John Boehner Man of the Hour

Charts: Up until a few weeks ago the current bull market had seen low volatility and one of the highest correlations between different stocks in history. There was no point in even buying individual stocks rather than an index because everything was moving up or down in lockstep. But now, all of a sudden, we have the weakest correlation in history. If one stock beats its earning forecast by a penny it might go up 20% in one day. If another stock misses by a penny it might go down by 20% in one day. And volatility is very high. This shift speaks to naked fear permeating the market. The debt ceiling debate is the source of all this fear.

Fundamentals: Speaker Boehner is holding a vote in the House tonight on his debt plan. It makes some real cuts, although not enough. Its main feature is to extend the debt ceiling only 6 months and therefore make America's debt crisis the focal point of the election. This is very smart because real spending cuts can only come by way of a voter mandate with the Republicans taking both the House and the Senate. Contrary to what the Tea Party thinks, real spending cuts cannot be achieved right now. So tonight's vote is crucial. If Boehner gets his way in the House, then the Senate will quickly vote his plan down. Boehner will then have to craft a new bill with Sen. Reid over the weekend, to do this he will have to give away some spending cuts. Then both chambers will have to vote on the new bill and it must pass before anything resembling a default on America's debt can occur, including a downgrade.

The key factor in the new Boehner/Reid bill will not be how much spending is slashed, rather it will be whether or not the spending ceiling is extended to right before the election or after the election. If it is extended until after the election, then voters can pretend that the problem is solved and they can vote for big spending Democrats and the crisis will start all over again.

That is unless a failure of Boehner's bill immediately reignites the crisis. Interest rates are soaring in Italy and Spain. Cyprus is highly exposed to Greek debt and is teetering on default. A tiny shove and Cyprus will be the first European country to default and contagion will spread through Europe like wildfire, plunging the globe back into recession.

US money market mutual funds represent a key source of short term funding for European banks. These funds are jerking hundreds of billions worth of funding out of the European financial markets. A tiny shove and they will jerk everything out, clobbering European banks.

The majority of central banks across the globe have US dollars as their primary source of reserve. If Boehner's plan fails, the dollar will crash and central banks will become insolvent.

These are just a couple examples. Many other bad things will happen if Boehner's plan fails.

Long War: Today's super volatile stock market is similar to the market in 1948. The charts look exactly alike. Charts did not stabilize until after the Korean War in the early 50s when America entered a period where the Pentagon was not fighting the Cold War, but the CIA was. So this blog will continue to chart CIA activity.