Stocks Ripped Lower Again; More Questions than Answers

Since US stock markets are so delightfully linked t the fates of Europe, the same old story keeps repeating itself over and over, such as today, as the Euro fell sharply (1.00 EUR = 1.30348 USD) against major currencies and the Dollar Index closed at an eleven-month high (DXY:IND 80.273 0.708 0.89%).

While those dual developments are intertwined, the parties involved - from European, US and Chinese exporters to American and European consumers - will feel the effects in dramatically different manners.

Naturally, for most of Europe, a collapsing Euro is bad for consumers, making everything imported more expensive, but great for exporters, whose goods are cheaper by comparison in importing nations.

The opposite is true for the US, which is why stocks are usually down when the Euro dips and the dollar strengthens. Americans should welcome a stronger dollar, especially at this time of year, because all those trinkets and holiday goodies - mostly from China - will be cheaper, though probably not right away.

As has been a repeatedly-held view in this space, the Euro is headed for catastrophe, and it's going to occur sooner than anyone thinks, probably before the middle of 2012. German people are sick and tired of bailing out the Southern countries, Greece has already defaulted on some debt, Italy, Spain, Portugal, Ireland and Belgium are holding on for dear life and the ECB is going to be quickly as tapped out of funds as its leaders are of ideas.

The idea of printing more money, as has been the case in the US, with dubious effect, will only make matters worse when inflation rages and dissatisfied citizens stop paying taxes in deference to feeding their families. The trouble is that sovereign debt, ridiculously rated at AAA or beyond, is about to be downgraded across the Euro-zone and beyond.

For those unfamiliar, sovereign debt is the money governments borrow to fund everything from pensions to schools to war machines (like here in the US). Most of Europe should be rated no better than A or A+, a move that is coming soon from either S&P, Moody's or Fitch, because nations have shown over time that while they may always repay on time, they are profligate spenders and tax revenues are dropping, not expanding. Balance sheets (those things nobody likes to look at) of most governments are ridiculous when compared to that of an average American or European family, who don't get the benefit of positive credit ratings, pay higher interest rates than silly governments, yet most manage to pay bills on time and keep their households in relative sanity.

With all of the monstrous debt of Europe and the US overshadowing just about all other economic realities, there are more questions than answers these days, a few of them being:

• Where's the money (over $1 billion) that MF Global took from investors?
• How soon will the ratings agencies lower the credit ratings of Italy, Spain, Portugal, France and the rest of the Euro-zone nations, and, how far down will they go?
• If US banks are borrowing at 0-0.25% from the Fed, why are credit card rates 8, 10, 15 and even 28% for US consumers who have solid track records of on-time payments?
• Can government statistics be trusted at all?
• Why would anyone under the age of 40 contribute to Social Security if not that it's automatically deducted from their paychecks?
• If the world is headed for global depression, won't all asset classes, including gold and silver, devalue?
• Why are government employees in the US paid 30-40% more than their private-industry counterparts and receive gold-plated health care and pensions, when the US population - who pays them - work for less, have fewer benefits and many have no guaranteed retirement plans?
• Why is the world's greatest criminal, Hank Paulson, still a free man?
• Where is Eric Holder, the Attorney General, and why hasn't he even investigated any of the banks or the prior administration?
• Why must Americans choose between Mitt Romney or Newt Gingrich as the Republican presidential nominee when Ron Paul and Michelle Bachmann have better positions and more consistent voting records?
• Why is President Obama opposed to the Keystone pipeline that would bring oil from Canada (our largest trading partner and a friendly one) and thousands of high-paying jobs?
• Why is 20% supposed to be a "fair" percentage one should pay in federal taxes when most people outside the middle class pay little to nothing?

Those are just teaser questions, without good answers from politicians, regulators, academics or economists. The tough ones await in the new year.

And, to those kids waiting for Santa Claus, you've got 11 days left to try being good. For the scoundrels on Wall Street, awaiting the famous, year-end Santa Claus Rally, you've been bad, so just coal (clean coal, for sure) for you, and, even if there is a rally, it will only get the indices back to where they were a week or a day or two ago, and 2011 will go down in the books as a year of near-zero (or less) returns. So much for owning stocks.

A couple of quick points on economic data. November retail sales figures were up 0.2%. There's one word to describe all the hoopla over Black Friday and the whole retail consumerism mantra. BULL---T.

The FOMC of the Fed had its last policy meeting of 2011 and did nothing. Thanks, for nothing.

Dow 11,954.94, -66.45 (0.55%)
NASDAQ 2,579.27, -32.99 (1.26%)
S&P 500 1,225.73, -10.74 (0.87%)
NYSE Composite 7,276.65, -86.84 (1.18%)
NASDAQ Volume 1,732,941,625
NYSE Volume 4,080,177,000
Combined NYSE & NASDAQ Advance - Decline: 1462-4165
Combined NYSE & NASDAQ New highs - New lows: 107-146 (more red)
WTI crude oil: 100.14, +2.37 (higher due to fears over Iran)
Gold: 1,663.10, -5.10
Silver: 31.26, +0.26

So Much for Europe Being Fixed; US Stocks Dashed over Persistent Fear of Euro Collapse

Let's face it. There's no easy way for europe to fix the mess they've created without a lot of pain, including bank failures, a massive, long-term deflationary depression, government overthrows and the near disintegration of the Euro-zone, those countries which exclusively use the Euro as currency.

After last week's up-and-down Thursday and Friday sessions, marked by trepidation over the ECB's interest rate cut and a demure stance on monetary policy by new ECB head, Mario Draghi, and Friday's euphoric rally on the umpteenth outline of a Euro solution, Monday turned just plain ugly for European bourses and US indices.

Anybody who understands the enormity of debt that's been built up by Europe and the US - not only in the government, but by the banks, financial institutions and households as well - sees no end to the crisis in Europe, and the distinct probability that their problems - being partly those of our own banks and our Federal Reserve - will become ours. The massive overhang of public debt, much of it owing to national pension funds like Social Security, has always been an albatross around the necks of European leaders and now it is quickly becoming one for whoever leads the US (Take your pick from Obama, the banks or the congress. None of them are doing a good job.).

And while Social Security is set to run in the red for another year (this being the first), what are congress and the president fighting over? Whether to cut the Social Security contribution paid by employees and/or add a tax on the wealthy. The fact that the latest boondoggle is being branded as "payroll tax" - a wholly incorrect moniker - tells exactly how deep and severe the US fiscal condition has become.

If the government big-wigs actually came clean on the issue and said they want to cut Social Security contributions so people can afford to buy food, gas and maybe the occasional iPad or plasma TV, the cat would be out of the bag, permanently.

As it stands today, Social Security is DOA. Current beneficiaries can expect payments though the next five years, maybe, but, eventually, there's not enough money going into the system to support the huge numbers of upcoming recipients from the Baby Boom generation, most of whom have less than $40,000 saved for retirement (Hint: that's not enough), and cutting contributions is going in exactly the wrong direction.

On Capitol Hill, most senior congress-people know that Social Security will have to be substantially changed in order to survive and the changes will have to be dramatic measures, like raising the retirement age to 70 or 72, means testing, so that people who don't need it won't get it, and raising the limit of contributions from the current first $106,800 of income to something more realistic, like the first $200,000 of income.

Making high-earners pay more would add more money to the SS coffers at the same time the government is cutting the percentage take from employees. Still, most of the measures even considered by congress and the White House are nothing more than stop-gap measures designed to satiate the masses until the next big election, in November, 2012.

In the meantime, the economy continues to struggle along, unless one is inclined to take their lead from the ruthless bankers on Wall Street and cheat like crazy, paying people off the books, under-reporting income and generally skirting the IRS at every turn. Hey, the big corporations do it, so why not everyone else.

At the bottom of all the financial malaise is the collapse of government, as we've witnessed in the Middle east and North Africa, is now spreading to Europe and Russia, and thanks to people actually taking change of their own lives and their own finances, is quickly gaining ground here in the USA.

There is one way to stem the crisis in the United States. Elect Ron Paul president. The mainstream media is currently dancing around Dr. Paul, whose positions have been consistent and poisonous to the status quo, but there's no doubt mainstream America is listening to the 76-year-old Texan, as he continue to gain ground in Iowa and elsewhere.

Compared to the current leaders, Newt Gingrich and Mitt Romney, a Ron Paul - Michelle Bachmann ticket is sure beginning to look like a winner.

When Americans ask themselves, "which of the Republican candidates are most like us?" the answer becomes obvious.

BTW: Volume was so low today that the markets could have closed at noon and hardly anyone would have noticed. Even fewer would have cared. That's what happens when trust flees markets. People, and money, follow out the door.

The Euro hit a two-month low against the US Dollar, below 1.32. The end of the Euro is coming, and sooner than anyone dares think.

Dow 12,021.39, -162.87 (1.34%)
NASDAQ 2,612.26, -34.59 (1.31%)
S&P 500 1,236.47, -18.72 (1.49%)
NYSE Composite 7,363.49, -139.39 (1.86%)
NASDAQ Volume 1,523,045,375
NYSE Volume 3,421,469,750
Combined NYSE & NASDAQ Advance - Decline: 1272-4386
Combined NYSE & NASDAQ New highs - New lows: 79-120 (flipped to red)
WTI crude oil: 97.77 -1.64 (head back to 80-85 range)
Gold: 1,668.20 -48.60 (deflation signal)
Silver: 31.00, -1.25