Government Shutdown Day 10: Boehner, Republicans Cave to Scare Pressure?; Stocks Rally

After Treasury Secretary Jack Lew scared the begeezus out of congress and the public this morning in his congressional testimony, Speaker of the house, John Boehner went back to his caucus and outlined a compromise to be presented to senate Democrats and the president.

It goes something like this: Republicans will agree to an extension (raise) of the debt limit for six weeks. whether or not the government re-opens is still an open question. Republican leaders meet at the White House at 4:30 pm EDT (note: after markets are closed).

Essentially, the Republicans will propose a six-week extension of the debt ceiling, in order to avoid "default," which is nothing but a scarecrow argument since the US government never was and probably never will be anywhere close to defaulting on any of its outstanding debt, otherwise known as treasury obligations, bonds. bills and notes, because the government takes in 10 times the amount of money that it owes in interest. Paying down the principal may be another thing altogether, but that's not part and parcel of the "default" argument.

Stocks had their second-best session of the year, eclipsing the gains from the first full session of 2013, on January 2nd, but, these gains were based on speculation that the politicians would reach a compromise solution on the debt ceiling and a cntinuing resolution to fund the government. At this writing, neither condition has been met.

Why the timing of today's meeting at the White House is important is because If John Boehner emerges with a scowl and says that they still have differences to iron out, stocks could erase some, all or more of today's gains on Friday. So, the various balls being juggled by the House, Senate and the White House are still very up in the air, which is why playing stocks is sometimes called "investing," and more often defined as "speculation." Today is all speculation.

This brief summary of a portion of Goethe's Faust underscores the nature of today's Western government dilemma:

Accompanied by Mephistopheles, Faust attends the court of a ruler whose empire is facing financial ruin because of profligate government spending. Rather than urging the emperor to be more fiscally responsible, Mephistopheles—disguised, revealingly, as a court jester—suggests a different approach, one with disturbing parallels to our own age.

Noting that the empire’s currency is gold, Mephistopheles maintains there is surely plenty of undiscovered gold underneath the earth belonging to the emperor. Thus, he argues, the emperor can issue promissory notes for the value of this yet-to-be-found gold, thereby generating fresh monetary resources for the government and solving its debt problems.

Not surprisingly, the emperor and his treasurer are delighted with this idea. It means the monarch can avoid making hard economic choices while simultaneously providing the empire with desperately needed currency. Mephistopheles subsequently deluges the court with paper money, and Faust is praised by emperor and commoner alike.

The results, however, are not what are expected. First, the issuance of paper money does not solve the emperor’s spending problems. Instead the ruler and his court become even more extravagant, knowing they can always print more paper money to cover their ever-growing expenses. Second, the devil has subtly but fundamentally changed the basis of the empire’s currency. Instead of being rooted in the solidity offered by a tangible and valued asset, the currency is now based on flimsy paper promises. Thus long-term monetary stability and powerful restraints on extravagant government spending are sacrificed for short-term gain.

Goethe finished writing the second part of Faust in 1832.

In other, national security, news, this report, "$2 Billion NSA Spy Center is Going Up in Flames," caught our attention. Maybe there is a god that punishes evil-doers. Or, maybe karma has a nasty cumulative side=effect?

Dow 15,126.07, +323.09 (2.18%)
Nasdaq 3,760.75, +82.97 (2.26%)
S&P 500 1,692.56, +36.16 (2.18%)
10-Yr Bond 2.69%, +0.04
NYSE Volume 3,368,936,000
Nasdaq Volume 1,814,198,000
Combined NYSE & NASDAQ Advance - Decline: 4773-857
Combined NYSE & NASDAQ New highs - New lows: 204-34
WTI crude oil: 103.01, +1.40
Gold: 1,296.90, -10.30
Silver: 21.90, +0.005
Corn: 438.25, -5.25

Boehner, Pelosi Side with O'Bomber, Tank Markets

This past Friday, nearly the entire civilized world believed that US bombs would be falling on Syria over the weekend.

Abruptly, n Saturday, the president, in a true CYA moment, decided to get authorization from congress, which, according to our constitution (remember, we still have one, if in name only), is a necessity in order to attack any entity that does not pose a serious, immediate threat to the nation, and Syria easily qualifies.

With the congress winding down its month-long vacation (somebody remind us why are we paying them), a vote on the matter of whether or not to use offensive weapons against Syria couldn't occur much before September 9, the date upon which congress will officially resume to be in session. Thus, the inevitable bombing and unofficial start to World War III would have to wait.

On Tuesday, the house leadership of both parties - Nancy Peolosi and John Boehner - were back on the Hill, each making statements in support of the Bomber-in-Chief's proposal to use force against Syria.

So, if one is to believe in what the tea-leaves tell us, the president will get his authorization, despite some grandstanding by Tea Party members on the right and anti-war types on the left. Never mind that only nine percent of Americans support any kind of military action against Syria. The one-party rulers in Washington will have their way and theirs is the way of war.

Wall Street didn't take the news kindly. Up sharply early on, thinking that maybe, possibly, congress would not give the president the green light, markets did an about-face after the Boehner/Pelosi comments and stayed down for the remainder of the session. Everybody put away their "Dow 15,000!" hats and got back to thinking about how spiked oil and gas prices might negatively affect the economy, how bombing a nation essentially tearing itself apart in a civil war would benefit US interests, and how this might weigh on decisions surrounding the budget, the debt ceiling and whether the Fed would taper its bond-buying at its next meeting (Sept. 17-18).

With that, traders wiped 100 points off the Dow, albeit on volume that was hardly indicative of a back-to-work mentality. Come to think of it, since Obamacare is making work in America largely a part-time experience, maybe lower volume and shorter trading sessions might be just the ticket.

Dow 14,833.96, +23.65 (0.16%)
NASDAQ 3,612.61, +22.74 (0.63%)
S&P 500 1,639.77, +6.80 (0.42%)
NYSE Composite 9,333.50, +62.84 (0.68%)
NASDAQ Volume 1,568,192,750.00
NYSE Volume 4,111,344,250
Combined NYSE & NASDAQ Advance - Decline: 4025-2691
Combined NYSE & NASDAQ New highs - New lows: 130-89
WTI crude oil: 108.54, +0.89
Gold: 1,412.00, +15.90
Silver: 24.43, +0.916

America, Land of the Handout, Home of the Loser, by the Millions

Face it Americans, you've been suckered.

There's not going to be any "grand bargain," that's for sure, and any deal that gets done either over the weekend or on Monday, December 31, at the last possible minute, is going to fall well short of even the most pessimistic possible outcomes.

Money Daily has been saying all along that the deal always was to have no deal. The President, John Boehner, and all the other "leaders" in congress have been acting through this entire sickening tableau.

When and if some kind of resolution is arrived at, there will be very few happy about it. Almost everybody's taxes are going to rise, along with the 2% contribution to Social Security that was conveniently "excused" in 2012.

Washington is a complete clown show. If the American public had any kind of guts, the protests would surround the entirety of the mall, the thieves would be summarily kicked down the steps of the capitol and bankers would be hung from the nearest lampposts.

But that's not going to happen. Americans are too easily bought off (the number of people collecting food stamps, social security and other entitlements are numb and only want the checks and freebies to keep rolling in. Some day, those will stop because the government - at the behest of the international cartel of bankers (central and otherwise) - holds all the cards.

This is a sorry way to end the week. Wall Street has only begun to express their displeasure and discontent, with markets selling off for the fourth consecutive session, today's being the largest, after President Obama met with congressional leaders at the White House and once again did NOTHING.

NOTHING IS WHAT THE POLITICAL LEADERS DO BEST.

If this is what you want, you've gotten it, in spades, and deservedly so, especially the baby boomers, some of whom fought the establishment in the 60s, more of whom stood idly by and did nothing, other than joining the status quo as adults.These are the fruits of apathy and "let the other guy do it" mentality.

2013 will be the year of every man, woman and child to fend for oneself.

Dow 12,938.11, -158.20 (1.21%)
NASDAQ 2,960.31, -25.60 (0.86%)
S&P 500 1,402.43, -15.67 (1.10%)
NYSE Composite 8,316.17, -83.66 (1.00%)
NASDAQ Volume 1,120,378,875
NYSE Volume 2,407,416,000
Combined NYSE & NASDAQ Advance - Decline: 1794-3750
Combined NYSE & NASDAQ New highs - New lows: 63-51
WTI crude oil: 90.80, -0.07
Gold: 1,655.90, -7.80
Silver: 29.98, -0.265

Market Drops, Rallies on Fiscal Cliff Fears, Hopes

OK, now, this is getting interesting.

Stocks sold off severely in the early going, as Wall Street seems to be getting a little bit tired of waiting for the politicians to come to some kind of deal - any kind of deal - on the fiscal cliff issues.

Taking center stage today were Senate majority leader, Harry Reid, and minority leader, Mitch McConnell.

Reid made some noises about the House not even being in session, and, late in the day, McConnell made comments about how the Republicans have been waiting months for the Democrats to meet with them, without success.

During the session, stocks were hit hard to the downside, with the Dow off by as many as 150 points, but, about 2:30 pm ET, when news broke that John Boehner was calling the House back into session on Sunday, stocks miraculously starting gaining ground, with all of the major indices eventually reaching positive territory before giving back a bit to close slightly negative, though the NYSE Composite ended with a gain of four points.

There was other news that may have caught the attention of traders, particularly, the Conference Board's Consumer Confidence reading, which registered a disappointing 65.1, after last month's overly optimistic 73.7 was revised down to 71.5.

The number caught everyone off guard and triggered the initial sell-off.

As for negotiations on the fiscal cliff, there aren't any. Both sides have resorted to name-calling and jawboning precisely at a time both sides should be reaching compromise.

Having the House in session on Sunday, December 30, is a hopeful sign that there is some progress behind the scenes, even though nobody's reporting any.

The saga continues...

Dow 13,096.31, -18.28 (0.14%)
NASDAQ 2,985.91, -4.25 (0.14%)
S&P 500 1,418.09, -1.74 (0.12%)
NYSE Composite 8,399.84, -4.36 (0.05%)
NASDAQ Volume 1,314,243,625
NYSE Volume 2,816,814,750
Combined NYSE & NASDAQ Advance - Decline: 2473-3032
Combined NYSE & NASDAQ New highs - New lows: 74-61
WTI crude oil: 90.87, -0.11
Gold: 1,663.70, +3.00
Silver: 30.24, +0.205

John Boehner's Political Apocalypse; the Secret of Oz

As far as one can tell, the Mayans were incorrect. With less than eight hours left in this winter solstice 21st day of December in the year 2012 (actually, it's already the 22nd in some parts of the world across the international time line), it's a safe bet that planet earth isn't going to meet up with a death star, tilt over on its axis or flip its poles in a magnetic firestorm.

Incidentally, in numerology, today's date is significant. The digits in 12/21/2012 reduce to 11, both a prime number and a master number in numerology, 11 is representative of great spiritual energy and a linking between mortal and immortal states. The Mayans may have been - according to their calendar supposedly ending on this date - predicting the end of an epoch, and the beginning of a great enlightenment.

Whether or not there's even a shred of believability in all of this Mayan "end of world" hysteria, simply the hope for change - to a more peaceful, spiritual existence -should suffice to empower some to good and better achievements.

For those who decry numerology as mere nonsense, one should be apprised that the most popular and widely-employed system was originated by none other than Pythagoras, who knew a bit about numbers, meaning and their relationship to our known existence.

In any case, life goes on unabated, though one could make a case that the evening of the 20th and the day of the 21st marked a personal political apocalypse for one John Boehner, Republican Speaker of the House, when he could not muster enough support from his caucus to pass his proposed Plan B spending and tax proposal last night in the US House of Representatives.

Around 7:30 pm Thursday night, a raucous meeting of the Republicans in the house adjourned with a lack of consensus on the Speaker's proposal and the measure was shelved, much to the dismay of Mr. Boehner, who has gotten nowhere in either negotiations with the president or within his own party.

The tightrope Mr. Boehner has been treading has developed either a knot or a twang, depending on one's own political outlook. In any case, Boehner's future as Speaker appears to be as much in doubt as his ability to harness his members to an agreement with the president on avoiding the fiscal cliff, the deadline for a solution now a mere ten days away.

So, while the world may not have ended today, in John Boehner's insular little world of Washington politics, it may seem like the end of the political road. That's how apocalypse usually works: bad for some, but not for all.

When the news hit that the Plan B measure would not come up for a vote in the House, along with a telling smirk on the face of Eric Cantor, the Marcus Junius Brutus to Boehner's status as Julius Caesar, futures took a nose-dive, Dow futures plummeting to more than -200 in a matter of minutes.

Cantor, incidentally, the House Majority Leader, has eyes on the Speaker's office, and while modern day politics may be more civilized than what took place in Roman forums, political assassinations can be easily more painful than actual ones. The knife is turned more slowly in the modern world.

Markets were not pleased when they opened this morning, though after the initial selloff, the decline was very limited, with stocks trading in a tight lower range throughout the day. There was little of the expected quadruple-witching volatility after the initial thrust lower, probably something to be expected with the algo-crunching computers in charge of the bulk of trading.

While volume was elevated, it was not outstanding and the end results of the trading day were hardly cognizant of the turmoil on Capitol Hill. Wall Street still appears to be holding out hope for a happy ending to 2012 and a solution to the nation's fiscal issues. Good luck with that.

As this week comes to a melodramatic close, Monday will be a half day, with markets closing at 1:00 pm ET. Money daily will not post on that day, taking some needed time off for the holiday, unless there is some event worthy of memorializing.

One bit of business to attend to is contained in the video posted below, the exceptional, award-winning documentary exposing the secrets of L. Frank Baum's "The Wizard of Oz," which, though a best-selling children's book, years later adapted for the big screen starring July Garland as Dorothy, the story was a scathing riposte of the banking system and a searing critique of the frailty of government.

Well worth the viewing time, if you do nothing else at all to educate yourself on the truth about fractional reserve banking and politics, this is must viewing.



Happy Holidays, and Merry Christmas to all, and to all a good night!

Dow 13,190.84, -120.88 (0.91%)
NASDAQ 3,021.01, -29.38 (0.96%)
S&P 500 1,430.15, -13.54 (0.94%)
NYSE Composite 8,443.15, -73.28 (0.86%)
NASDAQ Volume 2,825,451,750
NYSE Volume 4,834,776,000
Combined NYSE & NASDAQ Advance - Decline: 1823-3704
Combined NYSE & NASDAQ New highs - New lows: 118-45
WTI crude oil: 88.66, -1.47
Gold: 1,660.10, +14.20
Silver: 30.20, +0.525

TEOTWAWKI, but, Stocks Gain on Boehner's Plan B

Since, according to myths and Mayan calendars, the world is supposed to end tomorrow, this will be a short post, because most people have better things to do to prepare for annihilation than read about stocks, bonds and commodities.

Apparently, Wall Street traders aren't buying the hype - but, they still believe the Republicans and Democrats in Washington will work out a deal before January 1, 2013, because they keep buying stock.

The joke will be on them if the world ends tomorrow, because all that trading they've done will not have done them any good. The upside for the world ending on December 21 is that anyone who hasn't done their Christmas shopping until now will have saved a bundle. Also, the end of the world kind of puts the kibosh on the Zombie Apocalypse. No world, no zombies... or maybe this would be the kickoff party.

The biggest event of today was John Boehner pushing ahead with "Plan B" which would keep the Bush tax cuts intact for anyone earning less than $1 million a year. Traders apparently were happy with that prospect, as a little rally ensued after Boehner spoke, never mind that Harry Reid said the House bill was already a dead issue in the Senate.

If there's no tomorrow, then this would be good-bye, but, just in case those crafty Mayans were wrong, we'll be back tomorrow. Darn, everybody will have to go to work on Friday.

Dow 13,311.72, +59.75 (0.45%)
NASDAQ 3,050.39, +6.03 (0.20%)
S&P 500 1,443.69, +7.88 (0.55%)
NYSE Composite 8,516.43, +52.61 (0.62%)
NASDAQ Volume 1,685,494,500.00
NYSE Volume 3,656,370,750
Combined NYSE & NASDAQ Advance - Decline: 3574-1921
Combined NYSE & NASDAQ New highs - New lows: 250-32
WTI crude oil: 90.13, +0.15
Gold: 1,645.90, -21.80
Silver: 29.68, -1.438

Tip-toeing Along the Edge of the Fiscal Cliff (a melodrama)

This fiscal cliff nonsense is getting a little thick.

Just yesterday, it appeared that the president and John Boehner were coming together on a deal. Today, Boehner steps up to a mic in the Capitol and blurts out something about the president needing to get serious, which is exactly what he said two weeks ago.

Money Daily continues to cling to its creepy, cynical prediction that there will be no deal, never was going to be one, because the parties had already agreed to raise taxes on everybody (why not?) and blame each other.

At this point, all signals should be indicating that there will be no deal prior to the official deadline of midnight on December 31, and beginning with the first tick of the clock in 2013, we begin to slowly dip over the cliff.

The effect of going over the cliff will not be a sudden, recognizable event, but rather a series of widely distributed government outreaches directed straight at the wallets of American citizens. It's a horrible policy decision, but, seriously, could we have expected less from this particular gang of clowns.

Regular wage earners will be hardest hit, as both regular income tax rates will increase, but the government will put pack the 1/3 of the trust fund deductions (SSI) that they so generously didn't deduct from everyone's paychecks in 2012, which was part of last year.

This inconsistency in tax policy, government bickering and annual changes in rates, deductions, spending cuts and increases, et. al., is not anything any stable nation would entertain, the USA having proven to be anything other than stable the past four or five or twelve years as concerns fiscal and monetary policy, though the FED has been trying (ZIRP and QE1, 2, 3, infinity, 4, and likely, beyond... yessh, good luck).

Congress will be departing for the holidays en masse tomorrow and Friday, so who really among us still believes anybody in the Capitol is serious about making a deal, finding common ground (remember that quaint concept of "common good?") and relieving the American people from so much uncertainty, doubt and outright confusion.

These are questionable times with a questionable cast of characters, something along the line of the soap operas, but without doctors who return from the dead or schmaltzy, scheming middle-aged marionettes living in some alternate universe, even though Washington seems to be spinning in an orbit all its own.

So, if there's no deal by tomorrow, because the individual members in the congress have to read whatever bill is presented, no? And then they have to vote on it, pass it or turn it down. If its passed, the President's signature is a quick finish and on to more misadventures.

Whether the congress and the president agree to anything before New Year's Eve becomes New Year's Day is probably immaterial at this point. If they miss any deadlines, they'll just claim the law to be retroactive and everything will be fine. But a couple of things are virtual slam dunks. Whatever they come up with it will not be enough to revive the economy, which, after all, is the point of this exercise. Also, somebody's - and possibly everybody's - taxes will be going up and some government programs will not be funded or appropriated for as generously as before.

The Dow was off nearly 100 points today, which isn't much, in light of recent moves higher. A deal on the fiscal cliff has been priced into stocks. Today's action was a little bit of recognition that all may not be well in deal-land.

Denial. It's what's for New Year.

Dow 13,251.97, -98.99 (0.74%)
NASDAQ 3,044.36, -10.17 (0.33%)
S&P 500 1,435.81, -10.98 (0.76%)
NYSE Composite 8,463.82, -35.53 (0.42%)
NASDAQ Volume 1,938,485,625
NYSE Volume 3,838,595,000
Combined NYSE & NASDAQ Advance - Decline: 2752-2748
Combined NYSE & NASDAQ New highs - New lows: 278-39
WTI crude oil: 89.51, +1.58
Gold: 1,667.70, -3.00
Silver: 31.12, -0.553

Boehner, Obama Closer on Fiscal Cliff Negotiations, Prompting Exultant Wall Street Rally

In a piece of somewhat shocking news, considering the participants are both career politicians of the highest grade, it appeared today that President Obama and House Speaker, John Boehner, were getting much closer to reaching a compromise to end the fears of going over the fiscal cliff on January 1, 2013.

Essentially, Boehner has agreed to some tax cuts for wealthier individuals while Obama is making headway in spending cuts, bringing the two sides closer to an agreement that would, at the very least, provide a level of certainty about tax and spending policies for the near future.

While the roughly $1 trillion in tax increases and another $1 trillion in spending cuts is phased over 10 years, it represents some easing of the tense gridlock between the two parties that have plagued Washington for years.

Compromise being the key to negotiation on these issues, it appears both sides are ready to give a little as the December 31 deadline approaches.

Cynics might say that the politicians are closing in on a deal only because their party members don't want to stay in Washington or have to return to the capitol between Christmas and New Year to hammer out details of a deal.

Most indications are that the President and the Speaker are within a few hundred billion dollars of each other's targets and a bill could be brought to the House and Senate by Thursday, allowing time for votes, a few minor changes and all escaping back to their districts (and families) in plenty of time for the holidays.

What was for certain was Wall Street's enthusiastic response, sending stocks sharply higher on strong volume. The rally - despite fears stemming from the fiscal debate - over the past four-and-a-half weeks has been nothing short of remarkable with the Dow Jones Industrials advancing more than 800 points since the closing low on November 15 (15,542.38) and the S&P tacking on 94 points over the same time span.

Whether or not the politicians arrive at a compromise deal, shorting this market - coincident with the real potential for a blow-off Santa Claus rally - before year's end would not be a wise move right about now.

The Wall Street crowd can best be compared to college kids on Spring Break, where just about anything is ample cause for a party.

Dow 13,350.96, +115.57(0.87%)
NASDAQ 3,054.53, +43.93(1.46%)
S&P 500 1,446.79, +16.43(1.15%)
NYSE Composite 8,499.35, +92.34(1.10%)
NASDAQ Volume 2,017,737,875
NYSE Volume 4,116,356,750
Combined NYSE & NASDAQ Advance - Decline: 4078-1520
Combined NYSE & NASDAQ New highs - New lows: 284-41
WTI crude oil: 87.93, +0.73
Gold: 1,670.70, -27.50
Silver: 31.67, -0.611

Stocks Slide on Fiscal Cliff Stalemate, Fed Confusion

As they've done after the occasion of every recent FOMC meeting, traders sold off on the news, though today's slide was exacerbated at least a little by angst over the ongoing stalemate in Washington over fiscal cliff issues.

John Boehner, Speaker of the House, went before the microphones this morning, followed by Senate leader Harry Reid, and the two of them managed to give Wall Street a dose of temporary depression, sending stocks lower throughout the session.

The major indices slid into the final hour, but rebounded off their lows of the day when news leaked that President Obama and Boehner were to meet at the White House late this afternoon. While it will probably amount to nothing, as have their previous talks, the markets viewed it as slightly positive.

Traders are still mulling over yesterday's FOMC announcement, in which Chairman Bernanke tied raising interest rates to the unemployment rate and inflation. It's something of a crude cobbling of numbers that may or may not make sense, but, in the best counterintuitive spirit, lower unemployment and a recovering economy wiht low inflation (all good) would probably send stocks screeching into the abyss because interest rates would be on the rise.

Whatever the case and however it eventually plays out, it's a scenario unlikely to arrive any time soon, probably not for at least another 12 months, but it still has investors somewhat spooked.

Some good news for the economy came in the form of lower initial unemployment claims dropped to 343K in the most recent reporting period, on expectations of 375K. Retial sales, however, were a little disappointing, up just 0.3% in November, though that was better than the -0.3% from October.

The PPI was downright deflationary, posting a decline of 0.8% in November. Tomorrow's CPI reading will give an indication of price pressure or the lack thereof at the consumer level.

Dow 13,170.72, -74.73 (0.56%)
NASDAQ 2,992.16, -21.65 (0.72%)
S&P 500 1,419.45, -9.03 (0.63%)
NYSE Composite 8,338.62, -42.26 (0.50%)
NASDAQ Volume 1,800,313,250
NYSE Volume 3,299,683,250
Combined NYSE & NASDAQ Advance - Decline: 1847-3671
Combined NYSE & NASDAQ New highs - New lows: 85-58
WTI crude oil: 85.89, -0.88
Gold: 1,696.80, -21.10
Silver: 32.36, -1.427

Bernanke Drops Unemployment Bomb; Markets Get Cranky

After John Boehner chastised President Obama again from the floor of the House of Representatives in the morning, the markets got what they were so eagerly anticipating and pricing in for the last two weeks: Ben Bernanke's unveiling of QE4, the promise by the Federal Reserve to purchase an additional $45 billion in long-dated treasuries each month, commencing with the wind-down of a similar program known as "Operation Twist."

This new monetizing of government debt is in addition to the fed's commitment to continued purchasing agency mortgage-backed securities at a pace of $40 billion per month for the foreseeable future, which translates roughly into "forever, or until the fiat monetary system collapses."

What the market didn't expect was the Fed's statement tying interest rates to the unemployment rate. In the FOMC statement issued shortly after noon and prior to Bernanke's 2:00 pm ET press conference, the Fed announced, "the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

With inflation fairly tame and trending toward dis-inflation on the retail level, the Fed has finally embarked upon a robotic-like exit strategy, though with existential caveats and various loopholes and escape clauses.

After digesting the news, stocks were initially bought up, but, during the press conference, began to slip, finally ending the day with no gains.

While on the one hand the Fed is keeping the monetary floodgates wide open, they are anticipating economic recovery, though even the most ardent bulls don't see the official unemployment rate (U3) falling below 6.5% for at least another year. It currently stands at 7.7%, though that figure is largely due to the decline in the labor participation rate.

With baby boomers retiring at an estimated rate of 10,000 per day - many taking the offer of smaller benefits at age 62 - the labor market is in a state of generational flux unlike any seen in modern times, so there's literally no telling when unemployment might fall below the Fed's threshold level, if at all.

One thing's for certain: if the economy suddenly finds its legs and springs into a real recovery with job creation and rising GDP, Wall Street will be offended because the free money spigots will be turned off or borrowing costs will be significantly increased.

It's a double-edged sword of competitiveness vs. financial repression being played by Wall Street bankers against the population at large. Higher interest rates would tamp down rampant speculation and reverse the galloping higher market trends. In fact, the mere hint from the Fed that interest rates might rise already has seen some effect.

Withe the final Fed meeting of the year out of the way, all eyes will be on the Speaker and the President as they race against time to find a solution to their wide differences to solving the fiscal mess they've created (with ample assistance from Wall Street and the 2008 crash).

Time is running short on the politicians and Wall Street may not be so easily amused over the next few weeks.

Dow 13,245.45, -2.99 (0.02%)
NASDAQ 3,013.81, -8.49 (0.28%)
S&P 500 1,428.48, +0.64 (0.04%)
NYSE Composite 8,380.88, +14.40 (0.17%)
NASDAQ Volume 1,755,775,625
NYSE Volume 3,678,721,000
Combined NYSE & NASDAQ Advance - Decline: 2467-3083
Combined NYSE & NASDAQ New highs - New lows: 204-45
WTI crude oil: 86.77, +0.98
Gold: 1,717.90, +8.30
Silver: 33.78, +0.765

"Cliff" Negotiations Going Nowhere; Wall Street Begins to Get the Message

Anybody who took the time to watch any of the Sunday morning comedy shows, otherwise known as "Meet the Press", "This Week" or "face the Nation could come to no other conclusion than the Democrats and Republicans were still miles apart on solutions to fixing issues pertaining to the "fiscal cliff" that has become the cause celebre in Washington, on Wall Street and just about everywhere else in America.

Alternating between Treasury Secretary Timothy Geithner, House majority leader, John Boehner and a parade of politicians, pundits and philosophers (notably, Grover Norquist), there was widespread agreement on one thing: that there was no middle ground upon which anybody was seen standing. The Democrats and Republicans are so far apart that the idea that there might not be a deal in time for all the Bush tax cuts to expire, sequestration of mandatory budget cuts would take place and the US economy - and with it the world - would fall into recession early in 2013.

It took Wall Street most of the day to figure out that a deal might not be forthcoming by the clowns they purchased in the last election cycle, a thought so pregnant with dire consequences that many in the (cough, cough) investment community might just be in denial on the topic.

By late afternoon, President Obama took his case to the Twitter-world, answering questions from his point of view. A little later, there was a counter-offer from Boehner's office, though it was much like the president's original proposal: having no chance of acceptance and merely a bargaining salvo, testing the waters, so to speak.

By the end of the day, there was some damage done, though it was nothing like what may occur should Wall Street types begin embracing the idea of actually plunging over the "cliff."

Incidentally, the Dow pooped out right at its 200-day moving average, especially in light of the somewhat stunning November ISM index, which drooped into contraction territory with a 49.5 reading, on expectations of 51.2. Naturally, hurricane Sandy was blamed for the bad read, though a number of analysts did not agree with that assessment, believing that Sandy might be responsible for 0.3 to 0.5 of the shortfall, which would still render a reading of 50, at best.

Spain requested a 39.5 billion euro bailout for its ailing banks, but fell short of making an official request for a sovereign bailout. In the best counterintuitive fashion, European stocks rallied and bond yields fell. Talk about denial! The Euros have that market cornered.

As the cliff diving enters a critical phase this week - because the politicians plan on making their escape from DC on the 14th of December, naturally, taking an extra week off on the taxpayer's dime - expect markets to get ever more jittery. Adding to the unusual noise, Friday's non-farm payroll report for November might rattle a few cages as well.

Dow 12,965.60, -59.98 (0.46%)
NASDAQ 3,002.20, -8.04 (0.27%)
S&P 500 1,409.46, -6.72 (0.47%)
NYSE Composite 8,223.54, -36.90 (0.45%)
NASDAQ Volume 1,666,248,500
NYSE Volume 3,060,504,000
Combined NYSE & NASDAQ Advance - Decline: 2307-3205
Combined NYSE & NASDAQ New highs - New lows: 213-44
WTI crude oil: 89.09, +0.18
Gold: 1,721.10, +8.40
Silver: 33.76, +0.48

Wall Street to Washington, the Clown Show Continues

OK, it's finally gotten officially stupid to invest any money at all in stocks, though judging by the massive outflows from stock-related mutual funds to bond funds, it seems that may be preaching to the choir as far as retail investors are concerned.

Today saw more ridiculous posturing and pontification by various US public office-holders, first by House Speaker John Boehner (who seems to relish in the publicity and his new-found super-power, capable of moving stock indices with a single phrase) who, after meeting with the president's chief negotiator - Treasury Secretary Timothy Geithner - said that there had been no substantive progress on the fiscal cliff issues in two weeks (no kidding!) and that the president needs to put his cards on the table.

Apparently, Geithner is stone-walling for Obama, insisting on allowing the Bush tax cuts to expire on the wealthiest taxpayers - those earning over $250,000 - while allowing them to remain in place for everyone else, but Boehner is likely still insisting on concrete spending cuts. Both have good ideas, though the probability of a realistic compromise appears to be still a ways off.

So, Boehner steps to the microphone a few minutes after 11:30 am ET, says a few words and the Dow loses 50 points in about a minute. A little while later, Senate Leader Harry Reid takes his turn and stocks recover a bit. Maybe Harry has a gentler touch? But stocks went up even more when NY Senator Chuck (I represent Israel) Schumer took to the podium and said a deal was almost a certainty by Christmas, once again, overstating the obvious. Senator Schumer probably had an options straddle working, needed a few extra points on the SPY and he got them.

Nancy Pelosi threatened to speak nearing the close, but held off until after the final bell. Apparently, Mrs. Pelosi plays the futures markets. It's all so absurd, the great Saul Bellow could not have penned a more abstract, obtuse script.

Other than the fiscal cliff bad theater, existing home sales in October were reported to have increased by 5.2% percent over the previous month, third quarter GDP was revised upward from 2.0% to 2.7%, which the market had expected, though most of the gains came from government spending, inventory additions and hedonic adjustments.

Retail Sales for November were reported by a number of chain stores, showing an overall gain of 1.7%, well below the happy forecast of a 4-5% jump. Naturally, Hurricane Sandy was blamed for much of the shortfall, though actual sales declines at Kohl's (down 5.6%), Macy's and Nordstom's were more likely due to a combination of competition, poor marketing and overall sluggish demand by consumers, who can only buy so many 42-inch flat screens, iPods and clothes on limited budgets.

Also, this graphic caught some attention. It shows how former Goldman Sachs executives are now the central bankers of most of Europe. No wonder they're doing so well over there.

Gold was up sharply, as was oil and silver, a day after being belted down by unseen forces. Silver, in particular, is at a two-month high, and looks like its about to break out, though that's been said and seen before, with no follow-through, thanks to the suppressive work constantly being done at JP Morgan.

The big tent will open for the circus promptly at 9:30 am ET tomorrow.

Dow 13,021.82, +36.71 (0.28%)
NASDAQ 3,012.03, +20.25 (0.68%)
S&P 500 1,415.95, +6.02 (0.43%)
NYSE Composite, 8,256.07, +48.71 (0.59%)
NASDAQ Volume 1,758,355,875.00
NYSE Volume 3,337,720,000
Combined NYSE & NASDAQ Advance - Decline: 3963-1531
Combined NYSE & NASDAQ New highs - New lows: 233-30
WTI crude oil: 88.07, +1.58
Gold: 1,727.20, +10.70
Silver: 34.35, +0.664

John Boehner Rescues Markets... for Today

Stocks were slip-sliding away again on Friday until Speaker of the House, Republican John Boehner, emerged from a meeting with the president sounding very conciliatory and committed to a deal on the fiscal cliff issues facing the federal government.

Boehner spoke to the press just before noon, as stocks reached their lows of the day. Following his remarks that there was a "framework" in the negotiations - which include fellow Republican Mitch McConnell, Nancy Peolsi and Senate majority leader Harry Reid - stocks took off on a tear, with all the major indices quickly erasing losses and turing positive, where they remained, for the most part, into the close.

The Dow, which had been sporting a loss of 71 points, rallied 120 points in a matter of twenty minutes.

Boehner has a tricky path to navigate, between playing hard ball with Democrats while keeping his fellow Republicans - especially those of the Tea Party denomination - from mutiny and potentially blowing up negotiations, but for today, at least, he played the part of a Wall Street superhero.

A couple of other salient points on which to close out the week:

October industrial production dropped 0.4% and capacity utilization fell from 78.2 to 77.8, a significant decline, suggesting that the economy may not be just limping along, but actually slipping.

The advance-decline line was positive for the first time this week, though new lows were once again ahead of new highs, for the eighth consecutive session, or, for those cynics in our midst, since the re-election of President Obama.

It was a real downer of a week for the bulls, especially being options expiry on Friday, a day usually reserved for back-slapping and rounds of drinks over big scores. There was probably more crying into beers late this afternoon than glad-handing fellow insiders.

That's a wrap, and don't expect much next week, as the market faces a short week with a half-day session on Black Friday, the day after Thanksgiving. Additionally, President Obama will be visiting the Far East during the week, so no meaningful negotiations are likely until his return and after the weekend, leaving the politicians just about four weeks before Christmas to work things out.

Good luck with that.

Dow 12,588.31, +45.93 (0.37%)
NASDAQ 2,853.13, +16.19 (0.57%)
S&P 500 1,359.88, +6.55 (0.48%)
NYSE Composite 7,931.55, +34.67 (0.44%)
NASDAQ Volume 2,191,482,500
NYSE Volume 3,991,566,750
Combined NYSE & NASDAQ Advance - Decline: 3638-1796
Combined NYSE & NASDAQ New highs - New lows: 28-329
WTI crude oil: 86.67, +1.22
Gold: 1,714.70, +0.90
Silver: 32.37, -0.304

Santa Claus Comes to Wall Street

We all knew this was coming.

Good news or bad, there was going to be a Santa Claus Rally, and today was the day.

Any attempt to quantify or qualify this massive uplift on slightly positive news (really, there was nothing earth-shattering) would be foolhardy. Suffice it to say that the powers that be got the HFT computers cranked up at the open and didn't change the algorithms all day long.

It wasn't as though Europe was fixed for good, or that seven million people went back to work today, or that retail sales have been robust (anecdotally, the malls and the post office aren't especially busy). The top news - and it's suspect, at best - was that housing starts rose 9.3 percent to a 685,000 annual rate, though most of the gains were in multi-family units (rental apartments), which were up 25%, while new construction of single-family houses rose just 2.3 percent from the prior month, so, apparently, the fact that most people in America can't qualify for a mortgage and thus, must rent, qualifies as blockbuster good news.

Today's moves were somewhat misleading, as Santa Claus rallies often are. The closing prices on the major indices got them back to where they were about a week ago.

Merry Christmas. It was the feel-good rally for the season. By the time we hit January, this will be all but forgotten, so don't make a big thing out of it, OK?

Meanwhile, the markets actually should be a little bit uneasy over what's happening (or not happening, as the case may be) on Capitol Hill, where House Republicans refuse to pass the two-month social security payroll contribution reduction that was overwhelmingly passed by the Senate over the weekend.

Majority leader John Boehner took the extraordinary step of calling the Senate's bluff, saying they should come back to Washington to work out a better, longer deal. Most Senators have already exited the capitol, en route to a two-week vacation, while the nation stumbles on, without a comprehensive package.

Boehner, in calling out the Senate and President Obama, said, "President Obama needs to call on Senate Democrats to go back into session ... and resolve this bill as soon as possible."

Failure to pass a bill in the House will also curtail unemployment benefits to about two million Americans and Medicare payments to doctors will also be cut short.

The House did pass a bill, 229-193, that sends the legislation back to the Senate. However, with the Senate already out of town for the holidays, House Republicans have set up a perfect stalemate, just in time for the holidays.

Of course, none of this drama means anything to Wall Street, which had donned blinders for the session. Stocks closed at or ear their highs of the day on extremely light volume. All sectors and nearly all asset classes gained on the day, including gold, oil and silver, which had been beaten down mercilessly over the past two weeks.

Not to throw cold water on the festivities, but after the bell, Oracle (ORCL) missed on their quarterly numbers, coming in at 54 cents per share on expectations of 57 cents and missing revenue estimates of $9.2 billion by a mile, at $8.8 billion.

Also, the National Association of Realtors (NAR) will announce tomorrow that they are revising, downward, existing home sales from the past five years, dating back to 2007, when the housing boom went bust. It may not mean a thing to the 1%ers on Wall Street, though the data will show that housing was - and is - in worse shape than previously reported.

Dow 12,103.43, +337.17 (2.87%)
NASDAQ 2,603.73, +80.59 (3.19%)
S&P 500 1,241.30, +35.95 (2.98%)
NYSE Composite 7,357.14, +214.69 (3.01%)
NASDAQ Volume 1,751,316,750
NYSE Volume 4,002,632,750
Combined NYSE & NASDAQ Advance - Decline: 4943-862
Combined NYSE & NASDAQ New highs - New lows: 183-106
WTI crude oil: 97.22, +3.34
Gold: 1,617.60, +20.90
Silver: 29.54, +0.66

Down to the Wire on Debt Ceiling Compromise

Over the weekend, House majority leader John Boehner genuflected to the Tea Party coalition of Republicans, put forth a bill that was sure to pass the House and die and the Senate, and that's exactly what happened.

By Monday morning, however, Senate majority leader Harry Reid had put together a compromise plan that has more chance of passing both bodies before the clock strikes midnight on the debt ceiling issue. Reid's plan calls for an initial $1 trillion in deficit reductions, all in the form of spending cuts, has a trigger for more cuts by Thanksgiving and puts the onus of delivering on mandatory cuts - should debate in congress not find suitable agreement - on a welve-member committee made up of six Republicans and six Democrats which would then make mandatory cuts to both Medicare and Defense spending among other programs.

While all this wrangling was going on the markets were closed over the weekend, but opened Monday morning in a very positive mood, with all major indices hitting their highs of the day within minutes after the opening bell.

The euphoric spirit was short-lived. At 10:00 am EDT, the ISM Index for July came in at 50.9, on expectations of a reading of 54.0. The sharp contraction - from 55.3 in June, reminded traders that whether or not the debt ceiling is raised, the US economy continues to stall out, sending all of the indices into free-fall. The Dow, which was up 139 points at the open, was lower by 100 points just 35 minutes later. Stocks continued to slide until the noon hour, bouncing off the bottom and finally rallying into the close, though all finished in negative territory.

For the Dow Jones Industrials, it was the seventh consecutive losing session, an event which has not occurred since 2002. And, as the market players took off their trading aprons and headed home, there still was no vote on the Reid plan, though indications were that both houses of congress would approve the measure and the president would sign it into law.

The debt ceiling, if the bill passes, will be raised to over $16.4 trillion, which should be enough to keep the Washington spendthrifts happy until after the 2012 elections. A vote is supposed to happen this afternoon or tonight, though no timetable has been announced.

What is annoying, or amusing, depending on your state of mind, is how the congress can waste so much time arguing, to only come up with a bill that satisfies nobody. The Tea Party faction held the public debt hostage, and likely will come out looking like winners in the end, though, typical of Washington, all will claim victory when actually nobody won a thing.

Meanwhile, we still await the vote, which is still somewhat in doubt.

Dow 12,132.49, -10.75 (0.09%)
NASDAQ 2,744.61, -11.77 (0.43%)
S&P 500 1,286.94, -5.34 (0.41%)
NYSE Composite 8,040.94, -38.50 (0.48%)

On the day, decliners beat advancers, 3416-3189. On the NASDAQ, 36 new highs were overshadowed by 99 new lows, while the NYSE registered 35 new highs and 93 new lows, making the combined total in favor of new lows, 192-71, continuing the sell signal. Volume was somewhat robust, as the kleptomaniacs behind the HFT (high frequency trading) computers shaved fractions from everyone on the way up, down and back up again.

NASDAQ Volume 2,176,811,750
NYSE Volume 4,948,650,500

Fortunately, crude oil, which was up sharply in the opening minutes of live trading, also reversed course and ended lower by 81 cents, at $94.89. Gold was also whipsawed, but ended down $9.50, at $1,621.70. Silver met a similar fate, losing 59 cents, to $39.31.

Whether or not the debt ceiling increase and debt reduction bill becomes law before the markets open tomorrow is in the hands of congress and president Obama, but the real test for markets will come later in the week, on Friday, when July non-farm payroll data is released. The market is expecting an increase of only 84,000 jobs, which would be bad enough to send stocks tumbling again. Many believe that number will not be met or even come close to, and that it's entirely possible that a number in the 20-30,000 range may be in store.

We'll get a preview on Wednesday, when ADP releases its private payroll report for the same period.

Money Daily will publish a special post, with more details, if and when the House and Senate approve the proposed legislation.

Traders Still Positive on Debt Limit Deal; Markets Spooked

It could have been so much worse.

US stocks took another tumble Friday, on revisions to 1st and 2nd quarter GDP and fears that the debt ceiling debate in Washington was running out of time.

An hour prior to the opening bell, the government reported its second revision to second quarter GDP, which came in at a measly 1.3%, but the greater shock was the revision to first quarter GDP, which was revised lower, from 1.9% growth to a frighteningly-low 0.4%. That sent shock waves through the futures market and US indices fell sharply at the open, hitting the lows of the day within the first 15 minutes of trading.

Just before 10:00 am EDT, Chicago PMI was reported to have fallen to 58.8 in July, lower than forecast, from 61.1 the prior month. That wasn't bad enough news, however, to shake off the nascent rally on rumors and hope that congress would decide on a debt ceiling increase by the end of the day or over the weekend.

As the session wore on, stocks moved sharply on any unfounded rumors, but eventually gave way late in the day, as lawmakers in the House of Representatives agreed, 236-186, to begin debate on House majority leader John Boehner's debt ceiling proposal, which had been in limbo since Tuesday because the measure did not have the backing of the Tea Party wing of the Republican party and - even if it did pass the House - was seen as almost certain to fail in the Senate. An actual vote on the measure is expected to come around 6:00 pm EDT Friday.

At the end of the day and end of the week, with no resolution on the debt issue and economic data overshadowing even the best corporate second quarter reports, the Dow finished lower for the sixth straight day, the S&P down for the last five, and the NASDAQ in negative territory for the fourth day out of the last five. On Thursday, the NASDAQ registered a gain of just over one-and-a-half points.

For the week, the Dow lost 538 points, a 4% decline. The S&P slipped 53 points, the NASDAQ shed 102 points and the NYSE composite fell by 328 points.

As bad as it was, stocks actually recovered half of their earlier losses on Friday. Still, it was the worst weekly performance for US indices in a year.

Dow 12,143.24, -96.87 (0.79%)
NASDAQ 2,756.38, -9.87 (0.36%)
S&P 500 1,292.28, -8.39 (0.65%)
NYSE Composite 8,079.44, -44.59 (0.55%)

Declining issues again dominated advancers, 4113-2476, and the gap between the expanding number of new lows and shrinking new highs worsened. On the NASDAQ, there were just 26 new highs, as compared to 114 new lows. The NYSE showed even worse, with just 16 new highs and 177 new lows. The combined totals of 42 new highs against 291 new lows is sending the strongest sell signal imaginable. Even if the congress does find a way to pass a debt ceiling increase by Tuesday, August 2, the damage for wasting time has been done the Moody's and S&P will likely downgrade US debt in short order, as they both have warned would occur if serious measures were not taken at this impasse.

Add to that the non-recovery "recovery" which has been represented by high unemployment and falling home prices and the recipe for further declines in equities is writ large.

Volume on the day was strong, another sign of a weakening stock market poised on the brink of turning losses into a major correction and a resumption of the bear market.

NASDAQ Volume 2,274,169,000
NYSE Volume 5,045,403,000

Among other interesting notes were the 10-year, which rose in price, but slumped in yield, down to 2.80%. The 30-year bond also hit a fresh low yield of 4.13%.

Oil took some losses, down $1.74, to $95.70. Gold made another intra-day high of $1637.50, before settling back to close at $1,628.30, up $14.90 for the day. Silver was up 31 cents, to $40.11 per ounce.

With the markets suffering their worst weekly losses in a year - coincidentally at the same time top economists are partying at their annual convention in Jackson Hole, Wyoming, the same place that Fed Chairman announced the launch of QE2 last summer - the onus is on the congress to come with a plan that appeases not only both parties but the ratings agencies as well.

While it is doubtful they would let the August 2 date pass without a debt ceiling increase, the chances of them passing a bill before then that actually cuts spending appropriately are still quite long.

Week Ends with Split Decision; Gold, Silver on the Rise

After a week of ups and downs, it's probably appropriate the Friday ended with a bifurcated market: the Dow and NYSE down and the S&P and NASDAQ up.

It makes little sense to the casual observer, though the condition becomes more understandable if one is an insider, playing long and short, hedging positions, trading momentum and running super-fast computers in the 2011 version of "timing the market."

For the rest of us, forget it. Stocks have become nearly impossible to trade with any success unless one is truly gifted or just dumb lucky.

The White House and congress still haven't decided what to do about raising the debt ceiling. The Republicans' ploy of passing their ridiculous Cut, Cap and Balance bill in the House is a desperate and dangerous maneuver, costing more time as the ratings agencies and the rest of the civilized planet look on with alternate views of shock, horror and amusement. The continued stalemate virtually assures that the United States will receive a number of ratings downgrades no matter what happens from here on out.

By comparison, Europe appears far worse, though they have more than enough gall and arrogance to keep the media and the ratings agencies in check for the time being. With all of the Mediterranean nations in some sort of trouble or already having been bailed out, the European Union seems to be held together by duct tape and crewing gum.

There was nearly nothing worth reporting about this week, as the Ponzi schemers made it through another week without anybody receiving a subpoena or getting caught cheating. Score another one for the rich guys.

Dow 12,681.16, -43.25 (0.34%)
NASDAQ 2,858.83, +24.40 (0.86%)
S&P 500 1,345.02, +1.22 (0.09%)
NYSE Composite 8,408.20, -3.25 (0.04%)

Advancing issues narrowly beat decliners, 3293-3194. The NASDAQ showed 79 new highs and 23 new lows, while the NYSE registered 102 new highs and 24 new lows. The combined total of 181 new highs and 47 new lows is about par for the course in an upward-sloping market. Volume, however, dipped back into apathetic mid-summer malaise.

NASDAQ Volume 1,674,379,250
NYSE Volume 3,538,032,250

The commodity markets gave both good and bad news. Oil was up another 74 cents, to $99.87, which is bad news for everybody except oil company executives and Arab sheiks. The precious metals bore most of the good news, with gold up $14.50, to $1,601.50, and silver higher by $1.17, to $40.12. Silver appears ready to head into orbit, now that the new Hong Kong silver futures vehicle is offering some variation in pricing.

As the US economy becomes more and more bad theater, expect gold and silver to grind higher, with most of the explosive moves in silver, which is still underpriced at a 40-1 gold-silver ratio. The long-term trend is 16-1.

Today, House Republican "leader" John Boehner walked out of debt ceiling negotiations with the president, saying the two sides, "couldn't connect." No kidding, John, when you won't even allow for closing tax loopholes on millionaires and billionaires when we're suffering the worst depression of all time.

Boehner, and the rest of the "Tea Party" Nancies ought to be ashamed of what they're doing to the country. When the collapse comes, they should be handed the great bulk of the blame. President Obama has tried to deal with them, but it has become a losing battle.

God save us.

Rattled Market Recovers in Late-Session Trade

Investors, worried over an imminent government shutdown, got another jolt of reality when it was reported that a 7.4 earthquake struck Japan just after 10:00 am EDT.

The quake struck in pretty much the same region as last month's 9.0 earthquake, but geologists quickly downgraded the temblor to 7.1 and eased fears over another tsunami, measuring this one at a mere one meter (roughly three feet). This most recent quake hit in what was the middle of the night in Japan, so reports were rather sketchy, though it appeared that damage had been minimal.

With the waning of that alarm, investors quickly got back to work buying stocks, bringing the major indices back to nearly break-even at the close.

Word out of Washington was still dire, suggesting that Republicans would force Democrats into a no-win situation without resolution of their differences and cause a government shutdown on Friday night, April 8, at midnight. While most Republicans and Democrats alike would prefer to work out the narrow $7 billion worth of difference on the current budget, the House Republicans, led by first-term Tea Partiers, seem intent on standing fast to ridiculous ideological riders that would defund Planned Parenthood and public support for PBS and NPR, and it appears that these freshman legislators are going to get what they cheered yesterday, an indefinite shutdown of non-essential government services, since the Obama administration and the Senate Democrats say they have negotiated in good faith and enough is enough.

Just a little more than a day is left to work out a compromise, though a meeting today between House leader John Boehner, senate leader Harry Reid and President Obama produced nothing other than a promise that the same leaders would meet again at 7:00 pm tonight.

In another grandstanding move, House Republicans pushed through a one-week funding bill that would provide paychecks for the military, though President Obama has promised a veto should the measure reach his desk. This is how the Republicans are holding the process captive, by using American servicemen and women as props in their political debate. This level of audacity and below-the-belt maneuvering is reserved to the worst politicians on the planet, though the House newcomers seem perfectly content to drive the country to the brink of insolvency.

Wall Street took it in stride, but the eventual fallout from shutting the government down for an extended period could have long-lasting consequences the newbie Republicans can hardly imagine.

Dow 12,409.49, -17.26 (0.14%)
NASDAQ 2,796.14, -3.68 (0.13%)
S&P 500 1,333.51, -2.03 (0.15%)
NYSE Composite 8,489.33, -18.90 (0.22%)

Even though the major indices finished in the red, there was a pronounced number of losers over winners, with declining issues beating back advancing ones, 4092-2427. The NASDAQ finished with 115 new highs and 24 new lows, while the NYSE saw 154 new highs and just 4 new lows. Volume, despite the drop and rally in the morning, was still very much on the light side.

NASDAQ Volume 1,811,538,125.00
NYSE Volume 4,322,927,000

The day's events did nothing to slow the rise in the price of oil, however, as WTI crude futures rose to $110.30, up another $1.47 on the day, as word that Libyan rebels were being pushed back by forces loyal to embattled leader Moammar Gadhafi.

Gold made another new closing high, but only by an 80 cent gain, to $1,459.30. Silver tacked on 17 cents, to $39.55, another 31-year high.

With a looming government shutdown less than 36 hours away, markets are more than likely to remain somewhat stable, though a prolonged battle by the political leadership might be more than the fragile economy can handle. Sadly, the amount in question is tiny compared to the intellectual vacuity of the Tea Party Republicans.

Flat City

Maybe Tuesday's ramp-up was a little too much, or investors are actually a little concerned about events unfolding in Egypt, but whatever the case or cause, markets didn't do anything other than flatline on Wednesday.

The Dow traded in a 45-point range, while the S&P and NASDAQ were bound by 10 and 5-point ranges, respectively, proving that three's nothing like pushing already overvalued stocks even higher to stall out trading completely.

ADP released its monthly employment report, which suggested private payrolls grew by 187,000 in January, and revised December's report down 50,000, to 247,000. The revision means that the initial report was off by a factor of 16%, making it about as reliable an indicator as anything coming out of the Bureau of Labor Statistics (BLS), which, by the way, is the "official" measure of everything employment-related in the USA.

Market reaction to the number was a big yawn and the rest of the session more resembled churning of butter or grape-stomping rather than orderly markets. The day was a mash, and a dull one, at that.

Dow 12,041.97, +1.81 (0.02%)
NASDAQ 2,750.16, -1.03 (0.04%)
S&P 500 1,304.03, -3.56 (0.27%)
NYSE Composite 8,272.57, -17.52 (0.21%)

Losing issues took control over gainers on the day, 3569-2893. The NASDAQ recorded 158 new highs and 15 new lows, while the NYSE had 255 new highs and 6 new lows. This indicator has been stuck at roughly these levels for the past two months with no signal that they are going to change any time soon, thanks largely to the Fed's easy money policies of ZIRP and QE2. Volume was back at the usual moribund levels.

NASDAQ Volume 2,011,206,000
NYSE Volume 4,553,074,500

Commodities took the day off, especially crude futures, which registered a smallish gain of 9 cents, to $90.86. The precious metals continued to be depressed, with gold down $8.20, to $1,332.10 and silver off 23 cents, to $28.29.

Thursday will bring initial unemployment claims at 8:30 am and Friday will be the big number, the BLS' non-farm payroll report. Of course, none of these indicators really matter much with the Super Bowl on Sunday. As mentioned in previous posts, there won't be any real movement in markets (other than straight up) until after the big game.

Inflation remains a hot topic, with the official government CPI proclaiming it to be hovering in the 1 1/2-2% area, when everyone in the real world knows it's really 5-8% or higher, especially concerning food and fuel.

One area not experiencing inflation are payrolls, which haven't budged much in the last 10 years for most middle class jobs. How long the government can keep the Ponzi scheme of rising prices and stagnant wages going before the USA turns into either Ireland, Greece or Egypt is an open question, though considering the general stupidity and apathetic nature of the American public, it could carry on for some time, measured more in years than months.

But then again, nobody in the "official" world saw the Sub-prime or banking collapse coming, so the next Black Swan could be right around the corner, say, in Pakistan.

Leaders in Washington have been particularly silent of late, focused more on in-fighting than any meaningful, needed reforms, and that condition is unlikely to change. After all the next big congressional and presidential elections are only 21 months away. It's actually quite astounding that nobody from the Republican camp has declared themselves a candidate.

Maybe they're all scared of Sarah Palin, or something worse. But, is there anything worse than the former Alaska governor? Well, there is Michele Bachmann, the woman who keeps John Boehner in tears.