Ronald Reagan Spinning In His Grave

Charts: The S&P 500 closed at 1192, down a whopping 1.6%. Support at 1200 was shattered in huge volume but 1190 held. Since only one support level was taken out the technical rally is still intact, but shaky.

Fundamentals: The SEC charged Goldman Sachs with fraud, just as the hideous financial reform bill was floundering; now it is certain to pass. Maybe a coincidence, but the timing smacks of an anti-bank witch hunt and is scaring the hell out of investors. Just as bad, President Obama signed another unemployment benefit extension into law, a step towards making this “temporary” benefit a permanent entitlement. The bill also torpedoes an automatic cut to Medicare and heaps on tons of miscellaneous pork. The refusal to cut Medicare today is strong evidence that the future cuts spelled out in the Obama-Care bill will never happen.

Geopolitics: In Pakistan’s Swat Valley, dancing parlors have reopened. For generations young women born into a sort of Muslim dancer caste have danced with men for money under heavy chaperonage and under strict rules that allow very little touching. The female dancers are also covered head to toe, of course. When the Taliban ruled the Swat Valley female dancers were brutally executed and tossed into the street. Dancing, music, and singing were all a death sentence. These activities have returned to the Swat Valley, proof that there are no Taliban left.
The Presidents of Russia and America, working closely together, have removed the deposed president of Kyrgyzstan to a neighboring country, averting a civil war. Since the ex-leader of Kyrgyzstan was a watered down Islamic bad guy, he would have certainly become a full fledged bad guy and drawn on Al-Qaeda support if a civil war had erupted. The war would have occurred 80 miles from Afghanistan. The consequences would have been earthshakingly bad. The two presidents were able to unite as a team because of the newly crafted START treaty. Republicans are determined to scuttle this treaty in the Senate. They are also doing everything possible to undermine Obama’s move to isolate Israel, principally by shifting focus to Iran and away from settlement building in E. Jerusalem. The Republicans are opposing the President’s “smart sanctions” (targeting Iran’s leaders) in favor of their own “stupid sanctions” (targeting average Iranians, leaving the leaders unscathed and fostering anti-American sentiment). As in the late 30s, the Republicans are promoting a toxic foreign policy that the President must overcome. What’s really sad is the Republicans aren’t doing anything to stop runaway government spending. So what good are they?