, Wal-Mart is only $1.3 billion; very little else of that remaining $19.3 billion has been shifted into December this year.

—By CNBC's Bob Pisani

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