On a day when the global and national markets had more than enough reasons to fall, the financial, homebuilding and social media companies turned sharply higher. Trading was low, but investors threw support into U.S. Equities.
The jump appeared to be based on a statement from the Federal Reserve that the new capital requirements were less severe than anticipated. Investors showed a willingness to overlook more bad news from the Eurogroup and ignore the chaos caused when House Republican leaders Boehner and Cantor refused to bring the Senate Payroll Tax Cut and Unemployment Insurance extensions to a vote.
Last week, Republican Speaker of The House Boehner met with Harry Reid and Mitch McConnell, majority and minority leaders in the Senate. Boehner participated in negotiations and gave his proxy the McConnell. The bill passed the Senate with a dazzlingly harmonious bi-partisan majority of 89 –10. Understanding that Boehner’s proxy was accepted, the Senate headed home.
On Monday, Boehner informed the world that he did not support the Senate bill. He and Cantor orchestrated another artful dodge and tabled the two-month extension in favor of a conference with selected members of the Senate.
Republicans, who did not favor the extensions originally, changed direction and demanded a longer-term extension of one year. Boehner and Cantor refused an up and down vote so that the American public would not know how various House members voted. This sparked conjecture that there were enough votes in the House to pass the bill.
The House Republicans opposed the Senate bill because the economy is staring to improve and they are determined to see the economy and President Obama fail. Republicans view this as absolutely necessary to win the Presidency. Recognizing this condition, the President has taken his message to the public.
This strategy is working. The President’s approval rating has climbed to50% while the approval record of Congress is 9%. Ineffective Republican caucus leader, Boehner, has lost credibility with the public and his party. The Speaker of the House speaks with a forked tongue.
House Republicans are calling the Senate back to session because they want to accelerate passage of the Keystone XL pipeline.
Republicans have touted the pipeline as a jobs program. A report from the U.S. State Department indicates this is not the case. Republicans will claim that the pipeline will ease the country’s dependency on foreign oil. This is an untrue representation.
The Keystone XL Pipeline will increase, mot decrease the cost of oil product to the Midwest farming industry. The State Department indicates that the cost of fuel to Midwest farmers will increase $0.20 per gallon.
The XL pipeline will run Canada’s tar sand oil to refineries in the Gulf Coast. Upon arrival, the majority share of the tar sand will be refined and then exported to Europe. This refined product will not be used by Americans. However, this pipeline will reap big export profits for big oil in the USA.
The State Department also reported that the pipeline would provide about 3.500–4,000 jobs. Like House Republicans, the pipeline has no credibility.
The State Department encourages research and a thorough environmental study. The Keystone XL Pipeline states that this is a safe process. More than one pipeline failure per year is unlikely. However, the Keystone I Pipeline has burst 12 times this year alone!
For farmers in the Midwest, the Keystone Pipeline will divert tar sand currently used in the Midwest in favor of sending that product to the more Gulf Coast.
To accelerate the pipeline project, Republicans have blocked the passage of the Senate bill that would have provided 160 million Americans a tax break and provided millions more Americans 40 more weeks of unemployment benefits.
This is the climate that investors ignored. Compounding market issues is the announcement that Spain’s Vega Asset Management Hedge fund resigned from the committee representing private creditors in restructuring the Greek debt.
Greece is negotiating with creditors to accept a 50% reduction. This structured default would decrease the country’s debt by 100 billion euros. Greece is teetering. There are no winners in this situation. The ripples of a default by Greece will fall hard on Eurogroup banking institutions.
Investors must be cautious. The euro is maintaining unjustified value. The Eurogroup’s GDP is retreating, not growing. Bond sales are labored, not fluid. Italy and Spain cannot support then yields they are forced to pay. Experienced investors are standing down on Eurogroup offerings. They are also slow to move into the equities markets. Today’s rise seems like a flight to safety that will not be safe if the tax cut and unemployment benefits are discontinued by House Republicans.