Patient Returning To Normal?

"Come on people, smile on your brother..." 

         The Youngbloods, "Get Together"

Bargain hunting, short covering and some safe-haven buying snuck back into the precious markets today, driving gold up around $30. Silver is up 2.8%. The dollar also fell against major currencies, most notably the euro.

Equities retreated in New York as well as on the European and Tokyo exchanges although they rose in Shanghai. Crude oil shot up on the dollar's decline.

The two sides in the struggle over the budget and attendant government shut down were meeting at the White House today, but there are few rays of optimism. The actual financial effect once all waves are measured is around $300 million in loss per day. The world does not need $2 billion per week yanked out of the economic system.

As if on cue, Eric Rosengren, president of the Boston Federal Reserve Bank issued a blistering defense of continuing QE3 bond buying measures. That also helped propel the precious metals higher.

He said that he "strongly and unequivocally" supported the Fed's decision last month to maintain its $85-billion-a-month bond-buying stimulus, and that reducing the program "would have been premature." Rosengren added, "If the economy evolves as expected, policy should in my view include only a very slow removal of accommodation over the next several years - and that should only occur when the data ratify our forecast for an improvement in real GDP and employment."

Add this sort of viewpoint to the convolutions caused by the shutdown and it is a pretty sure bet tapering will not occur during the October FOMC meeting. (But the Fed has been unpredicatable before and will be again.)

It is on labor data and the shutdown that the Fed itself will feel the collision of ideology and pragmatism.

The big report due out this week is the September employment report, which is scheduled to be published Friday. However, even if the government shutdown is resolved tomorrow, the full data won't be available on schedule. Without new data, the Fed will largely be unable to begin tapering unless some private and state-collected data seems absolutely overwhelming on the positive side. Fat chance. 

As time wears on, we are also faced with the possibility that the extremists in the House will not agree to raise the debt ceiling, a usually pro forma move. More and more voices, regardless of where they generally stand on the political spectrum, are demanding the debt ceiling be dealt with immediately, if not sooner. The CEO's of 6 of the nation's largest bank parachuted into D.C. to make the point as are leaders of business and industry doing from from afar.

The fracas in Washington is pitiful. The Affordable Healthcare Act was passed by both houses of Congress, signed by the president and passed the acid test of constitutionality in the Supreme Court. Now, approximate 4% of the House of Representatives is insisting the program be defunded.

The Founding Fathers devised a government that would protect the rights of a minority. They did devise a government in which the minority would rule. 

Regardless... buckle up. 

Wishing you as always good trading,