SP 500 and NDX Futures Daily Charts - Weak Jobs Data Sparks Rally

The unemployment rate upticked to 7.8%, and the jobs added number was mediocre as expected, with 155,000 jobs being added.

Stocks rallied on beginning of the year enthusiasm.



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Wages: The Median and the Mean

The 'mean' is the average of all wages.

The 'median' is the wage in the middle, that is, what is earned by those people in the numerical middle of the population.

And the ratio of the median to the mean continues to fall, as the rich get richer, and a large part of the country is left behind, as a matter of policy.

This is the plight of 'the 47%.'



Source: SSA

Gold Daily And Silver Weekly Charts - Non-Farm Payrolls Tomorrow

The metals were hit late day because some of the Fed member are fantasizing about an economic recovery this year, and of course, we get the Non-Farm Payrolls number tomorrow.

SP 500 and NDX Futures Daily Charts

Non-Farm Payrolls tomorrow.

The FOMC minutes suggested that some of the Fed board think they can cut back on QE in 2013.

Well they can, but it won't be because the economy has recovered.

Unfettered Capitalism and the Great Crash of 1929

“The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced.

The manners of capitalism improve. The morals may not...

When the modern corporation acquires power over markets, power in the community, power over the state and power over belief, it is a political instrument, different in degree but not in kind from the state itself. To hold otherwise — to deny the political character of the modern corporation — is not merely to avoid the reality. It is to disguise the reality.

The victims of that disguise are those we instruct in error. The beneficiaries are the institutions whose power we so disguise. Let there be no question: economics, so long as it is thus taught, becomes, however unconsciously, a part of the arrangement by which the citizen or student is kept from seeing how he or she is, or will be, governed...

The conventional view serves to protect us from the painful job of thinking.”

John Kenneth Galbraith

"To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society.

For the alleged commodity "labor power" cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man's labor power the system would, incidentally, dispose of the physical, psychological, and moral entity "man" attached to that tag.

Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation.

Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed...

Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance, as well as its business organization, was protected against the ravages of this satanic mill."

Karl Polanyi, The Great Transformation, 1944

FDR: Advice to Young Progressives

It is interesting to compare Franklin Roosevelt's advice to the Young Democrats of his day, to the actions and politicies of the present Democratic President.

"From the beginning, democracy has meant progress and its battle ever since Jefferson's time has been a steady conflict with the forces of reaction and special favors. Every time the policies involving greater opportunities for the common man have triumphed, our political enemies have sought to minimize those policies and to neutralize the decisions of the people. Today is no exception to that classical course of events.

Uniformly the party of Nicholas Biddle of Jackson's time, of Quay and Hanna of the Cleveland era and of the Theodore Roosevelt period has bowed to the progressive wing to the extent of pretending accord with the objectives of the progressive administrations but has found fault with the methods requisite for putting and keeping these principles at work.

Uniformly have they appealed to such elements in our own party as dreaded the departure from ancient habits or were responsive to the powerful agencies that financed and controlled local politics. Probably the hoariest story of corruption in American elections is the history of those monied magnates who contributed vastly to the campaigns of candidates of both parties with the idea that they could continue control regardless of the way which the political cat jumped.

Just as there are progressives in the Republican ranks, so there are reactionaries in our own party. Political affiliation is often the child of hereditary principles, begotten in the first instance of issues of terrific importance in the beginning but which have no more significance at present than the inflamed controversy of a century and a half ago as to whether the Capital of the United States should be at Washington or somewhere on the Monongahela River.

Always has it been the aim of the enemies of liberalism to seek to attach to themselves such members of our party. Sometimes they have succeeded; sometimes they have failed.

When they have succeeded they have not infrequently been successful in their efforts to supplant a Democratic administration with a Republican administration. Such happenings, though they have brought dismay for a period, have not sufficed to stop the general and inevitable movement to make our country a better country for all of us rather than to make it a lush pasture for the seekers and holders of privilege.

Every Democratic Administration has left a progressive mark on our own history and has influenced world progress as well. But when it has been succeeded by a typically Republican Administration, progress has slipped backwards—sometimes a few feet and often many miles. It has been said that a great many voters today want us as a nation to stop, look and listen. What they fail to understand is that nations cannot stand still because by the very act of standing still, the rest of the procession, moving forward, inevitably leaves them in the rear. Therefore, their desire to stand still actually means moving backward in relation to the rest of the world.

Republican and Democratic reactionaries want to undo what we have accomplished in these last few years and return to the unrestricted individualism of the previous century· Republican and Democratic conservatives admit that all of our recent policies are not wrong and that many of them should be retained-but their eyes are on the present; they give no thought for the future and thus, without meaning to, are failing to solve even current social and economic problems by declining to consider the needs of tomorrow. Radicals of all kinds have some use to humanity because they have at least the imagination to think up many kinds of answers to problems even though their answers are wholly impracticable of fulfillment in the immediate future.

Liberals on the other hand are those who, unlike the radicals who want to tear up everything by the roots and plant new and untried seeds, desire to use the existing plants of civilization, to select the best of them, to water them and make them grow-not only for the present use of mankind, but also for the use of generations to come. That is why I call myself a liberal, and that is why, even if we go by the modern contraption of polls of public opinion, an overwhelming majority of younger men and women throughout the United States are on the liberal side of things.

In considering the present and the future of American politics or policies, you have the right and the duty to say to those who want to stand still—Have you no program other than standing still? We are not satisfied if you tell us glibly that you believe in taking care of old people, that you want the young people to have jobs, that you want everybody to have a job, that you believe in a fairer distribution of wealth—we insist in addition that you give us specifications of how you would do it if you were in power."

Do not let the reactionaries and the conservatives get away with fine phrases. Pin them down and make them tell you just how they would do it.

The Democratic Party will fail if it goes conservative next year, or if it is led by people who can offer naught but fine phrases.

Last Winter, in speaking at the Jackson Day Dinner, I referred to the sad state the country would be in if it had to choose between a Democratic Tweedle Dum and a Republican Tweedle Dee. I want to amend that simile, so let me put it this way: The Democratic Party will not survive as an effective force in the nation if the voters have to choose between a Republican Tweedle Dum and a Democratic Tweedle Dummer.

If we nominate conservative candidates, or lip-service candidates, on a straddle bug platform, I personally, for my own self respect and because of my long service to and belief in, liberal democracy, will find it impossible to have any active part in such an unfortunate suicide of the old Democratic Party.

I do not anticipate that any such event will take place, for I believe that the Convention will see the political wisdom, as well as the national wisdom, of giving to the voters of the United States an opportunity to maintain the practice and the policy of moving forward with a liberal and humanitarian program. A large part of the responsibility for such a choice of fundamental policies lies in the hands and in the heads of the younger men and women of the nation. Be vigilant to keep Tories from controlling your own ranks—just as vigilant as you will be to keep Tory Republicans from controlling your own nation."

Franklin D. Roosevelt, Advice to the Convention of Young Democratic Clubs of America, August 8, 1939

C. S. Lewis: On Hatred, and the Blinding Power of Extremism

“Now that I come to think of it, I remember Christian teachers telling me long ago that I must hate a bad man's actions, but not hate the bad man: or, as they would say, hate the sin but not the sinner.

For a long time I used to think this a silly, straw-splitting distinction: how could you hate what a man did and not hate the man? But years later it occurred to me that there was one man to whom I had been doing this all my life—namely myself.

However much I might dislike my own cowardice or conceit or greed, I went on loving myself. There had never been the slightest difficulty about it. In fact the very reason why I hated the things was that I loved the man. Just because I loved myself, I was sorry to find that I was the sort of man who did those things.

Consequently, Christianity does not want us to reduce by one atom the hatred we feel for cruelty and treachery. We ought to hate them. Not one word of what we have said about them needs to be unsaid.

But it does want us to hate them in the same way in which we hate things in ourselves: being sorry that the man should have done such things, and hoping, if it is anyway possible, that somehow, sometime, somewhere, he can be cured and made human again.

The real test is this. Suppose one reads a story of filthy atrocities in the paper. Then suppose that something turns up suggesting that the story might not be quite true, or not quite so bad as it was made out.

Is one's first feeling, 'Thank God, even they aren't quite so bad as that,' or is it a feeling of disappointment, and even a determination to cling to the first story for the sheer pleasure of thinking your enemies are as bad as possible?

If it is the second then it is, I am afraid, the first step in a process which, if followed to the end, will make us into devils.

You see, one is beginning to wish that black was a little blacker. If we give that wish its head, later on we shall wish to see grey as black, and then to see white itself as black.

Finally we shall insist on seeing everything -- God and our friends and ourselves included -- as bad, and not be able to stop doing it: we shall be fixed for ever in a universe of pure hatred.”

C.S. Lewis, Mere Christianity

Gold Daily and Silver Weekly Charts - 'Why the American People Hate Congress'

The metals had a nice run higher, but gold was capped below 1700 and silver at 31.

Aside from the phony fiscal cliff, nothing has changed.

I am sure Chris Christie speaks for quite a few Americans as he slammed the Republican leadership of the House for their irresponsible inaction and duplicity.

I wondered if Governor Christie, and the people of his state and of New York, were being spanked for his walking the devastated cities and beaches with Obama in the aftermath of Hurricane Sandy. No one likes to be Katrina'd. If so, Speaker Boehner and Leader Cantor are even lower than I had imagined. I prefer to think that they are not malicious, just arrogant and detached from the common people whom they serve.

"It is why the American people hate the Congress."

I don't think anyone should 'hate' anyone else. Perhaps it would be better to say that this is why the Congress has historically low approval ratings of around ten percent. And they don't seem to care while they are getting paid by serving wealthy benefactors.

Does the government of Greece care what the people think? Egypt? Ireland? Spain? Join the club.

Some of the Congress should be encouraged to find productive employment elsewhere. And the method by which they are paid and funded needs serious reform.

SP 500 and NDX Futures Daily Charts - Gapped and Overbought

Non-Farm Payrolls on Friday.

The fiscal cliff was a phony crisis.

Nothing has changed.

Be careful about overextending your positions though especially on the short side. This market is thoroughly artificial. It really is a shame, but not the only one.

House Republicans Leaders Refuse to Bring Hurricane Sandy Relief Bill to a Vote

For comparison, $64 billion was allocated for Katrina in 10 days.

Shame.

House Leaders Draw Ire for Dropping Sandy Relief Package

House Republicans have reversed their pledge to take up an emergency aid bill this week for states devastated by Superstorm Sandy. The move potentially leaves the $60 billion aid package to die at the end of the legislative session Thursday.

The House was expected to consider the bill today but dropped it following lengthy talks on the "fiscal cliff." The decision drew harsh condemnation from both sides of the aisle.

Republican Rep. Michael Grimm of Staten Island — one of the areas hardest hit by Superstorm Sandy — said, "It is with an extremely heavy heart that I stand here almost in disbelief and somewhat ashamed." Democratic Rep. Jerrold Nadler of New York blasted his colleagues for failing to take urgent action.

"Hurricane Sandy struck on October 29th, eight, nine weeks ago. It’s unprecedented that it should take so long. I can understand — I would not sympathize, but I can understand — with members who might say the amount requested is too much, we should change it, we should quibble with it, we should debate it.

Fine. But to ignore it, to ignore the plight of millions of American citizens? Unprecedented, disgusting, unworthy of the leadership of this House. They should reconsider, or they should hang their heads in shame, Mr. Speaker."

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The end of year precious metals smackdown seems to have eased on schedule.

How unusual.

Premiums are still very guarded. Although stocks may not see it yet, the money sector including the metals knows that the budget discussions are still in the path ahead.

A Closer Look at the SP 500 Futures - Crisis Deferred, Not Resolved

Looks like a 'gappy New Year' from here.

The deal just kick the can down the road. Can meets foot again fairly soon when the 'debt ceiling' discussions get underway, and the intractable issue of spending cuts and 'entitlement reform' hits the table once again.

The December precious metals smackdown has certainly faded away on schedule.

There will be no sustainable recovery without reform. Stagflation still seems to be the most likely outcome, within a continuing series of 'crises' and confrontations.

Roosevelt and Lincoln both faced similar problems, with equally unruly Congresses. This is nothing new. Hard problems call out for great leadership.

So far there is little to be seen. This is the age of the modern manager and the pampered princes of the professional elite. Even the 'party of the people' has largely abandoned them.

"Why has the Democratic Party become so arrogantly detached from ordinary Americans? Though they claim to speak for the poor and dispossessed, Democrats have increasingly become the party of an upper-middle-class professional elite, top-heavy with journalists, academics and lawyers."

Camille Paglia

US House of Representatives Passes the Tax Increases Without Amendment

I have to admit that I did not think the House had it in them to take the deal as crafted by the Senate and the President, especially after having rejected Boehner's famous 'Plan B.'

The House did not insist on or even offer a single change. I am surprised.  I was expecting at least some fight.  Actually, I am astonished.

The spending cut discussion will be deferred for later, most likely as part of some debt ceiling fandango near the end of January.  Obama has threatened to ignore them.  Let's see how that one plays out.

One might expect the Congressional conservatives to be a bit irritable after eating crow on this deal, raising taxes on their wealthiest constituents with no spending cuts.

After all, the conservatives adamantly rejected a much better deal a year or so ago when Obama served up a good portion of his own constituency in a shockingly lopsided offer of cuts for revenue.

McConnell and Boehner and their Tea Party brain trust did not want to give Obama any deal at any price in order to smooth the way for their own powerful presidential play, the Mittster, riding a wave of money to victory.

I think they call this kind of a play turning chicken salad into chicken something else.

Obama was playing chess, but the loudest guys in the room thought that they were playing checkers.

And as they say in the American vernacular, You got served.

But it was not all tax increases. There were some corporate entitlements and subsidies rolled up in that bill as well.

U.S. House Passes Budget Bill, Averts Most Tax Increases
By James Rowley & Roxana Tiron
Jan 1, 2013 11:06 PM ET

The House of Representatives passed legislation averting income tax increases for most U.S. workers after Republicans abandoned their effort to attach spending cuts that would have been rejected by the Senate.

The 257-167 bipartisan vote breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts set to begin taking effect today. The Senate passed the bill early this morning, 89-8, and it goes to President Barack Obama for his signature...

US Stock Market Is Priced Relatively High

The exchanges on the far right may be a little 'exuberant.'

For the US, this is an artifact of monetization flowing almost directly to the financial sector. I am not sure how to account for India and South Africa, and some of the others except to say that a few are obviously riding the China 'miracle.'

As an additional datapoint, stock exchange margin debt has reached highs not seen since before the collapse of Lehman Brothers. Margin Debt

Austerity is taking an obvious toll on the economies and the markets on the left.

As in the case of a nation's currency, God bless the child that's got its own.

At least for a little while.

As a rule of thumb, a wise nation and a free people never surrender the control of their sovereign currency to another.

Bonne Année - Happy New Year

"Do not be preoccupied with the wicked, or envy those who do evil. They will dry up and wither away like the grass and green plants.

Trust the Lord, and do good things. Live in the land, and practice being faithful.

Be happy with the Lord, and He will give you the desires of your heart.

Conform your ways to His, and He will sustain your efforts. Your righteousness will shine like a light, your just cause like the sun.

Surrender your self to the Lord and wait patiently, abiding in Him."

Psalm 37

Merson, Rest On the Flight Into Egypt

Gold Daily and Silver Weekly Charts

A sharp rally in the metals today along with stocks, on the last day of the year.

Gold extended its longest bull market since 1920 with a modest 7 percent gain for the year. Stocks returned about 13 percent, and bonds eaked out about 4 percent depending on duration.

In a period of inflation stocks may do well. In stagflation, not so well depending on how the expansion of the money supply and tax gimmicks are wrapped up in policy and the delivery of monetization. Multinationals may outperform depending on the evolution of global trade, policy, and the currency wars.

And as for me, I suspect that we haven't seen anything like a top yet in the metals. The printing presses and de facto defaults are just getting underway.

Non-Farm Payrolls number on Friday, and the fiscal cliff follies will enliven the Congress for the rest of the week.

There is a chance that they will kick the budget cuts can down the road, and merely prevent those making $450,000 or less from a repeal of the Bush tax cuts.

I would suggest that you keep an eye on those rowdy boys in the House.

Have a safe and Happy New Year.

SP 500 and NDX Futures Daily Charts - No Deal

There was no deal on the 'fiscal cliff' before the deadline at midnight tonight, but there was plenty of speculation, hints, and hope.

Whatever the leaders decide amongst themselves, the members of the House and Senate must ratify.

But there was plenty of paint on the tape for the close of this year.

Non-Farm Payrolls number comes out on Friday.

Have a safe and pleasant holiday.

Gold This Time Last Year - A Faux Deal and Ongoing Currency Wars

The waters are a little muddied this time around because of the fiscal fluff and the January debt ceiling policy scrum to come, but lo and behold, gold rallied sharply on the last day of the year, after a series of repeated hits lower.

How unusual.

New year, same old games.

And Washington announced, in time before the markets close, that they reached a deal, kind of.

No grand bargain, but a deferral.

It looks like the Senate will agree to avert the tax increases for those with less than 450,000 per year in income, arrangements on capital gains, 40% inheritance tax on estates over 5 million, and AMT. It appears they will leave the budget cut wrangling for the debt ceiling fight in January, and possibly every two months next year after that.

The House will not have a chance to vote for it until later this week most likely.

And at the bottom, an update on Jim Rickards on the ongoing currency wars.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

Remarkably thin premiums.

In case you were wondering, there will be no deal on the 'fiscal cliff' until sometime in January, if then.

And remember that the debt ceiling is coming into play now, once again.

They might have a continuing resolution today, and even perhaps some sort of  vague 'handshake deal' amongst the Congressional leaders and the President.

But come the end of the week the Senate, and especially the unruly House, must confirm anything in detail that is agreed to amongst the leadership.

And I suspect that this policy battle between austerity and expansion will be a continuing story throughout the new year.

Empires of Illusion and the Credibility Trap - First They Come For the Weak

This will be my last post for 2012, excepting the usual chart updates, as we toddle towards yet another artificial crisis, this time the fiscal cliff.

I came across an interview with Chris Hedges by the Canadian Allan Gregg which illuminates Hedges' thesis of the decline of the American Empire and the illusory thinking that accompanies it. Can the shock and meltdown of Karl Rove on election night be any better contemporary illustration of the power of selective thinking to delude a group of seemingly rational people to their own downfall?

Although I differ from Hedges on a number of observations, particularly in degree, history does suggest that at the end of empires, and the accompanying sea change of social organization, there are often remarkable extremes in human behaviour. The almost frenetic preoccupation and stubborn adherence to the Nazi ideology in the latter stages of the war, when it was obvious to any rational observer that they had failed, is illustrative of that point.

I had been particularly struck in my reading some time ago with the 'wolf packs' of Nazis who had raged through Berlin, rounding up old men and boys who had not joined the Volkssturm and hanging them, even while the Russians were shelling the Reichstag. It never made sense to me until today.

"The radio announced that Hitler had come out of his safe bomb-proof bunker to talk with the fourteen to sixteen year old boys who had 'volunteered' for the 'honor' to be accepted into the SS and to die for their Fuhrer in the defense of Berlin. What a cruel lie! These boys did not volunteer, but had no choice, because boys who were found hiding were hanged as traitors by the SS as a warning that, 'he who was not brave enough to fight had to die.'

When trees were not available, people were strung up on lamp posts. They were hanging everywhere, military and civilian, men and women, ordinary citizens who had been executed by a small group of fanatics. It appeared that the Nazis did not want the people to survive because a lost war, by their rationale, was obviously the fault of all of us. We had not sacrificed enough and therefore, we had forfeited our right to live, as only the government was without guilt."

Dorothea von Schwanenfluegel, Eyewitness account, Fall of Berlin 1945

This is an almost perfect illustration of the credibility trap. One cannot allow the illusion to falter, even a little, to the bitter end. And as the fraud fades, the force intensifies, becoming almost rabid in its deflection of guilt. Because that illusion has become the center of a hollowed people's being, their raison d'être, a mythological justification for their existence.

If the ideology had been a lie, then they are not heroes and gods on earth, but monsters and criminals, and their life has been self-serving and meaningless, without significance and honor. And that is the credibility trap. It is the impulse for the leaders to keep doubling down in the hope of a win, until exhaustion and collapse.

"Treason doth never prosper: what's the reason? Why if it prosper, none dare call it treason."

John Harrington

How else can one explain the irrational, self-destructive policy impulse? This is why they are metaphorically hanging Greeks and Spaniards and Irish in Europe, as tribute to an unsustainable and corrupt Euro monetary arrangement, with its puppet governments run by the banks.

And this is the US financial system and the American policy discussions today. First they come for the powerless and the weak, whether it contributes anything substantial to the broader resolution of the problems or not. The madness serves none but itself.

"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems ot that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery."