Government Shutdown Day 8: Overcoming Fears and Tears

Are average Americans ready for the fight of their lives, one which could, quite literally be for their lives?

Surely, many are unprepared. Most have little or no savings, don't have basic survival skills, wouldn't know a dandelion (good food) from a jimson (poisonous) and many rely heavily on the federal government as their lifeline.

THE WELFARE STATE OF THE USA IS ABOUT TO END.

Read that again, you disability recipients, welfare check hoarders, farm subsidy leeches, overpaid government employees, social security dependents, corporate tax cheaters, food stamps suckers, members of the House of Representatives, Senators and Mr. President.

Friends, Romans, countrymen, lend me your ears. I come not to bury Obama, but to praise him.

Clear out the biases already developed over his illegitimacy, stupidity, narcissism, etc., for a moment and hear me out. Mr. President is doing the best thing that we, holders of gold and silver with stores of guns, ammo and food, could have ever hoped for by refusing to negotiate over either the shutdown or the debt ceiling, holding the strawman Obamacare over everyone's heads.

Isn't a severe downsizing of the US government and destruction of the Federal Reserve what we have longed for these past five, six years? Obama is bringing it to us, albeit in a haphazard manner, although one might suspect that such earth-shaking events don't happen neatly, anyway.

By refusing to negotiate on anything, in addition to having unblinking adversaries in the House of Representatives (our beloved Tea Partiers), the president, with an assist from congress, has already partially shut down the government and has paved the way for a no-win condition over the debt ceiling. The genii in the White House (aka Jack Lew and his buddies) and at the Fed have no doubt already figured out the next moves. When the debt ceiling debate fails to produce a responsible result, the government will begin to prioritize spending, paying off creditors first (interest on the debt), and probably Social Security and military pay (not necessarily in that order) next, and so on down the line.

The US federal government can, and will, proceed in this manner for quite some time, slimming down, shutting agencies, cutting budgets by blunt force and actually becoming somewhat fiscally responsible. During this period, there will be considerable chaos, available to be exploited by none other than those of us smart enough to do so. Price discovery, for everything from real estate to peaches, will be a matter of making the best deal available, and many of us are adept at deal-making. Government employees may be furloughed, laid off or permanently disenfranchised, their pensions slashed, and other government programs (can you spell FARM SUBSIDIES?) will have to be eliminated in order to cut wasteful spending and/or increase revenue.

At the same time, the government will become more and more dysfunctional, having lost its most basic trapping of power, the consent of the governed, in many places, particularly large urban centers and deep rural communities. If martial law becomes the norm, how long and how well will that be enforced in a country chock-full of gun-toting, liberty-loving individualistic patriots and their new-to-the-party brethren?

There will be chaos. But eventually, there will be peace and a new understanding that the federal government is powerless over the needs of individual states, and even counties and other municipalities. A new form of feudalism or tribalism may be the result, but the bottom line is that the federal government will be a shadow of its former self, individuals and communities will forge new leaderships, apart and away from government, which will (and in many cases, already is) be viewed as not the solution, but the problem.

People will become more self-reliant, industrious and unburdened by regulations and authority. A new America will emerge, one that is less-centralized, more progressive (I know that's a dirty word to some), less encumbered by regulation and overall, more free, and freedom is what America is all about.

Let's get behind our president. NO NEGOTIATIONS. Keep chanting. Keep the government closed. Begin the process of downsizing and prioritizing spending. Stop borrowing. How will the Fed issue new debt-money if the Treasury can't borrow? There will be progress against the Federal Reserve, but not victory, until we rise up and smite them, refuse their fiat and return to a gold standard or gold/silver standard.

Real money. And all because the politicians played a game of chicken which neither can win.

We all have reasons to doubt or criticize the president, but, maybe, just maybe, he's willing to risk his reputation and his life in order to be the transformational figure he promised. I know it's a stretch, but maybe he's a wickedly wise politician and playing the banksters for all they're worth, willing to shut down the government and destroy the economy in order to save it all. What comes out the other side is largely up to him, but also well within our grasp.

THIS is OUR MOMENT. Carpe Diem!

Both Obama and House Speaker Boehner took to the podium today and made courtesy remarks, but still haven't met. Short-attention span theater continues. The markets began to worry in earnest, the major indices closing at the lows of the session. The A-D line continued to deteriorate, with losers outpacing gainers by a 9-2 margin and new lows exceeded new highs for the first time since mid-August.

The market is beginning to roll over. The phony leaders are running out of time. The world won't end, but the obtrusive, invasive, bloated, absurd federal government is creaking, cracking and about to fall over.

Good times, indeed.

Dow 14,776.53, -159.71 (1.07%)
Nasdaq 3,694.83, -75.54 (2.00%)
S&P 500 1,655.45, -20.67 (1.23%)
10-Yr Bond 2.64% 0.00
NYSE Volume 3,546,719,000
Nasdaq Volume 2,037,821,875
Combined NYSE & NASDAQ Advance - Decline: 1085-4474
Combined NYSE & NASDAQ New highs - New lows: 95-101
WTI crude oil: 103.49, +0.46
Gold: 1,324.60, 0.50
Silver: 22.44, +0.057
Corn: 441.75, -7.50

The Day After: Buyer's Remorse and the Tea Party Gambit

One day after the Fed did the unexpected - which really should have been expected, after all, since the Fed is so good at doing nothing - and kept its asset purchase program intact, stocks on Wall Street were shaken, not stirred, with the Dow and S&P posting modest losses and only the NASDAQ ahead at the close.

Since yesterday's post-announcement feeding frenzy was done at such a rapid pace, there was a feeling today that the party was great, but some may have overdone it, so positions were squared in front of tomorrow's quadruple-witching options expiry, locking in profits.

There was also a bit of nastiness coming out of Washington, DC, in the form of forty or so House Republicans promoting a bill that would fund the federal government, but only if a provision to defund the Affordable Care Act (ObamaCare) was included.

While that measure could survive a House vote, and well might, the chances of it making its way through the Senate are a different-striped animal altogether. And the chances of Obama signing it into law are absolutely zero.

If the House Republicans have their way, this stalemate could produce a partial shutdown of the federal government (please save your applause for the end of the performance) on October 1, which is just 12 days hence, so traders may have been taking a few chips off the table in advance of those ugly consequences.

Certain members of the House, known widely as Tea Partiers, would like to find a way to accomplish one of two goals: stopping ObamaCare before it is fully implemented, or, the more popular alternative, stopping the federal government from borrowing the Treasury into debt hell, a course which is already well-trodden. If the government cannot borrow any more, it stops the Federal Reserve's treasury purchases dead in its tracks and generally ends the economy as we know it, which, come to think of it, might be a brilliant idea, since the economy has strayed far from free market economics and is wholly controlled by the Federal Reserve and its vassals, the mega-bank primary dealers. Gains of all kind are generally flowing only to the top 3% or even the top 1% of the wealthiest Americans, with the rest of the populace nothing more than debt slaves.

If the Republicans in the House can stand their ground, force the government to pay its bills without further borrowing (a seeming impossibility), it could be the best thing that's happened in this country since Benny Goodman played Carnegie Hall in 1938, and that's a long time coming.

Sure, there will be dislocations and a massive depression, but on the other side would be prosperity and a more even playing field for entrepreneurs and citizens without the overarching dictates of an out-of-control oligarchy.

Sounds good, doesn't it? Let's see how this plays out, though nobody is betting that the House Tea Partiers could destroy the global economy with just one, grandiose, spectacular move.

Dow 15,636.55, -40.39 (0.26%)
Nasdaq 3,789.38, +5.74 (0.15%)
S&P 500 1,722.34, -3.18 (0.18%)
10-Yr Bond 2.75%, +0.04
NYSE Volume 4,047,428,000
Nasdaq Volume 1,742,718,375
Combined NYSE & NASDAQ Advance - Decline: 2837-3763
Combined NYSE & NASDAQ New highs - New lows: 564-34
WTI crude oil: 106.39, -1.68
Gold: 1,366.20, -3.10
Silver: 23.10, -0.192

Markets Stall as Fiscal Cliff Negotiations Are a Nullity

Talk about tight trading ranges, the major averages barely budged off the flat line today, and, considering the backdrop of the fiscal cliff non-negotiating stances of the warring parties, it's actually quite remarkable.

The NASDAQ was the most volatile of the majors, trading in negative territory the entire session, trading in a narrow band of 22 points. The S&P, top to bottom, moved an entire nine points and change, finishing ever-so-slightly in the red.

By comparison, the Dow's movement was phenomenal, covering an entire 82 points throughout the day. However, after giving up an initial thrust higher of some 53 points, the Dow's trading range from 11:00 am ET until the close was a mere 46 points. Just in case anybody is keeping tack, the Dow crossed over the unchanged line 27 times.

There was no economic data released, but the president did take to the airwaves in his first one-on-one interview since the election, exclusively on Bloomberg (take THAT CNBC!).

Basically reiterating that he would not budge from his position the the Bush tax breaks for the highest two percent earners (making over $250,000 per annum) must be allowed to expire before he and his democratic counterparts would seriously consider any proposal.

That did not inspire any reaction in either direction from the markets. It could be early onset of "cliff fatigue," since the two sides have engaged mostly in verbal sparring and little else. Wall Streeters may be getting a bit worn out, playing the waiting game for the past four weeks.

Without any movement in negotiations, the investment community will look to a crush of economic data releases beginning with the ADP Employment Change index for November, at 8:15 tomorrow, followed in close order by Q3 productivity revision and unit labor costs, factory orders, ISM services and crude oil inventories.

At the least, the ADP figure will give the non-farm payroll junkies a little to chew on until Friday when the BLS makes its monthly estimate of job growth in the nation.

Between now and then, don't look for a quick resolution to the fiscal cliff issues, as both sides appear to take the fight to the very last minute, if not beyond. Most of the politicians are planning on heading home for the holidays on the 14th of December, but, staying in the nation's capitol to iron out an agreement might be preferable to dealing with angry constituents back home, so the chance that congress might delay their holiday by a week is a distinct possibility.

While there are many voices expressing that the politicians will prevent the economy from going "over the cliff" more and more analysts are predicting that neither side sees any gain from negotiating a settlement and appearing weak in the eyes of constituents, especially from the Republican point of view, which is, has been and likely will be, completely intractable.

Things could get interesting at any time, though it appears more and more likely that the politicians will stall, posture and delay, to the ultimate detriment of everyone.

One can hardly blame the president for sticking to his guns on wanting to raise taxes on the rich. It's a no-brainer and long overdue. Besides, he did win re-election largely on the idea that the rich should pay more. How much more is the most cogent question, though the Republicans continue to appear myopic and standing in defense of their campaign contributors, not the people of America.

If the politicians don't come to agreement, blame will fall squarely on the shoulders of the Republican party, primarily the out-of-touch tea partiers in the House.

Dow 12,951.78, -13.82 (0.11%)
NASDAQ 2,996.69, -5.51 (0.18%)
S&P 500 1,407.05, -2.41 (0.17%)
NYSE Composite 8,223.87, +0.33 (0.00%)
NASDAQ Volume 1,746,404,375
NYSE Volume 3,218,542,500
Combined NYSE & NASDAQ Advance - Decline: 2638-2837
Combined NYSE & NASDAQ New highs - New lows: 94-55
WTI crude oil: 88.50, -0.59
Gold: 1,695.80, -25.30
Silver: 32.81, -0.951

No Debt Ceiling Deal Sends Stocks Lower Again

While the plutocrats in Washington dither away valuable time trying to figure out the most politically-expedient way out of their self-imposed debt ceiling crisis, the rest of the world goes on, mostly oblivious to the debacle in the capitol.

Stocks, however, as money substitutes, aren't taking the "no news" as good news. In fact, markets are absolutely terrified, not that the current congress and president will find a solution by the artificial August 2 deadline, but that their efforts will be so futile and pointless that the ratings agencies will lower the US debt/credit rating from its now pristine AAA sovereign status.

While the majority of people neither understand nor care about this delicious little surprise coming down the road like a 60-ton freighter, Wall Street and other governments are frightened out of their boots because a drop in the US rating would add something like $100 billion of cost - in interest - to the annual federal budget, which is already way out of whack.

Whether it be Obama's refusal to put a concise deal on the table, or the Tea Party wing of the Republican party insistence that there be no revenue enhancements in any kind of deal, the result will be the same as it has been for the past 12 years for congress and the presidency: abject failure, and a hike in interest rates.

Without poring over details of how the past three years have played out, we are approaching a seminal moment in the history of the United States of America and in the financial policies post-Bretton Woods. Nixon's closure of the gold window was the first inflection point, at which currencies were no longer backed by gold. The accumulation of nearly $15 trillion in debt and the failure of government to not only foresee the problem, but then to not be able to deal with it, is the second great event.

With just seven days until the government begins defaulting on some debt, markets are skittering about like schoolchildren at recess and there's nobody in his or her right mind who wishes to be exposed to inordinate risk at this point. With each passing day that there is not a deal and signed legislation increasing the debt ceiling, expect markets to recoil in terror. By Friday, we could be witnessing an all-out crash as many participants choose to sit on the side rather than engage in the dizzying dance of death.

The outflows from stocks were seen mostly at the end of the day, when the major indices peaked just after 2:00 pm EDT. From there until the close it was nearly free-fall, with all of the day's tiny gains wiped out in a flurry of near-panic selling.

One hates to beat a dead horse, but this debt ceiling debate is still alive and kicking, barely, and it will dominate financial news until something - anything - is done to rectify the situation. Absolutely nobody is holding their breath waiting for that, however.

Naturally, there were swing trades and day trades made during the session, but nobody is staking out new positions in the most uncertain market of the past two-and-a-half years.

Dow 12,501.30, -91.50 (0.73%)
NASDAQ 2,839.96, -2.84 (0.10%)
S&P 500 1,331.94, -5.49 (0.41%)
NYSE Composite 8,331.67, -25.90 (0.31%)

Declining issues overwhelmed advancers for the second straight day this week, 4096-2434. NASDAQ new highs 29; new lows: 36. NYSE new highs: 44; new lows: 46. Combined totals: 73 new highs, 82 new lows, a slight shift to the negative for that particular indicator. Volume was reliatively light, as expected.

NASDAQ Volume 1,716,556,125
NYSE Volume 3,988,655,750

Crude oil advanced modestly, up 39 cents, to $99.59. Gold racked up another record high, gaining $4.60, to $1,616.80. Silver notched a 38 cent increase, to $40.70.

The S&P/Case-Shiller Home Price index showed marginal gains of one per cent in the month-to-month numbers, but most of the 20 cites surveyed showed declines on a year-over-year basis.

New home sales sunk to 312,000 on an annualized basis in June. Some analysts were calling the number "unexpected," while the home construction industry has been in outright depression for more than three years.

Any further declines will be "expected" and those acting surprised will be executed by a firing squad of Mexican construction workers, as soon as they can be rounded up from immigration detention centers. (That's a joke, folks.)

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.

There's Something Very Wrong and the Tea Party Knows It

Stocks were down for the second straight session, as criticism of the Federal Reserve's recently-announced QE2 has ramped up and is nearing a fever pitch. While the Fed seeks to embark on another round of handing easy money to criminals on Wall Street, the rest of the world is not exactly enamored with Chairman Ben Bernanke.

Europe is beset with its own problems, stemming from unstable, out-of-control government spending in the PIIGS countries, but particularly Ireland and Portugal, which have gone from bad to mush worse over the past six months. That has kept the US dollar from appreciating against the Euro to any great degree, only because money seeks its safest refuge, and in currency markets, the US still appears to be a safer bet than most of Europe.

The Chinese expressed their displeasure by having their ratings agency, Dagong Global Credit Rating Co. Ltd cut the U.S. local and foreign currency long-term sovereign credit rating to A-plus from AA.

Throughout the day, stocks were sent lower as gold and silver, especially, caromed ever higher, with gold spiking to $1425.50 and silver hitting $29.38. By the end of the day, however, the fiat money-makers had had enough and the CME announced an increase in margin requirements to buy silver from $5000 per contract to $6500 (silver is traded in 5000 oz. increments).

That may have been cover for some serious naked shorting of both gold and silver, because while it may explain the late day selloff in silver, it would have had little effect on gold, which also crashed late in the day (see chart at right). At the moment, the bid on gold is $1393.00, and silver has been smashed down to $26.95. The obvious take-away is that the Bernanke put - his $600-900 billion in USSS created right out of thin air, is receiving some serious competition from real money, that being gold and silver, and the Fed, through their proxies on the trading floors had to do something.


They're likely to try to tamp down gold and silver prices in order to garner more bids on their beloved US stock markets, though it's unclear at this time whether anything they do can stem the tide rising against them. In the long run, though most people will never notice, gold and silver are going to become the basis for currency, not Federal Reserve Notes (FRNs) and debt. Sides are being drawn and this battle will end with few winners. Most of the losers will be stockholders and owners of paper currencies. Gold and silver - as they have over thousands of years - will prevail.

Dow 11,346.75, -60.09 (0.53%)
NASDAQ 2,562.98, -17.07 (0.66%)
S&P 500 1,213.40, -9.85 (0.81%)
NYSE Composite 7,702.31, -79.89 (1.03%)
NASDAQ Volume 2,204,733,500
NYSE Volume 5,605,771,500

Declining issues rocked advancers, 4709-1789. There were still 777 new highs to a paltry 82 new lows, but volume was much higher than yesterday's session and better than most days during the run-up of the past two months, a discouraging sign for stock investors, but probably the best news for the long-term, in which the stock market becomes a game of last-man standing.

Oil even came down for a change, dropping 34 cents, to $86.72, and if the stock market continues to slide, expect oil to diverge from gold and silver, following stocks down the deflationary path. Bernanke's big money bet notwithstanding, the next few weeks and into the end of the year may be very hazardous times for trading in anything.

With a pickup of sixty seats in the House, the Republican party has taken control, spurred onward by the success of anywhere from 30-40 Tea Party candidates. In the wide-ranging report from PBS below, some of the nuances are Rand Paul's hint that he may cut federal employee paychecks by 10%, Utah Senator Mike Lee pondering a constitutional amendment to balance the budget, cut the Department of Education and voting NO on raising the debt ceiling, a vote that is likely to come up early in the next term (March-May, 2011).