“I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth. Banks are going bust. We know things are bad. Worse than bad. They’re crazy. It’s like everything everywhere is going crazy so we don’t go out anymore. We sit in a house as slowly the world we’re living in is getting smaller and all we say is, ‘Please, at least leave us alone in our living rooms.’ Things have got to change my friends. You’ve got to get mad. You’ve got to say, “I’m as mad as hell and I’m not going to take this anymore!”

                                                                         Howard Beale (Peter Finch: Network 1976)

Things haven’t changed much since 1976 have they? Only the names, faces and circumstances have changed. Americans are still getting the shaft, but this condition is routinely self-inflicted. We’ve made a mockery of the presidency, congress and markets. We know little about civics, the constitution and bill of rights, history, economics, science, literature and economics. We care more about toys and Hollywood distractions since critical thinking is just too hard. But I digress.

Meanwhile the fiscal cliff sideshow and accompanying rumor driven algo / HFT trading dominates trading. Most Americans don’t even know what the fiscal cliff is – they just know it’s bad. The slip in Consumer Confidence to 65 from 74 reflected fear Thursday. Last week alone investors jammed $80 billion into bank CDs.

I’ve been avoiding commenting and even took a brief holiday in NYC for Christmas as HFT /algo driven volatility was to be expected this week. And this is what the HAL 9000s delivered. These programs alone have driven many investors out of markets. I hope the NYSE and other proponents of this activity are satisfied with the results.

The Chicago PMI was only superficially higher (51 vs 51 expected & prior 50.4). But within the data the employment reading was -55.2 vs -45.9 previously—a hiring freeze. Pending Home Sales were in line with estimates (1.7% vs 1.8% expected & prior 5.2%).

Again rumors and trial balloons are being launched. What to expect this weekend? A mini-deal, an extension to buy some time (always a first choice), or a deal that fixes nothing? There are many possibilities and all the volatility will sell soap for the media and that’s about it.

We’re rather well-prepared for trouble if not opportunity. We raised nearly 55% in cash two weeks ago with only 25% in stocks and the balance in the income space. We can deal with this one way or another.

Monday is scheduled to be a full trading day and one would suppose vacations will be cut short making New Years Day and Wednesday a tough go for partiers.

Stocks fell sharply and even more so after the close dropping 28 S&P points (see chart below).

Volume was spiked as news was leaked Obama wouldn’t offer any new compromise. Breadth continues to be negative per the WSJ.

Post close S&P 500 Index collapse.

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