“Only when the tide goes out do you discover who’s been swimming naked” — Warren Buffett

1. Debt Deal Search Intensifies — as the debt talks continue to go nowhere, President Obama has accepted that a grand $4T plan is out of reach. The most likely option now appears to be a Senate-hatched plan to let Obama raise the debt ceiling by $2.4T in three increments but to give the House “ownership” of the program so that it has a better chance of passing.
2. Gang of six plan offers hope — politicians from both sides have given varying endorsement to a revived $3.75T deficit-reduction plan from a bipartisan group of senators. The “gang of six” proposes immediate spending cuts of $500B and to raise $1.2T in revenues through ending tax breaks, but they also envision tax cuts of $1.5T through broad reform.
3. Fed planning for debt default — the Fed and the Treasury have been preparing for a U.S. default, FOMC voting member Charles Plosser said. Some of the planning is operational and some policy related, such as whether the Fed could treat Treasurys as collateral for loans.
4. Euro leaders agree on easing lending for Greece — The new aid plan for Greece, tagged at 109 billion euros ($157 billion), counts on participation from private investors, who would agree to swap their Greek bonds for longer maturities. The European Union estimated a private-sector contribution of around 50 billion euros when counting a debt buyback that’s still not fully formed.
5. Senate rejects House budget-cutting plan — the Senate rejected a House-passed plan that would raise the U.S. debt ceiling and make deep cuts in government spending. Senators voted 51-46 to kill further consideration of the House bill, which would also require passage of a balanced budget amendment.
6. Bullish sentiment rises to 39.9 — according to the latest figure from the AAII. Below is the chart courtesy from the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com: