The Distillery: Ceiling vent

The US government shutdown continues with no sign of a resolution, but it is the debt ceiling debate that has most commentators worried. The shutdown itself has no impact on whether the country can raise the debt ceiling, though the stalemate in Congress doesn’t bode well for a resolution before October 17 – and two jotters explain why a further impasse would be disastrous.

Closer to home, and one business scribe delves into murky dealings at Leighton, while another explains why Bunnings’ worth to Wesfarmers remains significant despite the Coles turnaround.

We start with the US debt ceiling, where negotiations are moving at a snail’s pace. No one really thinks Congress would be crazy enough to lead the US into a possible default, but that was also the optimistic groupthink that took place before the shutdown. The Australian’s John Durie declares the next two weeks will be about trust, which threatens to be crushed.

“October 17 is crucial because that's when the US government says it will run out of money, and by definition it will default on its loans. Ever since the global financial crisis, much of the Western world has attempted to restore trust to global financial markets, but this trust would disappear if congress showed itself to be better at reading Dr Seuss's books than managing the US economy.”

Fairfax’s Malcolm Maiden further explains why markets are so calm right now in the face of the instability.

“The market bounce showed that there was still optimism that the government shutdown could turn out to be a circuit-breaker. Republicans will get nowhere, capitulate, and do so in a way that kills their appetite for a brawl over the debt ceiling, so the theory goes – and if it is right a quick settlement of the budget brawl would be counter productive. The Republicans would need time, a week perhaps, to become totally dispirited as criticism of their tactic ramped up.”

Moving to local news, and The Australian Financial Review’s Chanticleer columnist, Michael Smith, outlines what led to an alleged breakdown of governance procedures at Leighton Holdings and the impact it will have on investor confidence.

“The latest allegations will … only reinforce the perception that Leighton lost its way as it expanded into risky parts of the world at a rate that left its sheer size impossible to manage. Transparency was never the company’s strong suit but this takes things to another level.”

The Herald Sun’s Terry McCrann, meanwhile, discusses the retail stoush between Wesfarmers and Woolworths that has spread from the supermarket aisles to hardware. While Wesfarmers’ main game is now Coles and not Bunnings, McCrann contends the latter is still crucial to its success. Fortunately for shareholders, it remains in a great position to contribute in spite of Woolworths’ best efforts.

In other news, The Australian’s Rowan Callick talks about the prospects of a boom in northern Australia and why we should make the region a focus, while the AFR’s Ben Potter analyses the alternative regulatory approaches of America and Australia to shale and coal seam deposits.

And finally, the AFR’s Matthew Stevens peers in for a closer look at the plans for the new venture of former Xstrata boss Mick Davis – could battered Alumina be an option or are coal and copper assets more likely to be the objects of his affections?