Don't blame Volker, blame Scott Brown

The media has been blaming the "Volker proposals" as the reason behind the market selloff. However, the market began selling off on Wednesday, which was a day before the news broke that Obama intended to go with Volker's restrictions on the banks.

So what happened Wednesday that made it a game changer?

Simple. It was the day after the Massachusetts special election, in which Republican challenger Scott Brown emerged victorious.

Brown's victory changed the balance of power in Congress in an instant. It anointed those who see deficit deficit reduction as being second only in importance to national security, in a position to make it happen.

In his victory speech Tuesday night, Brown even threw in the now-obligatory yet completely idiotic and inapplicable comment, "We can't keep leaving all this debt to our kids and grand kids," line.

The very next day the Dow tumbled 122 points and has been heading south ever since.

And if you don't believe me that the market is worried about deficit reduction, then pay close attention to the direction of stocks following President Obama's State of the Union speech next Wednesday (Jan 27). In that speech he is expected to propose some very austere deficit cutting measures, which will absolutely crush stocks.

If I were you and if you have money in the market, or are disposed to making some, I would aggressively be short stocks at the close of business Wednesday.

We are about to repeat the terrible mistakes of 1937, when FDR was conned into balancing the budget, sending the nation back into a mini depression. It took a world war to finally boost spending sufficiently to get us out.