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Maybe It's A Maybe

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PREMIUM MEMBERS

The risk of a wrong decision is preferable to the terror of indecision.

         - "Moses" Maimonides, 12th century Jewish rabbi/philosopher  

 

Not to decide is to decide.

         - Harvey Cox, liberal 20th century theologian

 

Indecision is as old as the human race. In Washington that failure to decide is setting everyone on tenterhooks. The equities markets seem to like the promise of a deal, regardless of the deal, as Rebe Maimonides says above. 

On the other hand, gold, silver, and bond yields have not shown partiality to the failure to act by Congress. We are left wondering if Congress is capable of deciding, or are they stuck in Cox's "paradox," also above. 

Whichever it is, the citizenry is angry, disillusioned and, most importantly, economically speaking, it is not spending money. Consumer confidence is down to its lowest point in nine months. Durables are soft; oil seems undecided whether it will join the deflationary camp or the exuberance camp. 

At least some people are temporarily putting some faith into precious metals.

"There has been some short-covering today... but overall, the market is expecting a U.S. debt ceiling agreement eventually and it is mostly positioning a little bit more on the short side rather than the long," head of MKS trading Afshin Nabavi said.

"If there is a deal, however, we may not have a big move down, as this seems to have very much been discounted." 

Regardless, gold is sitting in the same exposed position as stocks and bonds are, ready to be picked off by the next round of uncertainty. And this uncertainty is sure to occur. It may happen soon - if an agreement isn't reached. Or it may happen sometime after the Christmas/winter holidays - if the Congress is smart enough to time out the temporary lifting of the debt ceiling. 

Generally, gold is the beneficiary of a climate of uncertainty. It has not been operating in such fashion for some time. It has been operating better as a hedge instrument, although we've had almost no inflation.

The promise of inflation has given gold a boost even when it was dealing with the equities' "risk-on" days. 

Surely it would be disaster if a) the Congress doesn't come up with a solution to the debt ceiling or b) it lasts only 6 weeks as some are proposing. We don't need stomach cramps personally or economically around December 1st. If you think the level of resentment is high right now among the populace, just let the Congress try to spoil Christmas. 

Unless there is a massive rhubarb between the right wing on one hand and their centrist brothers and sisters in the house, look for a decent deal in which all parties are partly unhappy. The question is, what will the president sign?

Not much, we believe. No touching the reform of health care. No touching anything for seniors, who are most likely to boil over and show their temper at the next election. How will liberals react to the prospect of children getting sick from lack of food? 

We believe the extreme elements of the Republican Party are making a drastic mistake unless they really believe that creating a toxic adversarial atmosphere is going to resolve anything. The budget and debt ceiling won't be the last piece of legislation to arise before the 2014 election. It just takes one Democratic Senator to stop any Republican initiative, just the same as it takes only one Republican to stop a Democratic idea. 

No one wins. We're looking forward to October 29th and the next FOMC meeting. That way we can get back to the kind of uncertainty we're used to.
  

Wishing you as always good trading, 

   

 Gary S. Wagner - Executive Producer

Gary S. Wagner - Executive Producer