The indices snapped their 7-month winning streak, closing out June down about 1.5%. Doubts about the Fed continuing its easing policy, renewed economic struggles in Europe, and continuing unrest in the Middle East gave investors all the excuses they needed to sell. The average volatility index (VIX), which measures investor "fear" rose almost 30%. There were 20 trading days in June. For the Dow Industrials, 10 were up, 10 were down, and 16 of them resulted in moves of over 100 points. The average close was 15,036 for the month with an average daily move of 136, or just under 1%.

Alcoa will kick off second-quarter earnings reports next week, and congress will soon have to start talking about the debt ceiling, which it seems we've run into, again. Gold is losing the tug-of-war with a stronger dollar, and oil is climbing. These are just a few of the things that will impact markets in the very near term.

The economy added 195,000 jobs in June and the unemployment rate was unchanged at 7.6% as 177,000 joined the labor force. It should come as no surprise that Leisure & Hospitality saw big gains. A nice surprise is that the increase of 75,000 jobs in that area is more than twice the monthly average of 30,000 per month for all of 2012.

The number of jobs created in April and May was also revised higher; April, from +149,000 to +199,000, and May, from +175,000 to +195,000, for a net revision of 70,000 more jobs. The one piece of negative data contained in an otherwise glowing report was the U6 number, which includes people who can only find part-time work or have become too discouraged to look for a job jumped from 13.8% to 14.3%. This means a lot of the new jobs being created are part time.

Dallas Fed President Richard Fisher said in a recent interview that "feral hogs" are testing the central bank, as bond yields have spiked higher, implying that big money organizes itself somewhat like feral hogs. If they detect a weakness or a bad scent, they'll go after it.

This reminded me of a parable about a farmer who captured a herd of particularly aggressive feral hogs. He put out some food where he knew the hogs would find it. He continued day after day while slowly building a pen around the feeding spot. The story ends with the farmer simply closing the newly-constructed gate on the hogs while they are snout-deep in their slops.

Dave Galland at Casey Research continues the parable as follows...some months later, the farmer was facing hard financial times and decided he could no longer afford to keep feeding the hogs at the same level so he started cutting back the quantity and quality of their rations.

For a few days the hogs waited patiently for their usual rations, but when the farmer failed to come through, the hungry hogs began to fight over the reduced slops. Not long after that the farmer - thinking the hogs were properly domesticated - let himself into the pen only to find himself surrounded by angry hogs that killed and ate him.

To bring this full-circle, the moral to Mr. Galland's longer-version story is that domesticated hogs will remain docile only as long as you keep them snout-deep in slops. We saw some evidence of this in our markets when even the hint of a slowdown in the Fed's bond-purchasing program resulted in a 354-point selloff in late June.

Also keep in mind that the hogs, having now eaten their only source of food will starve to death, which may be illustrated by what's happening right now in Brazil, and which may be just the latest step in a seemingly-irreversible, slow-motion journey towards global financial decay.

Years of expanding, politically-motivated social-welfare programs at home and abroad have raised the expectations of the masses to the point where they simply can't be sustained. This week, it's Brazil. Last year it was most of Western Europe. Growing segments of the previously submissive masses, seeing their slops reduced in both quantity and quality, are now drifting back towards a more feral state. This chart shows federal government expenditures by function. While it is a little out of date, the trend couldn't be clearer...or more concerning.

The rapid growth in social spending reflects the unintended consequences of the "chicken in every pot" promises that have become the basis of every election campaign for decades now. This is a picture of what happens as the masses are trained to look to government, and not free markets, to solve every problem.

The pattern is mirrored the world over as governments "socialize" the bad debts of failing financial institutions by transferring those debts from private balance sheets to those of governments and central banks. Election results continue to indicate that politicians and those who elect them think that creating trillions of new monetary units to support virtually unchecked government spending is sound and sustainable policy.

This new operating model of "leadership" has evolved because no other way to delay the inevitable is seen. Riots encourage governments to keep the public slops flowing. The temporarily mollification of the masses encourages more counter-productive measures, like raising taxes on the successful to pay for the social spending demanded by rioters, and the cycle continues.

When might the hard truths become unavoidable? For a good answer in my opinion, I'll turn to Ayn Rand's classic Atlas Shrugged...

"Do you wish to know when that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming self-sacrifice - you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot."

I'll leave you with what I could only characterize as a lesson in irony that wraps it all up. The Food Stamp Program, administered by the US Department of Agriculture, is proud to be distributing this year the greatest amount of free meals and food stamps ever, to 46 million people.

Meanwhile, the National Park Service, administered by the US Department of the Interior, asks us, "Please Do Not Feed the Animals." Their stated reason for the policy is: "The animals will grow dependent on handouts and will not learn to take care of themselves."