The Cesspool on the Potomac

If you ever needed any further proof (not that we do at this point) how hopelessly corrupt Washington DC has become, take a look at the following report from "The Washington Examiner".

The package of legislation to come out of that vile place screams to heaven itself how far gone this nation is and how nothing can be done to reverse the inevitable slide into decay and mediocrity.

One thing I am more and more convinced of with the passing of each week - the fact that former Senators/Congressmen are allowed to serve as lobbyists for industry once they are either defeated in an election or choose to retire is a major source of the scum that floats on the surface of the water in Washington D.C.

Get rid of that and institute term limits and maybe we can eliminate some of the ills that afflict DC.

Tim Carney: How corporate tax credits got in the 'cliff' deal

January 2, 2013 | 6:00 pm

The "fiscal cliff" legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan. But these subsidies weren't the fruit of eleventh-hour lobbying conducted on the cliff's edge -- they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week.

http://washingtonexaminer.com/tim-carney-how-corporate-tax-credits-got-in-the-cliff-deal/article/2517397#.UOTPwUbDVSJ

Gold up to Start the New Year

While both gold and silver had nice days today, they both made their best levels earlier in the session. The rest of the session was pretty much spent going nowhere and fading off their highs.

Try not to read too much into any of these markets, with a few exceptions, based on one day's performance. What we are witnessing is both a combination of relief buying associated with a miserable, rotten piece of legislation that will accomplish nothing except to ACTUALLY INCREASE THE DEFICIT but has temporarily served to asssuage fears overs the so-called "fiscal cliff" and the fact that hedge fund managers are committing lots of brand new money into the markets to start off the year. This positioning or allocation of hot money is going to come in regardless of the fundamentals in those markets which have been selected by the hedgies as the go-to investments for the New Year.

In the grains, a host of that new money was greeted with jubilation by bears who wasted no time in using the machine buying to sell at a much better price than they were originally hoping for.

The liquid energies went the opposite direction as crude ran nearly to $94 before it too faded and fell back off its best level. Copper had a huge up day which certainly did not hurt the cause of silver one bit. As a matter of fact, the base or industrial metals, were all soaring skyward in union at one point as the algorithms gorged themselves on that sector in today's session.

One would think by judging the performance of the S&P 500 that the US has hardly a care in the world. Like I said in a post last week or so, hedge fund buying and selling tends to be very short-sighted in its activity so those with a longer time frame of reference are often left confused by what appears to be buying or selling divorced from anything in the real world. Get used to it as the mindless machines and this industry will be with us, unfortunately, until at least we get an environment in which the average saver can obtain a decent rate of return on their savings accounts and can forego the casino world of the US stock markets.

Gold did clear that stubborn resistance level at $1680 which is promising and has helped to turn the technical posture on the charts. Silver regained the very strong resistance level of $31 so both of these metals no doubt saw some significant short covering as a result. I am a bit concerned about the depth of the fade in silver as it fell nearly 50 cents off its session high. That level near $31.55 or so coincides with the falling 20 day moving average so if the bulls can take it through this level and hold it there, we should see it make a rather quick run to $32.30.

Downside support in silver is near the $30.40 level followed by $30.

The yen continues to fall apart which is helping to keep the Dollar from further weakening to the extent that we are used to seeing when these risk trades are coming on full bore. The British Pound made a 52 week high against that same US Dollar today.

Bonds fell apart today as no one wanted anything to do with them as a safe haven. Then again, I have been feeling this way about US TReasury debt since the second round of QE began. I will be surprised if the bonds completely break down at these levels since any move higher in interest rates at this point will absolutely brutalize the US fiscal condition even worse and I doubt that the Fed is not going to notice that. They are not directly targeting the back end of the yield curve with QE4 but rest assured a spike in the Ten Year Note is not going to go unnoticed by our master planners. Every time it appears that the long bond is about to finally start a strong downtrending move, it promptly reverses and move higher. Maybe this time will be the start of an exception to that. We'll see.