SP 500 and NDX Futures Daily Charts - Another Dull Day

Stocks showed a little bounce today but not much.

The bulls need to get their footing in order to make this a correction and not a trend change.

What Drove the US Budget Deficits

The biggest drivers of the current and near term US budget deficits are the unfunded wars, unfunded tax cuts especially for the wealthiest, bailouts for the banks, and the economic downturn.

Tax cuts and subsidies for the wealthy are good for giving much more discretionary wealth to the wealthiest, and not much else. And their use of the money is for the most part self-indulgent and predatory.

Discretionary wars are excellent sources of profiteering, and the price for them falls heaviest on the broader public, who pay in money, misery, and blood.

Bailouts are windfalls for the powerful and well-connected.

The US financial system as it is constituted today is mostly predatory rather than productive.   Gordon Gekko has many incarnations with high public profiles today. And they are shameless to the point of reckless arrogance.

The efficient market theory and trickle down economics are what the Brits like to call 'bollocks.' If you wish to take from the weak and the poor and the elderly and and give it to those who have the most already, just say it, proudly. 

But don't try to fool yourselves, in addition to everyone else.  Whatsoever you sow, that you will also reap.

Downturn and Legacy of Bush Policies Drive Large Current Deficits
Economic Recovery Measures, Financial Rescues Have Only Temporary Impact
By Kathy Ruffing and James R. Horney
October 10, 2012

Some lawmakers, pundits, and others continue to say that President George W. Bush’s policies did not drive the projected federal deficits of the coming decade — that, instead, it was the policies of President Obama and Congress in 2009 and 2010.

But, the fact remains: the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain most of the deficit over the next ten years — according to this update of our analysis, which is based on the Congressional Budget Office’s most recent ten-year budget projections (from August) and congressional action since we released the previous version of this analysis in May 2011.

The deficit for fiscal year 2009 — which began more than three months before President Obama’s inauguration — was $1.4 trillion and, at 10 percent of Gross Domestic Product (GDP), the largest deficit relative to the economy since the end of World War II. At $1.3 trillion and nearly 9 percent of GDP, the deficits in 2010 and 2011 were only slightly lower. If current policies remain in place, deficits will likely exceed $1 trillion in 2012 and 2013 before subsiding slightly, and never fall below $700 billion for the remainder of this decade.

The events and policies that pushed deficits to these high levels in the near term were, for the most part, not of President Obama’s making. If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers’ actions to combat it), we would not be facing these huge deficits in the near term. By themselves, in fact, the Bush tax cuts and the wars in Iraq and Afghanistan will account for almost half of the $18 trillion in debt that, under current policies, the nation will owe by 2019.[1] The stimulus measures and financial rescues will account for less than 10 percent of the debt at that time.

President Obama, however, still has a responsibility to propose, and put the weight of his office behind, policies that will address our key long-term fiscal challenge — preventing the significant rise in debt as a percentage of GDP that will occur under current policies. Allowing the flagship Bush tax cuts — which initially were slated to end after 2010 and were extended for two years — to expire on schedule at the end of 2012 would halt the rise in the debt-to-GDP ratio. In fact, that step — or an equivalent, substitute package of deficit reductions — would reduce the debt-to-GDP ratio and stabilize it at about 70 percent in the second half of the decade. Of course, with the economy still fragile, it is prudent to continue the middle-class portion of the tax cuts for a while longer. But there is no justification for extending the entire set of expiring tax cuts indefinitely. To keep the debt stable over the longer run, when the fiscal impacts of an aging population and rising health care costs will continue to mount, policymakers will need to take large additional steps on both the expenditure and revenue sides of the budget...

Read the entire report here or download a PDF here.

Gold Daily and Silver Weekly Charts - Silver Resilient - US Debt Auctions

Well, you may throw your rock and hide your hand
Working in the dark against your fellow man,
But as sure as God made black and white
What's down in the dark will be brought to light.

You can run on for a long time
Run on for a long time,
Run on for a long time
Sooner or later God'll cut you down
Sooner or later God'll cut you down.

Johnny Cash, Sooner or Later God'll Cut You Down

The metals were under pressure most of day along with stocks as the US Ten Year Notes were in the trading spotlight.

"Treasuries rose as the failure of European leaders to reassure investors the region’s sovereign- debt crisis will be contained led to higher-than-average demand at a U.S. auction of $21 billion in 10-year notes.

The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.26, versus 2.85 in September and an average of 3.11 for the prior 10 sales. Benchmark 10-year yields declined from the highest level in more than two weeks as Spain’s Prime Minister Mariano Rajoy, struggling to contain the country’s deficit, met in Paris with French President Francois Hollande.

As I recall, Big Daddy takes the center stage in a $13 billion auction tomorrow. Unless Ben and Timmy decided to just journal entry them over for a change of pace, without the middlemen of finance getting involved. Naw, never happen. John Galt always takes his risk free vig in war and peace. It's the American way.

Silver proved unwieldly for you know who to handle, even as the big chief of the firm was pontificating on the economy from the veranda of the Council on Foreign Relations on how lucky we are to have him and his crew. The title might have been, "Beyond God's Work."

What next? Stocks need to find some footing, and gold and silver continue to assert some connection between the paper markets and reality.

I suspect someone big is in the silver market negotiating for physical, and that sends shocks waves into the highly leveraged trading world as every ounce of physical bullion removed from the LMBA's spin machine takes the basis for about 100 paper ounces with it.

How much is too much leverage? 100 to 1? 500 to 1? It really doesn't matter how fast you are going, it is the relative distance to that wall up ahead, and how quickly you stop.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Showtime for the Bulls

What had been a correction is nearing the point where it may become a sell off if the bulls cannot find some footing for themselves around here or not too far from this.

A retracement is 50% in the kind of vaporous rally which we have enjoyed for the late summer months. More than that may be something else altogether.

Where is all that 'cash on the sidelines' that was so sad for having missed the summer rally? Probably parked over the customers' yachts.

A certain (in)famous Wall Street firm was heavily recruiting quants (engineers, physicists, mathematicians) at my nephew's university. Apparently the machines and those who tend them will be increasingly replacing the highly paid, frosted nose hair clothes horses of the investment banking world with silently humming digital highwaymen prowling the capital flows of commerce among nations. Progress!

The Romney rally failed awfully quickly. I cannot tell if the financiers are short of hope or just short of cash. Mom and pop are no mystery; they are just getting by.