December 2017 News: Government Shut-Down Likely — World Market Cap (Parabolic) — Lessons From The Bubble — Speaker Ryan Eyes Push For “Entitlement Reform” In 2018

Government Shut-Down:

In an announcement that brings the federal government to the verge of a weekend shutdown, on Thursday (December 7th) Democrat Leader Nancy Pelosi said her group won’t support a Republican bill for a two-week funding extension because almost none of their demands have been met.

Speaker Paul Ryan, appearing at the same podium just minutes after Pelosi left it, said he’s optimistic the Republicans can win enough Republican-only support to pass another Continuing Resolution (CR).  On Thursday, The Hill reported Speaker Ryan said, “I feel good where we are . . . “

Well, maybe he does but I don’t and the markets don’t seem all that thrilled either as there was a 2:00 p.m. (EST) sell-off. in the Stock Indexes  Then the whip count was texted to the banksters (the number of committed “yes” votes by Republican Congressmen), the Magic Levitation Team stepped-in and we saw a hard bounce right back up that continued into the close

HINT:  Non-Farm Payroll is tomorrow.  Don’t think for a second the friendly folks at Goldman and JPMorgan and Citi and DeutschBank, et al. don’t already know the magic number the rest of us will see for the first time at 8:30 a.m.

But as far as government spending — by CR or otherwise — we’re already over $20-TRILLION in the hole . . . what’s another $100-Billion or so?  C’mon!   We already pay $229-BILLION — and rising — each and every year on the national debt (it’s actually more but they net what we supposedly receive from interest against what is paid); the U.S. pays about $600-BILLION a year on the military; and $1.25-TRILLION a year on social security with another $985-BILLION on medicare!

— 87% of mandatory spending is on social security and medicare

— 53% of discretionary spending is on the military

The United States spends almost $700-BILLION a year more than it takes in via taxes and all other revenue!

Anyway, according to Bloomberg, the bill is a “waste of time” that doesn’t include funding for combating the opioid crisis, among other priorities like enshrining DACA provisions into law, something Pelosi has said must happen before the end of the year.   But, hey, kick the can as far as possible.  If only 2-weeks then you have 14-days to get the PR machines working on why the other side is to blame . . .

Speaking of blame, the two party leaders wasted no time blaming one another for the precarious situation.  What else is new?  It’s WWE Professional Wrestling on display with YOUR IRA, 401(k) and other retirement on the line.

The current CR expires at midnight on Friday — December 8, 2017.

If it expires, who knows what will happen when the markets re-open?

12/7 Update:  Yep, as expected, the can was kicked 2-weeks down the road.  But the House of Representatives won’t have as easy a path to getting another CR because the House Freedom Caucus wants things the Republican Establishment is not really willing to give.  Forget the Democrats who will obstruct-obstruct-OBTRUCT and try to use this as an election issue for the November 2018 campaigns!  Plus, even if it somehow cobbles enough votes to pass the House, the Senate is another whole dysfunctional thing!

Again, I ask:  What will happen to markets as a result of the U.S. Government effectively running out of money and shutting down?  Something to keep very much in mind . . .

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World Market Cap Near $100-TRILLION!


First, the 2017 right edge looks a lot like the INSANE Bitcoin chart to me.

Second, understanding what this top chart is might help.  It’s the total capitalization (current “value”) of all the stock markets in the world.

Update:  The first chart was “debunked” (for days) by the corporate-controlled propaganda media outlets because, supposedly, Venezuela was counted wrong by a little.  Right math.  Used their Stock Index value — but it wasn’t “adjusted” to reflect what “would have been” — kinda’ like the non-GAAP financial statements from the corporate world.  Anyway, they’re using the same old trick:  argue about individual trees and ignore the forest!  What difference does it make if the world cap is $90-Trillion or $85-Trillion?  It’s still going parabolic!

I keep telling everyone in the LIVE! Trading Room that markets are broken!  We see more and more evidence of it all the time.  But . . .

When anything goes parabolic, it’s a bubble that’s due to POP!

It’s like the Dutch tulip bulb mania — version 5.0.

Don’t know what that is?  Well, it’s happening right before your eyes in Bitcoin and stock markets.

OK kiddo . . . get comfortable . . .  here’s the story:  In 1593 tulip bulbs were first brought to the Dutch from Turkey.  They were new and unique and became popular quickly.  Then some sort of disease struck — which didn’t kill the tulips, but which caused them to flower in wildly exotic patterns.  This increased the rarity of an already rare and popular “asset.”  So tulips, which were already expensive, became even more expensive — especially according to how the most exotic patterns were demanded and how many were available (supply).  Everyone — farmers, barbers, metalworkers, grocers, etc. — began to deal in tulip bulbs which was essentially speculating in the informal Tulip Bulb Market — a market which apparently had no limits.  Tulip bulb merchants (like garden centers) bought for the next season which decreased supply even more.  Soon, prices were rising so fast and so high that ordinary people were trading their land, their life savings, and anything else they could sell to get more cash to “invest”  in tulip bulbs.  Many Dutch stubbornly believed they they would sell their hoard to foreigners, and thereby become instantly super-rich.  At its peak, the  originally overpriced tulips saw a twenty-fold (20X) increase in value — in one month!  [Now stop and think . . . You might have managed to get in early and have 5 tulip bulbs and be able to afford 5 entire estates.  But until you actually traded for the estates all you had was imaginary wealth.].  Well, back in Tulipland, then the selling began.  It started slowly and as prices fell more jumped on the bandwagon and a domino effect resulted.  There were NO buyers — only sellers.  Finally, the next natural step of panic-selling “at any price” kicked-in and soon most had lost everything!  At the peak of the market, a person could trade a single tulip for an entire estate — and, at the bottom, one tulip (for which someone had traded their entire estate) was the price of a common onion!

Can you see the similarities to the markets and Bitcoin?

Both are going parabolic (pretty-much straight up).

Everybody is buying-buying-BUYING!  Some are selling other assets to “invest” in tulip bulbs, oops, errr, I mean Bitcoin or the stock markets.

When “everybody” — your barber, your mechanic, your lawn service guys, grocery store managers, McDonalds managers — are investing in something (well, anything) because they all “just know” it’s going up-up-UP — then if I haven’t already, I sell.

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It’s like the actual New York stock broker I met while traveling to Costa Rica in late-2006, I think.  Now, of course, this was before the banksters were hitting CTRL+P and creating more imaginary money every day to flood the markets.

The Dow was so clearly (to me) topping and I had just encouraged my buddy (who was in the group that went with me to Costa Rica) to liquidate.  When he called his guy at Edward Jones — he told my buddy he was nuts!  He was a real professional (I guess unlike me) and the market was absolutely going higher-higher-HIGHER!

Well, in Costa Rica we came across three young stock brokers and we started chatting about all the beautiful girls and the best places to go at night, etc.  One asked what I did for a living and, aside from practicing law and writing, I said I was a day trader.

“Ooooh, can you believe the markets?  Going to the moon!” he said.

“Nope,” I replied, “they’re topping and are gonna’ come down.  Maybe a lot.”

“You’re crazy!” he insisted.

Even after I explained exactly why, he said he was “backing up the trucks as soon as they got back to New York and loading-up!”

In other words, he was going to borrow money and margin and buy as much as he could — because those tulip bulbs were only going to get more expensive.

Well, the moral of the story is that my buddy made out like a bandit.  He saved 100% of his 401(k) and got back in after the correction.  To this very day, he still has to buy me beers when we go to a favorite sports bar.

And we still drink a toast sometimes to the bankrupt stock broker.

When everybody says buy-buy-BUY — if I haven’t already — I sell.

When I see the World Market Cap going parabolic — I worry for everyone else.

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Speaking of Bubbles — How About The Bubble?

I’ve been trading since the 1980s.

WOW!  That’s over 30-years!

Anyway, I’ve seen and lived-through a lot . . . and younger traders might not have seen everything I have.

Heck, I can still remember when I was lucky enough to pay the exorbitant monthly fee I did for live data via satellite and so I had real-time charts and could call my broker to place swing trade orders in the mid-1990s.

Today, I press a button and get an instant fill.  WOW!

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My children and grandchildren have never known anything but the Internet, while I can remember a time my Nintendo Entertainment System (NES) and Pong game were cutting-edge.  LOL!

The Internet started to catch-on in about 1995, I think.  Some 10-years after my Nintendo.

Soon, the IPOs of internet companies emerged with ferocity and frequency, sweeping the nation up in euphoria.  Investors were blindly grabbing every new issue without even looking at a business plan to find out, for example, how long the company would take before making a profit . . . if ever.

It was buy-buy-BUY!!!

The NASDAQ — where almost all were listed  — rose and rose and rose.  I’ve often said a chimpanzee could have thrown a dart at the wall and you would make money on whatever stock it landed on.

But obviously, there were problems.  Serious problems.  The first shots through this bubble came from the companies themselves.  Many reported huge losses and some folded outright within months of their offering.  Silicon Valley overnight-millionaires were frequently moving out of $4 million estates and back to the room above their parents’ garage.

In the year 1999, there were 457 IPOs — most of which were internet and technology related.  Of those 457 IPOs, 117 doubled in price on the first day of trading.  In 2001 the number of IPOs dwindled to 76, and none of them doubled on the first day of trading.

The NASDAQ lost about 78% of its value as it fell from 5046.86 to 1114.11.

If you invested when everyone was buying-buying-BUYING — and you were lucky — your nest egg of $100,000.00 was soon worth about $22,000.00 . . . and you got to start all over again!  If you borrowed and “loaded up the trucks” to invest in the Bubble, well, you’ve probably met that former New York stock broker who once could afford a trip to Costa Rica.

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Speaker Ryan Eyes Push For “Entitlement Reform” In 2018

The Hill reported that last Wednesday — the day before the 2-week CR was passed — Speaker of the House Paul Ryan (R — Wis.) said House Republicans will aim to cut spending on Medicare, Medicaid and welfare programs next year as a way to trim the federal deficit.

“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said during an interview.

Actually, there is a very good TWO-prong approach:

(1) Decrease spending — across the board; and,

(2) Raise income (i.e., taxes).

Neither of these will be popular to Americans but the answer is a coming hard crash instead of a softer, more manageable landing.

No country can continue spending $700-BILLION a year more than it takes in and survive.  The only thing that has allowed the United States to do it for so long is the devil’s deal cut with Saudia Arabia decades ago that required all crude oil transactions to be settled in U.S. Dollars.

That makes the U.S. Dollar also be known as the Petro-Dollar — and it is under attack by other, rightfully jealous countries all over the world!  Those attacks are becoming more and more coordinated and now involve China and Russia.  The days of the Petro-Dollar are indeed very limited and the U.S. must get its financial house in order before it’s too late!

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Anyway, I’ve served in elected office and understand the legislative process a little at least.

I also know it’s best to negotiate from a position of strength.

The Democrats, who are in the minority in both the House and Senate and out of control of the White House, demand DACA (immigration-related: Deferred Action for Childhood Arrivals) be made permanent law and that’s their biggest demand and, thus, bargaining chip right now.

Making them choose between constituencies — those who are Latino, for example, versus those who receive “entitlements” — places them in a much weaker position and forces them to choose.  They can’t have both:  DACA and “entitlement” programs as currently funded.  And make no mistake, the GOP is not about to touch social security and medicare — so they might initially lump those in but for all intents and purposes are only taking about SNAP (food stamps) and TANF (formerly called AFDC years ago) and Medicaid.

I differ from the far left-wing Democrats and do not want to see generational, or multi-generational, families living off government assistance — without doing anything to help themselves.  But I also differ from far right-wing Republicans and do not want to simply cut-away the social safety net SNAP, TANF and Medicaid provides.  There has to be some middle-ground.

But what does this have to do with day trading in the LIVE! Trading Room?

First, depending on the budget situation and what happens vis-a-vis a U.S. Government default or shut-down, the Stock Indexes, and currencies, and Gold could respond violently.

Second, this is a hot-button issue and could result in civil unrest or outright rioting if a substantial “entitlement” cut is made.  The fabric of American society has never been weaker — with already hate-filled responses if you don’t agree with someone’s politics.  Can you imagine them having their “entitlements” cut?  That will also affect the markets we trade.

Third, with more cards on the table, it becomes more likely that other matters, such as tax reform and immigration reform, can be agreed to and passed.  Those will have repercussions in the markets we day trade as well.

Forewarned is forearmed!

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