Greetings,

The Democrats took a solid hit on the chin last night with the victory of Scott Brown in the Massachusetts U.S. Senate race.  While being far from a conservative, he takes away the super-majority that the Senate Democrats had enjoyed.

Now the big question is: “What happens to the Health Care bill?”

The Democrats will continue their efforts to push it through – although in a way that protects their behinds as much as possible from the wrath of the voters.  If they were smart, they’d be more concerned about the wrath of the Almighty God to whom they will one day appear before.

The Republicans will continue their efforts to cater to the banking and investment industry.  They also should be put out to pasture (Disclaimer: I’m a registered Republican).

The Federal government is in a large predicament now.  How can they obtain enough money through taxes, fees, US Treasury security auctions, or downright STEALING from “trust” funds in order to keep their Marxist experiment (called our Federal government) from crumbling?

As a reminder, the Federal government MUST create as much new debt as they can, and do it as fast as possible, in an effort to even out the enormous credit destruction that the international bankers have foisted upon our nation.  Federal government spending is the only thing keeping the general public from realizing how much of an economic catastrophe is all around them.

President Obama is now seeking to nationalize the entire $103 billion Student Loan industry - Obama to Nationalize Student Lending with Pending Budget Bill. This bill is currently being considered by the Senate “Health, Education, Labor, and Pensions (HELP) Committee.  Don’t you just love their propaganda acronyms?  George Orwell would have been hard-pressed to do better.  This will allow the Federal government to collect the interest on student loan payments instead of the banking industry.  It also will help to solve the problem where banks aren’t lending out student loans like they once did.  When will we all learn just how evil loans with usury really are?

We also see where the Senate Democrats want to raise our nation’s “debt ceiling” by another $1.9 TRILLION dollars – over $14 TRILLION: Senate discussing a raise in national debt ceiling to above $14 trillion.  Notice from the article that this is just to get them through THIS COMING NOVEMBER!

How many people remember the last time that Congress raised the debt ceiling?  Here’s a hint: Senate OKs raising debt ceiling to $12.4 trillion.  It was a $290 billion raise, and it happened last Christmas Eve – LESS THAN ONE MONTH AGO!

Obviously, the Democrats are planning on issuing a TON of  new debt over the coming months.  Will this even out the credit destruction created by the international bankers and knowingly or un-knowingly supported by many Republicans in Congress?  It may hold things off for a little while – but it will turn the economic storm that’s coming into a cataclysmic one.

Many pundits predicted (Jim Cramer being one) that the US equities market would have a huge rally if Scott Brown won.  Instead, the Dow tanked over 200 points at one point in the day.  Commodities such as gold and oil were down substantially, while the US dollar rallied strongly.  Why is this?

Many attribute the movements to China tightening their lending standards.  That’s a fine theory, but it doesn’t hold water since China announced this policy a number of days ago – and we had a large rally in equities just yesterday.

Instead, the movement today fits right in line with what I’ve been talking about.  The equities market knows that the Health Care bill was dealt a SEVERE blow last night due to Scott Brown’s Senate victory.  This means that the deflationary spiral stands a real possibility of moving much faster than new Federal government spending.  It’s a race.  In my opinion, the only reason that the Dow didn’t lose over 500 points today was because there are still a number of investors that believe health care will be rammed through at some point.  If new government spending stops, or greatly slows down, at any point then watch out below.
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Watch for these indexes to drop:

Chinese Shanghai Composite Index: 3,151.85 (change of 3.52% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 12,916.15 (change of 3.48% from July 20, 2009 base value of 13,381.22)
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Here are today’s numbers for the economic indicator:

1) Gold = $1,111.30
2) Silver = $17.87
3) Dollar Index = 78.36
4) Oil = $77.42
5) S&P 500 Index = 1,138.04
6) 3-month Treasury Bill yield = 0.05
7) 3-month OIS = 0.14

HEI = 30.45

(A value of under 100 indicates deflation, while over 100 indicates inflation – as referenced to Sept. 12, 2008…the day before Lehman Brothers collapsed)



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Here are the numbers for the day:

Dollar Index adjusted indexes:
Dow = (10,603.15) x (0.7836) = 8,308.63
S&P 500 = (1,138.04) x (0. 7836) = 891.77
Nasdaq = (2,291.25) x (0. 7836) = 1,795.42

3-month Treasury: 0.05

2-year Treasury: 0.88

10-year Treasury: 3.65

30-year Treasury: 4.54

2-yr vs. 10-yr Spread (Target > 273): 277 basis points – (Danger Zone)

2-yr vs. 30-yr Spread (Target > 369): 366 basis points

3-month LIBOR: 0.25

3-month EURIBOR: 0.67

3-month OIS: 0.14

TED Spread: 20 basis points

LIBOR/OIS Spread: 11 basis points

Dollar Index: 78.36

Volatility Index: 18.71

JPY-EUR Exchange Rate (Target < 115): 128.6525

JPY-GBP Exchange Rate (Target < 145): 148.5726

JPY-USD Exchange Rate (Target < 90): 91.23

USD-EUR Exchange Rate (Target < 1.25): 1.4102

USD-CNY Exchange Rate (Target > 7.0): 6.8270

Warmly,

Brad

Comments or questions?  brhamill@hamill.com

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