Mish's Global Economic Trend Analysis

Futures Surge on "Pathetic" Debt Deal; Congress Should be Ashamed; US Deserves Debt Downgrade; Is Boehner Balking Over Cuts to Military Spending?

Posted: 31 Jul 2011 07:51 PM PDT

After spending a day in the garden weeding and transplanting I arrive at my computer to see S&P futures up 20 points, 1.5% on news a compromise was reached. Quite frankly this is ludicrous given that anyone not brain dead knew a deal would be reached.

Let's pick up the action starting with U.S. Stock Futures Advance as Obama, Lawmakers Agree to Raise Debt Limit

U.S. stock futures rose, indicating the Standard & Poor's 500 Index may rebound from its worst weekly loss in a year, as President Barack Obama announced an agreement to raise the federal debt limit and avoid a default.

Obama said in remarks at the White House that both parties in the U.S. House and Senate had reached an agreement to raise the nation's borrowing limit and cut the federal deficit.

"A lot of people were short the dollar and U.S. equities into the weekend, betting that we wouldn't have a deal," Frederic Dickson, who helps oversee $28 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. "Now investors will be reversing those positions as things are looking better than they did on Friday, even though there are still some hurdles to climb in the next 48 hours."

Let's stop right there and point out genuine BullSweet starting with a US dollar intraday chart.

US$ 15-Mimute Chart

Does anyone see a short covering rally in the dollar? I sure don't.

Had there been an agreement to reduce the deficit by $4 trillion we might have seem one, but this deal changes nothing. Bear in mind this is coming from someone who is currently bullish on the US dollar.

Let's ask another question: Who did not expect a deal?

I accuse Frederic Dickson of genuine BullSweet.

The article continues ...

The framework of the debt agreement would raise the $14.3 trillion debt ceiling through 2012, cut spending by about $1 trillion and call for enactment of a law shaving another $1.5 trillion from long-term debt by 2021 -- or institute punishing reductions across all government areas, including Medicare and defense programs, according to congressional officials.

Senate Majority Leader Harry Reid, a Democrat, endorsed the emerging accord among Republican leaders and the Obama administration even as negotiators were working out the final details. Senate Minority Leader Mitch McConnell told senators tonight that the U.S. will not default on its obligations.

Both S&P and Moody's Investors Service are weighing a reduction of the U.S. credit rating. The impasse boosted to 50 percent the chance S&P will cut the grade from AAA within three months, the ratings company said last month.

Pathetic Deal

This is a pathetic deal. It's no wonder futures are rallying. My dead grandmother could find more cuts than this. The S&P, Moody's, and Fitch should all downgrade US debt on this deal.

$1 trillion up front and promises to cut another $1.5 trillion is the wimpiest of wimpy deals. The deficit is 1.4 Trillion. The immediate cut is a back loaded $100 billion. Then there is a possibility of another $150 billion back loaded cuts.

Anyone voting for this monstrosity should be ashamed.

Is Boehner Balking?

Here is something I picked up from Zero Hedge.

The Wall Street Journal "Washington Wire" comments on the The U.S. Debt Battle

5:24 pm: House Speaker John Boehner (R., Ohio) appears to be balking at the debt ceiling deal that Senate Democratic Majority Leader Harry Reid of Nevada has signed. Mr. Boehner is concerned about provisions in the deal that could lead to sharp cuts in military spending, say people familiar with the situation. House aides have warned that just because Mr. Reid has signed off on the deal doesn't mean the deal is done.

Ludicrous Deal Solves Nothing

This deal is ludicrous because it does not cut enough. Congress should be ashamed.

If Boehner is concerned about excessive cuts to military spending in this deal he has truly lost his marbles.

If it was up to me, I would pull all our troops out of Iraq, Afghanistan, Japan, Europe, and 140 countries where we have troops. If we did that, we could concentrate on protecting our borders instead of being the world's policeman. The savings would be enormous.

By the way, it would be fitting if this futures ramp was the mother of all gap-and-craps. This deal solves nothing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Weekend Diversions: "Spectacular" Double Meteor Shower This Week; Space-Time Cloak Could Make Events Disappear; Invisibility Cloaks from Calcite

Posted: 31 Jul 2011 11:26 AM PDT

Had enough of the debt ceiling fiasco? If so here are a few interesting weekend diversions courtesy of National Geographic.

"Spectacular" Double Meteor Shower This Week

One of the best shooting star events of the year is the annual August Perseid meteor shower. However this year's peak, on August 12, happens to coincide with a bright full moon—drastically cutting down the number of meteors visible to the naked eye.

Yet while the main event might be blocked out by the blinding moonlight, the opening act promises to be much better.

This year the lesser known Delta Aquarid meteor shower is expected to peak on Friday night, when the Delta Aquarids' more productive Perseid cousin is just starting to ramp up.

Together the showers will produce anywhere between 15 and 30 shooting stars per hour under clear, dark skies.

On average, the Perseids begin falling at a rate of around five meteors per hour. They're visible for a couple of weeks before mid-August, when they peak at hourly rates of 60 to 120 meteors.

Most people around the world can see the showers, best seen with the naked eye in a dark, rural area away from city lights. Since meteors will be streaking across the overhead skies, lie down on a blanket or recline in a lawn chair and allow your eyes to become adapted to the darkness, Samra suggested.

"Meteor shower activity always increases as the night progresses towards dawn. If you are a night owl, then staying up to catch a more spectacular show might be worth it."

But all may not be lost with the Perseids—observing the sky show a few days before the August 12 peak may work too, noted astronomer Geza Gyuk of the Adler Plaentarium in Chicago.

"For example, on the night of the ninth, morning of the tenth, there will be a couple hours after the moon has set [about 2 a.m. local time] and before the morning twilight begins when it's close enough to the peak that one might expect 15 per hour."

"They are also known for the occasional nice fireball with a long-lasting 'smoke trail,'" Gyuk said. "If we get more of these than usual, then even moonlight won't spoil the fun."

Perseid Pictures: Meteor Shower Dazzles Every August

One of many images in the link.

Space-Time Cloak Possible, Could Make Events Disappear?

It's no illusion: Science has found a way to make not just objects but entire events disappear, experts say.

According to new research by British physicists, it's theoretically possible to create a material that can hide an entire bank heist from human eyes and surveillance cameras.

"The concepts are basically quite simple," said Paul Kinsler, a physicist at Imperial College London, who created the idea with colleagues Martin McCall and Alberto Favaro.

Unlike invisibility cloaks—some of which have been made to work at very small scales—the event cloak would do more than bend light around an object.

(Also see "Acoustic 'Invisibility' Cloaks Possible, Study Says.")

Instead this cloak would use special materials filled with metallic arrays designed to adjust the speed of light passing through.

In theory, the cloak would slow down light coming into the robbery scene while the safecracker is at work. When the robbery is complete, the process would be reversed, with the slowed light now racing to catch back up.

If the "before" and "after" visions are seamlessly stitched together, there should be no visible trace that anything untoward has happened. One second there's a closed safe, and the next second the safe has been emptied.

Currently, nobody knows how to do that except in fiber optics, in which the speed of a signal can be varied by a few percent by changing the intensity of the light.

There are still a few hitches to address, though, before attempting such an experiment, according to the University of St. Andrews's Leonhardt.

For instance, being able to cloak an event lasting more than a few femtoseconds—one-millionth of a nanosecond—would require light from an immensely powerful laser, he said.

"The experiment is not entirely impossible, but it is at the limit of what one can do with present technology in an ordinary university laboratory," Leonhardt said.

New Invisibility Cloak Closer to Working "Magic"

A pink object seems to vanish behind a chunk of calcite, underwater and illuminated by green light.

Harry Potter and Bilbo Baggins, take note: Scientists are a step closer to conquering the "magic" of invisibility.

Many earlier cloaking systems turned objects "invisible" only under wavelengths of light that the human eye can't see. Others could conceal only microscopic objects. (See "Two New Cloaking Devices Close In on True Invisibility.")

But the new system, developed at Massachusetts Institute of Technology and the Singapore-MIT Alliance for Research and Technology (SMART) Centre, works in visible light and can hide objects big enough to see with the naked eye.

The "cloak" is made from two pieces of calcite crystal—a cheap, easily obtained mineral—stuck together in a certain configuration.

Calcite is highly anisotropic, which means that light coming from one side will exit at a different angle than light entering from another side. By using two different pieces of calcite, the researchers were able to bend light around a solid object placed between the crystals.

"Under the assembly there is a wedge-shaped gap," said MIT's George Barbastathis, who helped develop the new system. "The idea is that whatever you put under this gap, it looks from the outside like it is not there."

It is quite amazing the stuff scientists are working on and the images from National Geographic are spectacular. Inquiring minds will want to give some of those articles a closer look.

My weekend diversion is gardening and golf.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Mish's Global Economic Trend Analysis

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