The U.S. equity indexes are down overnight. The budget civil war has not reached any truce. Both sides of the American great divide have gone home to their supporters, who praise them lavishly and expect total victory. A little known public secret (its not taught like this in semi-official propaganda) is this: America has never not been in a war. Not one day. America also knows civil wars, and there is a civil war brewing.
Compromise has usually kept the machinery of government moving. Gingrich stopped the government in 1994, and his team overextended itself and lost. This time, both sides have picked their battle zone to maximize potential and minimize loss. No cold turkey government shutdown but a gradual decrease in scope and efficiency. This is the aim of the elephant team. Government regulations target their core industrial supporters in oil, gas, plastics, coal, steel, automobiles, and land speculation and development. The donkeys know that teachers, scientists, alternative energy, artists, computers, employees and the unemployed are on their side. These folk need the government to dispense awards and sustenance. The elephants wouldn’t mind seeing these people starved into submission to their quasi-democratic rule, but they know slow starvation works best– by the time their enemies have realized the damage its too late. So, naturally Obama will set up the cuts to affect his enemies. But they will be ready to accept the sacrifices and pounce on Obama for cutting their supporters– engendering more support from their bases.
The market opens in 5 minutes. What does this mean? After the initial frenzy, see what the market does and act accordingly.