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.