The Deluge Begins

Today the first Baby Boomer applied for Social Security benefits. Kathleen Casey-Kirschling, who was born at 12:00:01 AM on January 1, 1946, will become eligible for benefits when she turns 62 on New Year's Day. She is the first of many, signaling that the fiscal crisis experts have long predicted for the U.S. is no longer in the distant future. The Social Security system will begin taking in less in payroll taxes than it pays out to retirees in 2017. Social Security is only the first challenge; in 2011 the Baby Boomers will begin joining Medicare. Reasonable people can debate the impact this will have on the markets and the economy, of course. It will be interesting, at the very least.

As for the here and now, stocks fell today as Citigroup (C) reported a 57% drop in earnings for the third quarter thanks to delinquent mortgages and consumer lending shortfalls. Financial services and homebuilder stocks fell on the news, a trend that will likely continue if the other major money-center banks report similar results. The odds of another interest-rate cut by the Fed at its next meeting on October 31 are down to 32%, according to the futures market.

Crude oil rose to about $86 for the first time on concerns that the Turkish military may pursue Kurdish militants into one of Iraq's prime oil-producing areas. This provided a lift for energy stocks. In fact, energy was the only sector with any significant strength today. Wednesday brings the monthly Consumer Price Index data, and signs continue to point to more inflation.