Government Shutdown Day 9: Wall Street Still Skeptical or In Denial

As is usually the case with the Wall Street racketeers traders, they continue to play their stock and options games despite the shenanigans going about in Washington DC.

One can hardly blame them, because if the government were to actually shut down or default on debt obligations (a very low probability of that ever happening, despite scare tactics by liberal news outlets), the businesses they routinely trade in and around would become even less-encumbered by laws and regulations and gain even more outsized market share than many already have.

It's the oddity of the Wall Street/Washington connection: The crooks on wall Street don't really need the criminals in Washington; they more or less use them, via campaign contributions, to enact legislation that either enhances their market/tax/competitive position or cripples others who might think about competing with them. Washington politicians have become so overly dependent upon Wall Street and their highly-paid K Street lobbyists for campaign and other favoritism money and gifts that they will do just about anything to please them, including shutting the entire federal government down, thus removing themselves from their vaunted positions of power. As foolish as that may sound, that's exactly what the politicians in Washington are doing at the present time.

They probably don't need to worry, however. The elections are bought and sold by the power brokers on Wall Street, the results easily manufactured to produce any outcome they desire via their control over the electronic voting machines.

If all of this sounds like the stuff of conspiracy, well, that's because it is. Big business, the media and the federal government have been in bed with each other so long, it's almost incestuous. Politicians have long ago given up on the idea of representing their geographically-assigned constituents; they are aligned with special interests and businesses who best line their pockets.

And that is why nothing much happened today in Washington or on Wall Street, though behind the scenes, bond markets are beginning to look a little worried, stretched, and, in some cases, like at the low end of the yield curve, inverted, which, as anyone with historical knowledge will readily affirm, is a 100% sure sign of an oncoming recession.

That's somewhat of a bad joke, since many people believe we're already in a recession, having never recovered from the financial tsunami that came about in the fall of 2008. There's a distinct term for what heppens when a recession occurs within an ongoing recession.

It's called a depression, and ours is just about to get started.

Not to be overlooked, President Obama officially nominated Janet Yellen - known as the most dovish of the dove-laden Federal Reserve board of governors - to be the next Chairwoman of the Federal Reserve. Good riddance to Ben Bernanke, and thanks for fu--ing up our country.

And, yes, the number of new highs was eclipsed by new lows for the second straight session. Hold onto your hats, ladies and gentlemen. This is going to be one wild ride!

Dow 14,802.98, +26.45 (0.18%)
Nasdaq 3,677.78, -17.06 (0.46%)
S&P 500 1,656.40, +0.95 (0.06%)
10-Yr Bond 2.65%, +0.01
NYSE Volume 3,566,030,500
Nasdaq Volume 2,159,485,000
Combined NYSE & NASDAQ Advance - Decline: 2541-2985
Combined NYSE & NASDAQ New highs - New lows: 60-137
WTI crude oil: 101.61, -1.88
Gold: 1,307.20, -17.40
Silver: 21.89, -0.552
Corn: 443.50, +1.75

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

Government Shutdown Day 7: Debt Ceiling Begins to Take Precedence; Silver-Corn Trade Plummets

Remember a few weeks ago, when everybody (including Money Daily) was saying that the government wouldn't shut down? And then, when it did, all the pundits and "important" people saying it would only last a day or two?

Well, those predictions were all wrong. Now, what we're hearing is that the shutdown (which isn't really a shutdown, because 83% of the federal government is up and running) will meld into the debt ceiling deadline, which is October 17, but, but, but, some of the same predictors from before are now saying that there's no chance the politicians won't have a deal on the debt ceiling, or that the government won't go into default.

Wrong, wrong, wrong. The two sides are as far apart, ideologically, as they were a week ago, two weeks ago, two months ago, plus they have the added kicker of ObamaCare, the federal heath insurance program this is largely a fiasco of proportions only the federal government could accomplish, the main website for signing up only partially-functional, replete with glitches, shutdowns, "waiting rooms," and other assorted disasters. It is undeniably the worst rollout of any federal program in living memory (*some of our editors are pretty old, but don't predate WWII).

Imagine if this government were in charge of planning and executing D-Day, the invasion of Normandy which eventually resulted in ending World War II? Hitler would have won, after having laughed his tail off at our incompetence.

So, think that the US government won't violate its citizens again by exceeding the deadline for raising the debt limit? Think again. They've already done so. Treasury Secretary Jack Lew has been employing "extraordinary measures" - that's Wahington-speak for raiding the pension funds of federal employees - since mid-August and those funds are running out fast.

If the government doesn't raise the debt limit by October 17, nobody will notice at first, except maybe some of those future federal pensioners, whose trust funds would remain empty and funded only at the behest of congressional appropriation prioritization. In other words, federal employees might end up without pensions - or with greatly reduced pensions - should the US decide that their funding is not a top priority. Suppose there's a war, a natural disaster, or other unforeseen event that would require quick funding by the government? What might happen to those unfunded pensions?

Of course, most people see that condition as far-fetched, but, in reality, it is closer than one would want to believe. The various federal employee trust funds have already been drained, just like Social Security and Medicare, each of which poses an even more serious, existential problem than the current government funding issues.

So, eventually, all of this will be resolved, either by wise political will or abject bungling and failure, which is what we have now. Anyone even remotely believing that our current crop of grade B politicians will do anything more than apply remedial, short-term fixes to long-term problems is kidding themselves and not approaching the situation with the required seriousness.

The US government, because of 100 years of debt servitude to the Federal Reserve, willful neglect of fiscal prudence and outright incompetence has been pushed to the brink of disaster, a disaster which took decades to create, but which can come crashing down in a matter of days, and those days are numbered.

Despite the various voices in the media - especially on CNBC - who publicly appear to be not at all concerned about the government shutdown and debt ceiling issues, are privately fearful that the politicians are either inept and incapable of fixing the mess they've created or have planed the entire charade all along.

We will find out soon enough.

As for the public markets of the financial world, a state of semi-paralysis has taken hold. The usual buy-on-the-dip screamers have been silenced, now merely whispering about possibly buying a few selected stocks, as volume - already at lowered levels - has cratered, the result of relentless stock buybacks over the past four years and a market juiced by the funny money of QE and ZIRP from the Federal Reserve. There's less stock available to purchase, and most of it is overpriced, with average P/E ratios in the 16-17 range, a touch high for an economy embroiled in a severe recession or possible depression.

Since the government shutdown began officially on Tuesday, October 1, the Dow is down 194 points, most of that accounted for just today, and, bear in mind that the Dow kicked out three losing companies and replaced them with high-fliers Goldman Sachs, Nike and Visa just two weeks ago. The usually-ebullient NASDAQ is off by just 1.10 points and the S&P has shed a little more than 15 points, again, most of that being gnawed off today.

What's more worrying for stock junkies is that the A-D line took a severe downturn today, with losers outpacing gainers by a 7-2 margin and the gap between stocks making new 52-week highs and lows was the slightest since mid-August.

Market internals are indicating a degree of concern, but the mouthpieces for financial firms aren't openly expressing of it, yet.

For those taking a more esoteric view, consider the relationship of silver to corn. According to no less an authority as Adam Smith (yes, the one who wrote The Wealth of Nations in 1776), a decline in the real price of corn, expressed in silver (i.e., one could buy more corn for the same amount of silver or could buy the same amount of corn for less silver), is a certain sign of deflation, and that particular metric has been bleeding all summer, as the price of corn has declined while silver - even though its price is substantially manipulated to the downside - has remained stuck in a range of $21-23/ounce.

The reality is that without central banks and their agents stomping down on the price of silver and gold, the deflationists would have an irrefutable argument that the economy of the United States is close to, if not already in, a severe depression.

Dow 14,936.24, -136.34 (0.90%)
Nasdaq 3,770.38, -37.38 (0.98%)
S&P 500 1,676.12, -14.38 (0.85%)
10-Yr Bond 2.63%, -0.02
NYSE Volume 2,676,265,500
Nasdaq Volume 1,452,687,750
Combined NYSE & NASDAQ Advance - Decline: 1321-4288
Combined NYSE & NASDAQ New highs - New lows: 135-67
WTI crude oil: 103.03, -0.81
Gold: 1,325.10, +15.20
Silver: 22.39, +0.634
Corn: 449.25, +6.00

Government Shutdown Day 6: More Questions Than Answers

This post is essentially a placeholder, since the bogus (like everything else this government does) shutdown is now in its sixth day.

According to published reports, Defense Secretary Chuck Hagel has found some loophole in the law that will allow for some 400,000 Pentagon employees to go back to work on Monday. Also, the House unanimously passed a bill saying that all furloughed workers would receive full pay for the days they were off.

So, essentially, since the Fed creates money out of thin air and the Treasury can issue bonds to fund anything they want because the Fed will buy them, the government can continue on indefinitely, with or without proper funding.

That is, until they can't. It won't be long. The collapse - a mathematical certainty - of the US economy is proceeding along the proper path. It may not end next week. It should have ended in 2008, but, be assured, end it will.

Au revoir.

Government Shutdown Day 5: No Progress, $1.5 Billion Gone from GDP

The markets are closed, as usual, but not so usual, the federal government is still a dysfunctional mess of political miscalculation on a massive scale.

Costing something on the order of $300 million a day, the five-day closure now amounts to $1.5 billion, and is beginning to infect the private sector, as expected.

As the Chicago Tribune reports, Lockheed Martin announced layoffs of 3000 employees and noted that there could be more to come if the government doesn't get up and running soon.

Not widely reported are defections from the military, with active service men and women refusing to show up for weekend assignments due to the government withholding pay. Republicans in the House offered a bill that would have funded the military, but the Senate would not even consider what some are calling "piecemeal efforts" to keep some of the plates spinning.

In Washington, there were no efforts to reach any kind of compromise or to even discuss getting the federal government back to being a functioning government (truth is, it hasn't been functioning very well for some time now).

The shutdown looks like it will easily extend through the middle of next week and probably into the weekend. With the debt ceiling looming and the government running out of cash, the politicians have done the unthinkable: take themselves out of their own cushy jobs, if only temporarily.

Americans have been polled, and, by a margin of roughly 3-to-1 want the government to get back to work.

Too bad so many don't see the upside.

This has been a special report from Money Daily on the government shutdown. Now, back to football.