SP 500 and NDX Futures Daily Charts - Antics Abounding in an Option Expiration Week

I think that this is an option expiration week for stocks, as this Friday will be the 3rd Friday in October.

Stocks went out on their highs today on optimism that a debt ceiling deal will be reached in the Senate and will be accepted by the House.

Just a quick note for our non-US readers. A bill has to be passed by both bodies of the Congress: the House of Representatives and the Senate.

A simple majority does not suffice. In the Senate, because of a rule called the 'filibuster,' a party can demand a 60 vote out of 100 members 'super majority' to override their filibuster which is a means of delaying Senate action on any bill indefinitely. Normally a majority would be 51 votes. The Vice President can vote in case of a tie. There is a so-called 'nuclear option' which would be a rule change that would limit the power of a filibuster to block a vote. Neither party in the Senate favors this, but the use of the filibuster has become controversial because of much more frequent use these days as the politics have become more polarized.

In the House of Representatives it is always a simple majority and no filibuster rule applies there. HOWEVER, the Speaker of the House, who is the head of the majority party, exercises control over any bills which can come to the floor for a vote.

A recent innovation was called 'the Hastert Rule.' Republican House Speaker Dennis Hastert established the political principal that he would not allow any bill to come to the floor for a vote unless there was a simple majority of people from within his own Party (the Republicans) who could pass it without any votes from the opposing party (the Democrats). This is not a law, but a practice within the Republican party in the House. And that practice was tightened just before the government shutdown with a rule change that prohibited a little used exception allowing any member to bring certain categories of bills to the floor. See here.

In the case of the debt ceiling and the government continuing resolution, Speaker Boehner has determined that he will not allow a 'clean bill' to come to the floor for a vote because of the objections of a minority of his party, known as 'the Tea Party.' It is thought that a bill acceptable to both bodies could pass if brought to a House vote because it would gain most if not all of the Democratic votes, and the votes of moderate Republicans.

I just wanted to clarify this impasse for those not familiar with American political customs.  The polarization of the parties, together with the abolishment of 'earmarks' which were particular addendums for special state projects which had been used to entice individual Congressional votes, are diminishing the ability of the Congress to gain the consensus to pass laws and budgets.

And it has to be said that although he may be a very nice man, Speaker Boehner has a very tenuous position within his party, and faces a kind of ongoing insurrection by the more vocal minority of conservatives. 

Have a pleasant evening.

The Last Full Measure of Devotion: And Why the US Congress Should Be Ashamed

As Hero Finally Gets Medal of Honour, Some Question the Delay

Wall Street has infested the country with the spirit of reckless greed and the gospel of pride and selfishness. And the government provides the example for the people.

NAV Premiums of Certain Precious Metal Trusts and Funds

Aktion T4: The Disabled, the Different, and the Other

“Each day we are becoming a creature of splendid glory or one of unthinkable horror.”

C. S. Lewis

China Has Some Pointedly Hard Words For the US and the Dollar

Surely this is nothing new. China and the BRICs have been calling for a change in the US dollar reserve currency regime since at least 2009.

The problem with abusing a long standing arrangement is that it takes quite a bit of energy to fray such a relationship, given its momentum. And the US has risen to unipolar superpower status over the past twenty years with the fall of the Soviet Union.

A fiat currency exists on a combination of faith and force, with faith being by far the preferable and least expensive aspect.  

But full faith and credit in a currency or in any type of relationship is not inexhaustible. It may stand for quite a time, but once it begins to falter the failure can often come fairly quickly, so that many participants are caught by surprise, mouths agape, saying 'what happened?'

This is the currency war.  

"What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States."

Xinhua
Commentary: U.S. fiscal failure warrants a de-Americanized world
By Xinhua Liu Chang

BEIJING, Oct. 13 (Xinhua) -- As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.

Emerging from the bloodshed of the Second World War as the world's most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly.

With its seemingly unrivaled economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.

Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.

Under what is known as the Pax-Americana, we fail to see a world where the United States is helping to defuse violence and conflicts, reduce poor and displaced population, and bring about real, lasting peace.

Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.

Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.

To that end, several corner stones should be laid to underpin a de-Americanized world.

For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.

Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.

Apart from that, the world's financial system also has to embrace some substantial reforms.

The developing and emerging market economies need to have more say in major international financial institutions including the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape.

What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.

Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs.

And among all options, it is suggested that the beltway politicians first begin with ending the pernicious impasse.

US Senate Chaplain: Save Us From the Madness

Amen.

On June 27, 2003, Rear Admiral Barry C. Black (Ret.) was elected the 62nd Chaplain of the United States Senate. He began working in the Senate on July 7, 2003. Prior to coming to Capitol Hill, Chaplain Black served in the U.S. Navy for over twenty-seven years, ending his distinguished career as the Chief of Navy Chaplains. The Senate elected its first chaplain in 1789.

As Rear Admiral, his personal decorations included the Navy Distinguished Service Medal, the Legion of Merit Medal, Defense Meritorious Service Medal (two medals), Meritorious Service Medals (two awards), Navy and Marine Corps Commendation Medals (two awards), and numerous unit awards, campaign, and service medals.