So when president obama acts decisively and appoints a near universally liked candidate, janet yellen, as the next fed chair, the market reacts positively. Aided by a whiff of secret talks on the debt debacle with the dow climbing. The nasdaq declined. It shows you that washington may not be totally dysfunctional. Its reminiscent of when government worked. Sure, washington is poisoned enough to question yellin, along with motherhood and apple pie. But i do think shell pass muster in the senate. Unfortunately, the appointment of yellin seemed a bit like a sideshow today. Kind of like our american cousin, a play that mrs. Lincoln indeed might have liked except for the fact that her husband was assassinated while she watched it. The odds seem to be growint that the nontalks will stay nontalks right through the secretarys drop dead deadline of october 17th. Sure, weve been heartened today as weve heard one more chimera of reconciliation. Talks between the house leadership and the president. But follow the arc of this whole thing. We were thinking just last week that a default is as unlikely as a meteor hitting washington. I heard that sound bite. Now i think the odds are about 20 it does hit the capital, given how forceful both sides are about not talking to each other. Yesterday if these two were buddies, you would never see them in the same room again, right . Exbuddies. What have we got here . Obamas comet . Now 20 doesnt mean the event is going to happen. Especially if there is anything to these whispered talks. After all, there is an 80 chance the talks work. And we saw today that when there is any hope that we might have a deal, the market reverses and goes higher so quickly that if you do sell out tomorrow morning, i know i wont be able to get you back in. Not in time. Thats why i dont favor that course. Thats why my Charitable Trust was a net buyer today. But a 20 chance of default means you have to plan like it could happen. To me, i dont know about you, i dont know if it sounds like the Treasury Department has a plan. When youre playing a game of chicken, the odds increase by the day that something goes wrong, even if our leaders dont intend for to end go that way. Did anyone expect buzz gunderson to go over the cliff in Rebel Without a cause . Think back five years ago. People in government were looking hard at lehman brothers. They were worried. Before it fell, they were worried. But they all kind of figured that someone had a solution. They had a solution so it wouldnt go under. There was the same amount of confidence that someone was going to buy that company then that i hear now that a debt ceiling deal will be done. Back then it was going to be barclays or the koreans riding to the rescue. But it turned out to be no time left on the clock. It turns out the confidence was totally misplaced and we had the calamity of all calamities until perhaps this one. So what would this calamity actually look like, do you think . First we had a great insight from mark patterson, a senior fellow at the center for american progress, and former chief of staff of the Treasury Department, who appeared on squawk box this morning. He explained in english that while the deadline isnt hard and fast, it is the day when the treasury can no longer guarantee all the bills of the nation will be paid. Its possible that all payments will get a haircut, or that some will be delayed or that the treasury must pick and choose what to pay and who to ignore. Thats a horror show. As the month goes on with no new debt issue, these stop gaps wont even work and the government will be flatout broke and most likely have to stop paying everything at the end of the month. Remember, were running a deficit, for heavens sake. The treasury is a lot like a bank account for any small business. You dont want it to run out entirely. Now, there are plenty of republicans who apparently think that the whole thing is just a big charade. There is plenty of money kicking around, for whatever that matters. How can that be . If thats the case, why do we ever need to raise the ceiling . I mean, lets lower the ceiling, unless they really have a problem with arithmetic or believe the government takes in enough to pay its bills and is hoarding some of that money somewhere. What do people want the treasury to do . Cut the size of the Social Security cuts . Only pay the interest on the fiveyear. Cut back on the air force, not the navy. Pay some doctors, not others. Does that sound responsible to you . What lesson does it teach to not pay your bills, anyway . Why should i pay my bills if the government is not paying its bills . Why should i have to pay my tax bill . For a moment, lets deal with the reality of what happens when the actual event occurs. How do we know what it will look like . We are fortunate now have a terrific default map put out this morning by michael cembalest, the brilliant eye on the market editor from jpmorgan. You may sneer ahha, capitalist from the house of jamie dimon. But he is someone with tremendous insight about world events and correctly told you europe would collapse before it happened. Plus, listen up, gop. He is a deficit hawk. Certainly more than most of the republican politicians who claim theyre deficit hawks because he would actually cut entitlements. And i bet if push came to shove, most of the gop that wants to default wouldnt cut these entitlements the way that cembalest wants to. If Social Security and medicare really do get slashed. He points out that if you trigger even a technical default, you could have a liquidity event that would force job cuts, tighten credit and particularly that credit would be tightened for small and mediumsized businesses. Ironically, thats who the gop says they stand for. That sure sounds like a recession to me. Maybe even a severe one that the president predicted yesterday. Expect this to happen in two to six months. Simply proclaims that were unwilling to pay our bills, not unable. To if we do, the economy could roar out a few quarters from now. Although the shutdown itself is starting to really crimp things, people. Its crimping confidence on its own right. Im not a political guy. Hey, thats one of the reasons why im bringing Chris Matthews on tonight, shed some light on how opposites can attract, because he is schooled in the ways of washington and compromised. As he worked for the ultra liberal speaker of the house tip oneill when he was forced to work with ronald reagan. Chris just published chip and the gipper, when politics work, because theyre sure not working now. I am, however, schooled in the ways of wall street where we know that jobs were coming back and the world was getting stronger before the government got shut down and we had to put a percentage on the default. The just released fed minutes this afternoon, it made it clear the fed was split between those who saw the data Getting Better in the past, and those who clairvoyantly thought we might have an off the rails debt ceiling discussion. Thank goodness for the latter clique, because we may need the fed to buy hundreds of billions of dollars of bonds if bondholders want to dump their treasuries, and rates will spike even ahead of the default occurring. Still just another sideshow. Here is the bottom line. Unless the president starts negotiating or the gop caves, notice i did it one or the other, the post yellin announcement glow will be replaced once again by the gloom and doom that we had last night. It would be terrific to believe that the market knew something today when it turned up mid afternoon, but then again, a week ago friday when it turned up sharply, it seemed to know a lot too. Alas, it turned out to know nothing at all. Why dont we go to larry in massachusetts . Caller jim, i wish you and your dad well with the eagles this year. Well, i appreciate that. I think a rematch of the new England Patriots and the Philadelphia Eagles would be a super super bowl right here in new york city. Whats up . Caller hey, i look forward. Im suddenly down 11 on biomarin, one of the anointed stocks. Yesterday they announced an offering the senior subordinating convertible notes for r d, which will more than double the cash and receivables announced at the end of the second quarter, but at the price of uncertainty, which is a dirty word in cramerica. And i think its because of the way the notes were structured. Was this drop worrisome or just more washington noise . Look, i didnt want to see the subordinating convertible notes. You never want to see that. It drives the stock down. I know a lot of people are angry about this. What am i going to do . You recommend a stock and it goes up and up and up and then they do a deal and it goes down. I guess you would say i never recommended it when it was going up, but i cant. I did. I wish they hadnt done the deal. They did the deal and now i think it will be okay again. Biotech will come back. It tends to come back after a three or fourday decline as i said in realmoney. Com yesterday and again today. Jason in california. Jason . Caller a big booyah from silicon valley. Excellent. Caller all right. A little background. Pge is about to settle a huge lawsuit resulting from their 2010 pipeline explosion. The settlement could be in the billions. On the heels of this settlement, they just shut down another pipeline due to safety concerns. Stock is near 52week lows, but offers a 4. 5 dividend. Is this a great time . No. I never reach or yield. I would rather own dominion with a lower yield or con ed, okay, because i never reach for yield. Thats always a suckers game. Never reach for yield in a situation that has that kind of liability. What can i say . Thats the way i know it. There is one thing this market loves, it craves, its certainty. We could see some more gloom and doom. So never forget, even the appointment of a new fed chair is a sideshow compared to the debt ceiling. Mad money will be right back. Coming up, mighty metal . Alcoa is in the green after beating the bears. But can it keep its shine in light of the debates going on in d. C. . Cramers cracking open the quarter to find out. And later, state of emergency . Open the government, pay our bills and well negotiate. The d. C. Debate doesnt show any sign of compromise as washington barrels towards an historic default. Your money is on the line and cramer is on the job. Plus, hardball host Chris Matthews just ahead. All coming up on mad money. Dont miss a second of mad money. Have a question . Tweet cramer, madtweets. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something . Head to madmoney. Cnbc. Com. [ woman ] dear chex cereal, youve done the impossible. Made glutenfree cereals in a bunch of yummy flavors. Like cinnamon chex, honey nut chex, and chocolate chex. Were in cereal heaven. So thanks. From the mcgregors, cause we love chex. Evto earn degrees in mathan stand science. Ut but more than half leave their programs. 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Alcoa may have been booted from the dow jones average unceremoniously, but it shouldnt be booted from its status as a bellwether for you because the company has more to say about the state of the Global Economy than just about any other enterprise out there. Aluminum because of its lightweight, sturdy, anticorrosive and recyclable qualities is used for everything from cars and trucks, bench cans, aircraft screws, thats why when alcoa ceo Klaus Kleinfeld gives you his world overview in the Conference Call you got to marvel at his insight and his grasp of the International Business scene. So, you might ask, that if i think so much of the ceo, which i do, what the heck is alcoa stock doing only at eight smackers . The answer is Pretty Simple there are two alcoas, the one that makes aluminum, and the one that makes aluminum into useful products. Its the former, the actual commodity, its got alcoa running in place. Although i dont think its going to go down that much more unless the u. S. Defaults. You see, kleinfeld cant control the world price of aluminum, and the darn metal has been in glut for years. Thats been a constant drag on the company, which has had to take out costs and capacity pretty much around the globe just to tread water. It doesnt matter. Even after alcoas gigantic capacity cuts in spain and italy, you know what its like to close a factory there . There is still way too much of the stuff. But klaus has been able to fashion aluminum into products that are taking share from other materials that are selling well in growing markets. Even if you cant stand the stock because you never think that aluminum is ever going to go up in price again, and youre in belief that the company is actually hemorrhaging money, you should still want to know what alcoa is saying about its customers. Before i tell you how theyre doing, let me first tell you that klaus wants everyone to know that the debt ceiling talks are taserlike when it comes to all of alcoas customers. Meaning that thats not really a taser. Theyre illegal in jersey. Meaning that right now theyre being stunned and paralyzed by the lack of negotiation or promise. That said, alcoa is painting an incredibly rosy picture, one that shows were really about to break right out with a global head of steam before the total breakdown, the chaos and dysfunction that is washington. Leading the pack, aerospace, where there is now a 10,000 aircraft backlog. Amazing. Sales growing at a 9 to 10 clip. This is an industry that klaus believes cant be held back by the debt ceiling debacle. Unlike aerospace, the other products are divided by sales growth in three regions europe, usa, and china. And all three are doing better than they were just that last linked quarter, and much better than they were a year ago. China in particular really seems like it could be accelerating at a very healthy clip. For example, for example, take heavy truck and trailer. Thats an important category. Its an incredibly big market for alcoa. The United States and europe show sluggish orders in this category, but alcoa boosted for europe and upped the china growth rate from 12 to 16 , up to 17 to 20 range. Thats pretty amazing. Same with auto. Alcoa keeps u. S. Positive, europe minus, but china goes from 7 to 10 to 9 to 11. I know that doesnt sound a lot to you, but that is very big and very positive tightening of the range. Alcoas keeping its worldwide building construction, maintaining its bench can. Hey, by the way, its worth pointing out that u. S. Beverage cans continue to be soft. Europe has gotten even weaker, down to 2 to 3 from down 1 to 2 . So keep that in mind. But overall, the global picture is robust for the engineered products portion of this aluminum maker. And you know what . I think you get even better in 2014 when costs come down and cash flow continues to rise. Here is the bottom line. Im going to say it right here. I think this stock aa deserves to sell higher. But this is a true deserves has nothing to do with it situation right out of the movie unforgiven. However, any read of alcoas quarter shows you the world was getting to be a stronger place, ill take it. Assume it stays that way. When it doesnt, you can kiss every positive statistic i gave you goodbye. Courtesy to the tasering, and then you have to buy some staple stocks. Stay tuned. Ill tell you which ones you should be buying. After the break, well make some money. Coming up, state of emergency . Open the government, pay our bills, well negotiate. The d. C. Debate doesnt show any sign of compromise as washington barrels towards an historic default. Your money is on the line and cramers on the job. Plus, hardball host Chris Matthews just ahead. Tonight were thinking about the unthinkable. Were thinking about what the world looks like if there is no deal to raise high the debt roof beams, carpenters oops, i Mean Congress people. Im a salinger lover from way back. Were pondering what happens if the president cant figure out how to negotiate in a nonnegotiating way, and whether the grand old party is going to throw a grand old party if it can get the government to stop paying its bills because the bills are too high. The president wants the status quo. Who likes the status quo . Gop wants to follow the organization that could lead to defaults and what should be paid and what shouldnt be. Figuratively, yes thats what they want. And thats why ive taken the chances of a meteor hitting washington, or at least grazing the washington monument, from 0 last week all the way up to 20 today. Youve got to be thinking of it that way. You got to. You know why . Because the market is thinking that way. Its sending down the stocks of the highfliers. Many did bounce when we heard of secret debt talks. But can they really be secret if we heard of them . Its walking away from the big industrials because the president has assured us that well have a severe recession if and when we default. Some are saying he is basically guaranteeing that well have one if he doesnt negotiate. And the market is taking the man at his word. It will keep doing so as we get closer and closer to the default deadline which the president declared october 17th, and not one day later, even if it seems there is some money in the till to hold us over until whatever happens. Something tangible that would make main street Business People turn on the Congress People who dont want to accept the president s view on the ceiling. At least thats the Democratic Party line. Now, we have to be out tomorrow, but an actual Investment One isnt as simple as saying i see green on my computer. I want to buy kelloggs. Thats a huge mistake, because maybe the i see green rally unwinds the moment bad news hits