Fiscal Cliff

Charts: The market has been in a correction since late Sept. It is now in a rally attempt. The correction reached about a 10% loss on most of the major indexes. That doesn't sound too bad, except these indexes all plunged below their 200 day moving averages; so the correction has been worse than you might think from a chartist view point.

Fundamentals: Right before the election the market thought Obama and the Republicans would extend most of the Bush tax cuts and then try to leisurely hammer out a deal without the January fiscal cliff deadline breathing down their backs. The market knew that there was no way a deal could be reached by January. An extension would give both sides room to maneuver. The market wanted that extension. But Obama got super cocky and tried to hammer out a deal favorable to his ultra-left wing agenda without an extension. Obama thought he could put a gun to the Republicans' head and get everything he ever dreamed of right now, all at once. But the market is more powerful than Obama and it seems that the market will get its way, we hope, which is to say an extension on the tax cuts. If not, then the correction will turn into a bear market and the economy will drive off the fiscal cliff.

Spain is saying it will create a host of free trade deals with Latin American countries. The recovery is dependent on all major economies opening up and creating free trade accords. Austerity, fiscal discipline, government spending policies, none of these make any difference in the medium and long run. All that maters is free trade. That is the only thing that will keep the recovery going at this point.

Long War: CIA Director Petraeus was canned for having an affair, the greatest military mind of our generation. In WW II George Patton was canned for slapping a sick soldier. Patton was the greatest military mind of that generation. America is the only great power in history to eliminate its best military leaders during crucial wars for nonsensical reasons.

But its not as simple as all that. In my last blog I said that the killing of US personnel on Sept. 11 in Libya proved that the CIA was way more involved in the Libyan Civl War than was commonly assumed, way more involved than Congress or the White House had authorized. And Langley is more involved in the Syrian Civil War than they are supposed to be. Because of the hot juicy sex scandal nobody is digging into Langley going rogue. So Petraeus quitting or getting fired has a very good side effect. It is almost too big of a conicidence to swallow. Why did he really quit? Analyzing the CIA is like reading tea leaves, dificult to the point of impossible. Langley is home to the greatest liars and con men on Earth. We need them to keep lying and those lies need to be believed. More important, the CIA must never have civilian oversight. If the current Deputy Director is made Director, then we are out of the woods.