Let us now segue from the political elections to the developments we can expect over the next four years and how they are likely to be responded to.

Any one or combination of these events I would not be surprised to see derail affairs in this country, making our new old-president’s life hell.

EU Debt Crisis

This remains the first and foremost issue with regards to global economic activity. Europe is the largest single contributor to economic activity on the planet. And they are in trouble. Still.

Most recent acknowledgements from the ECB put expectations for recession increasing and any hope of lowering unemployment years away.

In the interim, expect another trillion euro easing from the ECB to pave the way to 2014. Coupled with price pressures and economic contraction, we’ll feel the ripples of these developments here at home.

HCR Implementation

Obamacare was here to stay the moment Roberts pulled a Benedict Arnold. But for mostly political reasons, the costs of the program were delayed until after these elections and into Obama’s second turn. Only a handful of the taxes to pay for this program have gone into effect. The majority are yet to come.

And Obamacare is disruptive. Very disruptive. Most businesses, I’m convinced, remain uninformed about the impact the law has on their operation and have been keeping their head in the sand, hoping it would go away.

Complex penalties, mandates, a mountain of required paperwork, loopholes, a bungle of disperse agencies with various territory to enforce, and any thousands of contradictive issues that could pop up mean that, by 2014 when the final provisions are supposed to be in action, American business will likely be pulling its hair out.

Pension Funding Gap Expiration

Private pension funds are required by law to maintain a minimum funding, actuarially determined, in order to meet obligations.

In the event that these funds do not meet their funding criteria, provided they are at minimum funded greater than 60%, they have 7 years to get things back in order.

Let’s say, 2008. Now start counting.

Hey 2014, nice to see you again.

US Debt

At the moment, US debt still remains popular, largely for its liquid characteristics and large volumes making it accessible anywhere. But, with the Fed buying as much paper as they are, eventually you’ve got to start asking, “how is this stuff valuable?”

For the moment, deflationary pressures should help keep the US dollar strong. But when the recovery (or specter of recovery) starts to infatuate the US markets again, that leaves us with our monetary supply almost triple from before the housing bust.

Should credit begin to expand again in this country, that leaves treasuries being pretty much worthless.

And thanks to the long term rollover and the Fed purchasing up assets like distressed mortgages at what have to be overpriced levels to keep the banking sector solvent, there is almost no recourse to getting that extra money back out of the system.

State Funding

Some states, like Illinois or California (usual suspects), are pretty fucked from being stupid. No more need be said.

US Retirement

The Baby Boomer generation (sometimes referred to by their proper name, The Worst Generation Of Assholes To Have Every Been Birthed On This Piece Of Shit Rock) are getting old. I mean really old.

And this generation, thanks to taking a triple leveraged position in housing they never had a viable exit strategy for, are also sitting on underfunded retirement accounts and in chronic need of cash. Plus those retirement accounts will begin to force liquidation in pre-specified amounts starting at retirement.

Couple that with these old codgers needing to buy down in housing to accommodate those knee replacements, and the Baby Boomers’ retirement looks to be as bleak for markets as it will be for their children having to listen to them bitch about how smart they think they are.

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Needless to say, I decided to edge long at exactly the wrong time. Ben suckered me in, and my once strong 30% cash position has been whittled away to a mere 10%.

This selloff is going to hurt, delivering its full force directly against the 9th floor, shaking the very walls.

But I find that I am willing to wait it out. The concerns that are driving this selloff are immaterial.

Spanish insolvency, fiscal cliffs, Chinese communists and Ben’s retirement – the four horsemen are dotting the sky and Twitter is like a dumping ground for snarky comments.

Earnings and growth are slowing and Bob Pisani is nowhere to be found.

The funny thing is I was sitting around in exactly the position of the bears this time last year, guffawing in between comments of doom and chugging from a golden chalice.

Let me tell you how this ends for the shorts.

First, they get run over by a stampeding flock of turkey’s. Seasonality adjustments and earnings projections tick up with bad modeling methods. A bottom in housing prices is called for the spring. Employment looks extra rosy with the holiday shopping.

Then Santa comes and mows the surviving shorts down with his sleigh.

This is how the holiday season works.

Let’s review the “impending demise” of civilization. Spanish insolvency can be flooded with EU money. The EU collapse comes from price inflation and manufacturing contraction, not outright defaults. Chinese communists are scary but China can’t exactly afford to have foreign investment flee the country at this precise moment. The fiscal cliff can be voted away.

And after his presidential inauguration, Mitt Romney is going to be ushered into a back room where central bankers will begin the process of extorting him. But even if they fail, Ben has plenty of time to sink so much money into dark pools there’s no chance of reversing his policies.

Why do we need to embrace the end of humanity right now? It’s the holidays. Can’t it wait until next June?

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The ride into work was scattered with rain and the sky line was covered with the murky grey of clouds pushing seamlessly against Old Eurus’ resting brow. But the cool shade provided was a welcome relief to the blazing heat of July.

Upon entering my place of work, I quickly made a cup of English Breakfast tea; letting the aged Camellia work over my tongue in conjunction with the scattered flavor of sugar. All the while, my fingers and eyes danced over the numbers spread out before me.

But on this break, I glanced up to read the market, and what I see is much a confirmation of what I already knew.

China continues to slow as the forgotten cable tow in Europe’s hand is pulled on; trying to right herself at the expense of China’s neck.

Industrial production is dwindling. The economy is buckling. We should be lower, but we’ll run higher anyway.

It’s the same game. Almost boring, if so much weren’t riding on the line…

But as such, one must be patient. One must be light on ones feet; spry, if you will, with the knees of an eight year old. And ready to move in a hurry.

Make no bets against this mark. And do not embrace her either. Let her do what she will, and know that, apart from a thin filtering of securities, most are a bad investment.

The world’s most luxurious mansion, when placed on a fault, is still an awful house.

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Hello, and I hope the new week finds you well.

My own weekend was quite nice, filled with beer from local microbreweries and good food.

I have just finished some leftover prosciutto-wrapped tilapia, actually, which we made last night; garnished with fresh zucchini and squash, and topped with some delectable Kalamata olive – all covered in liberal amounts of lemon pepper – and served with a side glass of Sauvignon Blanc.

As for the markets; I am all too aware that we are approaching the season where – for two years in a row now – my entire strategy has gotten clobbered without mercy.

I wonder, what will it be this year?

Perhaps scientists will discover that all uses of silver can be replaced with pop rocks?

Maybe, AEC goes bankrupt?

Or the UN puts forth a treaty, signed by all nations, permanently banning all power generation from uranium?

The possibilities are delightfully endless. All I know for sure is that October is a horrible month, and I hate it.

Now, I am opting to hold a hefty cash position with a large side of silver, just in case we get massive intervention. This is as opposed to outright shorting of stocks or commodities.

I’m as realistic as ever about the chances of a recovery here. There’s just too much drag on the system; and we’re “blessed” to have all the wrong people in charge just when we need real intelligence to implement reforms.

But if we’re to go down from here, I will profit from having a cash position, not generating cash flow from short positions. It’s too risky, in my opinion, that the market reverses and runs higher into the Winter months.

Firstly, shopping picks up in the winter.

Secondly, we have to be getting nearer to some desperate moves getting made by desperate people.

And thirdly, the market HAS run higher in the Fall for the past two years. The statistics crowd should be all over this.

So I’m not really gung ho about the economy or much of markets. But I have relearned how to step aside and let the crowd exhaust itself before reasserting my dominance.

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Spain’s behavior this weekend has created the remarkable opportunity – yet again – to discuss the fine points of complex, non-linear systems, and what happens when myopic retards fuck with them.

I was really worried that my selloff would not materialize. For all I knew, Spain had given the market just enough of what it wanted to hear to usher in another cocaine induced rally; maybe it would ultimately prove faulty, but does that help me if it can sustain itself for 6 months and 2,000 DOW points, like the last one?

But then, as if it were their intention, Spain fucked up so thoroughly that everything they thought they had accomplished was unwrought right before their stupid, socialist eyes.

I would have assumed they had learned their lesson after Greece. Greece tried this same bullshit, you’ll remember. They attempted to circumvent the terms of their credit default swaps; the result was pandemonium.

Without the specter of principle protection, there was no reason to be caught holding Greek bonds. That same week, their bonds sold off hard, making it more or less impossible for them to continue on without direct support from the EU.

They lost literally billions, trying to screw markets out of a few million worth of protection – and increased the likelihood that a multi-billion hit to their banks would ensue.

This weekend, Spain did the same thing. By working the terms of their bailout to give the rescue fund preferred treatment, they have reminded markets – again – that there is no security in loaning money to these people. What’s the point of the usual protections of sovereign bonds if unlimited government money can find its way to the front of the line?

There’s no safety there. Each bailout is a bigger threatening haircut to any bond restructuring you may have to take.

So at that moment, Spain and the EU, trying to ensure that their precious little bailout money was extra safe, undermined the entire bond market. Now, people are fleeing their notes en mass. In an attempt to make $100 billion inviolable, now Spain gets to worry about its entire fucking debt load.

It’s Greece, part deux. Brilliant move, Spain. Well done ladies and gentlemen.

The best part is, once again, the entire purpose of the ESM/EFSF mechanisms have been undermined in trying to screw over the other market makers. The only reason they wanted to bail out the PIIGS with these funds, rather than direct monetary intervention, was to appease Germany’s hardcore stance of avoiding any and all inflation.

The point of the ESM and EFSF was to encourage people to lend money to over indebted countries. But by giving them preferential treatment, they’ve actually succeeded in driving investors away further.

Now, all money that comes to Spanish debt, just like Greek debt, will come from the ECB. And so, the EU gets to enjoy stagnate lending, a budget crisis, AND more horrific inflation levels. Germany will be pissed. Manufacturing will continue to contract continent wide. And negotiations between countries will be tougher than ever.

All because Spain decided one gay weekend to act unilaterally and screw the pooch.

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I want to point out to everyone a phenomenon I personally first noticed around the middle of 2011. A hat tip to you, if you’ve noticed it also.

It was probably the Fall, right around the time when I was getting my face clobbered by the energy-short-gone-wrong that I pulled into a gas station and realized, “holy shit, there are two prices listed on the sign for the same octane.”

And indeed, there were.

One of those prices was for cash, and one of those prices was for credit.

This is a fantastic experience, which is crowded out by the seeming innocuousness of the observation. In the age of credit and computerized transactions, the good, old fashioned ledger book and under the table trade is winning out.

And why shouldn’t it? Cash transactions are excellent, in their ability to afford the cashier certain “leeway” in interpreting just how, when, and under what conditions said transaction took place.

Did that gasoline get sold when the price was $3.99 a gallon, or $3.88? If both prices were witnessed between refilling of the tanks, who’s to say? Plus, those convenience fees that are allocated to the extenders of the credit, those nickels and dimes, are wiped out, buffering the salespersons bottom line.

I want everyone to recognize how important this is. The single greatest outcome from digitalized transactions was the transparency of auditing. With all cash transactions, auditing begins to become, not opaque, but certainly more translucent.

It’s no wonder that the FBI put out a warning not long ago on the “terrorist nature” of all cash spending. Cash transactions will hit local, state, and federal budgets, while taking huge sums of money into black markets and out of the controlled circulation of bank transactions and financial circles. It undermines economic policy from the Federal Reserve. It strengthens the dollar, while causing the potential to impair debtors and their delicately balanced loan maturities.

In that sense, all cash transactions are a key sign of economic degradation, like carrion birds marking a carcass.

It will be interesting to see whether this phenomenon continues for long, or if at some point incentives or underhanded government strong arming attempts to force these transactions back into electronic form.

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