If Obama administration arrogance with its attendant partisan gridlock are still the criteria for international credit downgrades, it’s hard to see how the U.S. can avoid further cuts to its rating. The cliff looms in four days and the markets barely came back from steep losses in tumultuous trading Thursday. The last US stock market day before the cliff has arrived.

Obama may attempt to use executive power to usurp the budget function of Congress.  There has not been a budget passed since the Democrats took Congress under Bush. 

Let’s do a reality check.  Regardless of the fiscal cliff there is an Obama Cliff because he is running a deficit of $1Trillion/yr now and it will grow to at least $1.4Trillion/yr deficit with 40 million new indigents getting entitlements for unlimited poor quality care which will mean a triage system with a wait of a year or more for an operation as they have to wait in Europe.  We will have to go to a private clinic system like they have in France and other countries for people with money who want real health care as we have now before Obama’s kicks in.   He has already driven the American Deficit over $16Trillion and the increase in deficit in Obama’s first term was more than the entire deficits run from George Washington trough GW Bush. 

Wheat, corn and soybean futures fell, extending a slump to a five-month low, on signs that demand is waning for exports from the U.S., the world’s top exporter.

Bloomberg projected New York City’s deficit in the next fiscal year to exceed $811 million.  That city deficit exceeds most state deficits.

U.S. banks have suffered from denial-of-service attacks on their websites in recent months, including ones that targeted the online services of Bank of America (BAC), J.P. Morgan Chase (JPM) and now CITI.

Such attacks frustrate consumers, threaten to cause reputational damage and can even hurt banks’ bottom lines.

30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.50 percent from 3.47 percent, with points increasing to 0.44 from 0.36 for 80 percent loan-to-value ratio loans.

World Economies

http://www.bloomberg.com/news/

http://www.foxbusiness.com/index.html

Currently the world is losing confidence that America (with Obama) can lead the world in any way shape or form. 

Asian stocks fell on speculation gains that stoked the highest valuations in recent history were overdone as the fiscal cliff is Jan 1, 2013 and consumer confidence declined sharply in the U.S., the biggest buyer of the Asian nation’s goods this year.

Japan may finally be bottoming from their Quantitative easing started in 1985 which collapsed their growth since 1990.  It looks like the bottom has held for two years now.

http://in.finance.yahoo.com/q/bc?s=%5EN225&t=5y&l=on&z=l&q=l&c=

Germany has not made a breakout move...  However it is and could have a breakout soon. This could be the top of the world stock markets until the USA and Greece get their acts together.

http://in.finance.yahoo.com/echarts?s=%5EGDAXI#symbol=^gdaxi;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

American Economy

http://biz.yahoo.com/c/e.html

The US dollar is starting to fall under pressure as it is expected tax revenue falls off in 2013 and the 2014 projected deficit explodes.

This week

Dec 26 7:00 AM MBA Mortgage Index 12/22 not given-suspected very bad as the -12.3% last time.

The Mortgage Refinance Index decreased 14 percent from the previous week to while the seasonally adjusted Purchase Index decreased 5 percent from one week earlier.  See

http://www.calculatedriskblog.com/2012/12/mba-mortgage-applications-decline.html

Case-Shiller 20-city Index Oct 4.3% year over year up from 3.0%

Continuing Claims 12/15 3206K 3200K 3200K stable 3225K

New Home Sales Nov 377K up slightly from 368K

Consumer Confidence Dec 65.1 down sharply again from 73.7

Dec 28

Chicago PMI Dec 51.6 up slightly from 50.4 where anything below 50 is a contraction.

Pending Home Sales Nov 1.7% down sharply from 5.2% last month.

Crude Inventories 12/21 -0.6M down again from -.96M

Markets Dec 28, 2012

No sign of a potential upside breakout from the current trading range.  Without significant tax code changes soon, Obama in early 2013 is scheduled to hit America with what would be the largest tax increase in our history not just for the wealthy but on everyone.  The $1,000 per year tax holiday for a $50,000 income household disappears, the tax on the first $8,700 of income jumps from a 10% rate to 15% rate.  Child care tax credits will drop from $1,000 to $500. The marriage penalty will be back. The alternative minimum tax finally kicks in.   Therefore a family filing as married with two children making $50,000 will see their taxes increase by basically $2,700.  If the average American worker had previously set aside 5% for investment and retirement ($2500/yr) she would need to cut all of that plus reduce purchases to pay the Obama tax.  As for the wealthy, they are already moving their investments off shore and the expectation is that hundreds will seek citizenship in places like Belgium, Switzerland, and several island nations and stop working and travel the world living in hotels as many wealthy Europeans already do. 

http://www.policymic.com/articles/4451/when-the-payroll-tax-holiday-ends-in-2013-taxes-will-go-through-the-roof

Obama’s raising of taxes will reduce consumer spending.  Raising taxes on business will reduce business investment and American jobs and thus reduce consumer spending as well.  Reduced consumer spending will further reduce jobs.  Consumers are already spending most of their disposable income so higher taxes translate directly into reduced consumer consumption.  We are already seeing deflationary pressure and are tip toeing around a great double dip Obama depression like the on the socialist FDR had.  He is not considered a socialist today but was considered one in his time.  It just shows the USA is slowly creeping toward socialism with its poverty, class warfare and its union violence.

 But by April 15, tax revenue will be increasing because people are taking profits now before the tax increase.   Taxes on those profits come due next year.  So the benefits of the surge in tax revenue will sharply reduce deficits because it will be exaggerated two fold in 2013 mostly because people are taking profits before 2013 begins.  But that extra tax in 2013 will not be available in future years and the extreme increase in taxes next year will cause people to try to postpone taking 2013, 2014, 2015 and 2016 profits.  That will make 2014 a disaster because deficits will rise sharply in a likely deeper 2013-16 recession.  The USA will look much like Greece if Obama does not cut spending.  But if he cuts spending the recession will initially be deeper.  Still it will at least come to an end sooner. 

So at present many are taking profits before the new taxes but it may not be advisable to re-invest profits right now as they are doing.   We know that because volume is up but the market is just churning.  What Obama is doing will make things progressively worse.  He is not bright enough to know the revenue in 2013 is not his policy but the negative reaction to his negative policy (which is a positive tax windfall).  That revenue will be wasted again and tax revenue will plummet in 2014 because there will be few corporate profits in 2013. 

The DJ Rails continue to contradict the DJIndustrials and there still no DOW buy signal. The DJI and DJR confirmed a sell signal together in August 2011and the DJR remains confirming that sell signal today.  But evidence is that the two are now converging and it is a matter of there being another rally.

http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=3m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

Obama may be taking America into a profoundly deeper recession breaking 2009 lows since he was re-elected and we have little hope of a recovery with Obama in office.

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=5y;compare=;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Dow Theory Industrials and Rails sell signal of August 2, 2011 still holds. The Rails failed to meet even the last 3-month shoulder of the head and shoulder sell signal. But bulk trade is rising and October looks like a turn around beginning. http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=1m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

The USA VIX is flat lined.  A low VIX normally precedes a sell-off. Once that starts the VIX needs to go up above 30 until bear markets normally end.  Volume is so low it implies Americans are fleeing stocks again.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

Is the Baltic Dry Index is dropping toward a new low.  China probably hit bottom and has begun to bounce like a dead cat…unfortunately.   And Obama stalling the American economy will compound the worldwide recession.

http://www.bloomberg.com/quote/BDIY:IND/chart

Stock market update:

http://in.finance.yahoo.com/intlindices?e=asia

http://in.finance.yahoo.com/intlindices?e=europe

Why do we let the mentally ill have access to guns? Adam’s mother was obviously mentally ill to buy automatic weapons and to teach her son who she knew was mentally ill to use her weapons. How did she get certified as safe to own guns?

 One has to ask why the face of insanity is so often mistaken as the face of brilliance.

So rather than listen to modern Bolsheviks, Nazis, and Righteous Terrorists who all have mental health issues and continue to live in and advocate gun control in the USA... lets listen to the people who understand the problem.  What did Hitler’s mother have to say?  Did she write about her “well adjusted” son’s childhood and his love of humanity and his desire to help the disadvantaged?  The parents of mass murderers should be heard so we can hear the real story.  They are the group of parents who watched this horror in Newtown CT unfurl with an even a more excruciating thought—what if the lunatic is my child?  These mothers and fathers are parents of mentally ill children and young adults and they are afraid their own children.  And what does it say of the mental condition of the mother of a disturbed child like Adam Lanza, who buys automatic weapons and teaches her disturbed son to use them when he is greatly disturbed by the divorce?  Did his mother want her son to murder his father?  Why teach him to kill with such purposeful accuracy and efficiency like a good Nazi?  Neither Adam nor his mother was mentally fit.

                This week in a blog post republished on The Blue Review entitled “I Am Adam Lanza’s Mother,” Liza Long writes: “I live with a son who is mentally ill. I love my son. But he terrifies me….”

  “I am sharing this story because I am Adam Lanza’s mother. I am Dylan Klebold’s and Eric Harris’s mother. I am James Holmes’s mother. I am Jared Loughner’s mother. I am Seung-Hui Cho’s mother. And these boys—and their mothers—need help. In the wake of another horrific national tragedy, it’s easy to talk about guns. But it’s time to talk about mental illness.”
                Long describes the love she has for her 13-year-old son, a mentally deranged boy who loves Harry Potter and has a “snuggle animal collection.” But according to her, this same child has also threatened her with a knife so many times that she keeps a Tupperware container for the days she has to collect all the sharp objects in the house. Nothing really helps she says: the powerful meds, the intermittent hospitalizations, or what she calls a “Russian novel of behavioral plans.” She says she’s trained her other children to lock themselves away for their own safety when their brother falls into one of his unpredictable rages. 
                Liberals have now attacked Liza Long claiming. “Long's alleged "vindictive and cruel posts about her children in which she fantasizes them away.  They say her allegedly insane and violent son is a normal boy who incites her wrath by being messy, buying too many Apple products and “supporting Obama."

http://www.hollywoodreporter.com/live-feed/i-am-adam-lanzas-mother-403127

Obama is supporting unions that shut down several American ports at a cost of $1Billion lost revenue per day per port. At each port about “$760 billion worth of goods are just idled each day." As they continue to negotiate, both sides say wages, pensions, vacations and other benefits are not an issue.  The union says average clerical salaries are about $87,000 a year. When benefits are factored in, that raises annual compensation to $165,000.  Management has offered a new contract that would raise that amount to about $195,000 by 2016, along with providing 11 weeks of paid vacation.  These are clerks mind you not the high paid union workers.  They have high a school education.  They say they elected Obama and now Obama owes them a favor and they want him involved now and forget the fiscal cliff.  The union members realize they are all obsolete so they are striking for the socialist dream of a high paying job for life where they only are required to pretend they work.  When the USSR collapsed they pretended to pay their workers who pretended to work.  It took from 1917 to 1989 for the Union of Soviet Socialist Republics and about 80million people imprisoned, tortured and executed for the USSR to disintegrate. 

http://jobs.aol.com/articles/2012/12/04/los-angeles-port-union-striker-workers/

The world looks as the USA heads for a fiscal cliff and Obama gives the middle class an enormous tax increase, and the rich get a tax increase far below what they expected all because Obama does not like any compromise.  We need to cut spending two to three times faster than we increase taxes.

U.S. consumer confidence fell ten points in December to a five-month low as Americans grew more concerned about the possibility of higher taxes next year.

World Economies

http://www.bloomberg.com/news/

http://www.foxbusiness.com/index.html 

Currently the world is losing confidence that America (with Obama) can lead the world in any way shape or form.  Iran said this past week that America (with Obama) is pushing the world to a nuclear WWIII. 

Japan may finally be bottoming from their Quantitative easing they started in 1985 and collapsed their growth in 1990.  It looks like the bottom has held for two years now.

http://in.finance.yahoo.com/q/bc?s=%5EN225&t=my&l=on&z=l&q=l&c= 

No, not even Germany has confirmed a bull market.  However it is testing the previous high and could have a breakout soon. This could be the top of the world stock markets until the USA and Greece get their acts together.

http://in.finance.yahoo.com/echarts?s=%5EGDAXI#symbol=^gdaxi;range=2y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

American Economy 

http://biz.yahoo.com/c/e.html

We expect the US dollar to fall under pressure before the end of 2013 as the tax revenue falls off and the 2014 projected deficit explodes. 

Last week

Dec 17

Empire Manufacturing Dec -8.1 much worse again from -5.2 
Net Long-Term TIC Flows Oct $1.3B investment in the USA declined from $3.3B

Dec 18

Current Account Balance Q3 -$107.5B Deficit still very high -$117.4B

NAHB Housing Market Index Dec 47 Housing index holding 46

Dec 19

MBA Mortgage Index 12/15 -12.3% terrible decline in purchases 6.2%

Housing Starts Nov 861K down from 894K

Building Permits Nov 899K up from 866K

Crude Inventories 12/15 -0.964M dropped from 0.843M

Dec 20

Initial Claims 12/15 361K somewhat worse 343K

Continuing Claims 12/08 3225K worse than 3198K

GDP - Third Estimate Q3 3.1% manipulated up from 2.7%

GDP Deflator - Third Estimate Q3 2.7% Unchanged from 2.7%

Existing Home Sales Nov 5.04M up from 4.79M

Philadelphia Fed Dec 8.1 improved from -10.7

 Leading Indicators Nov -0.2% down from 0.2%

 FHFA Housing Price Index Oct 0.5% up from 0.2%

 Natural Gas Inventories 12/15 -82 bcf down from 2

Personal Income Nov 0.6% 0.3% 0.3% 0.1% 0.0%

Dec 21

Personal Spending Nov 0.4% up from -0.2%

AM PCE Prices - Core Nov 0.0% stable from 0.1% 

Durable Orders Nov 0.7% up again from 0.5%

Durable Orders -ex Transportation Nov 1.6% up again from 1.8%

Dec 21 9:55 AM Michigan Sentiment - Final Dec 72.9 down from 82.7

Markets Dec 21, 2012

No sign of a potential upside breakout from the current trading range.  Without significant tax code changes soon, Obama in early 2013 is scheduled to get hit America with what would be the largest tax increase in our history not just for the wealth but on everyone.  The $1,000 per year tax holiday for a $50,000 income household disappears, the tax on the first $8,700 of income jumps from a 10% rate to 15% rate.  Child care tax credits will drop from $1,000 to $500. The marriage penalty will be back. The alternative minimum tax finally kicks in.   Therefore a family filing as married with two children making $50,000 will see their taxes increase by basically $2,700.  If the average American worker had previously set aside 5% for investment and retirement ($2500/yr) she would need to cut all of that plus reduce purchases to pay the Obama tax.  As for the wealthy, they are already moving their investments off shore and the expectation is that hundreds will seek citizenship in places like Belgium, Switzerland, and several island nations and stop working and travel the world living in hotels as many wealthy Europeans already do. 

http://www.policymic.com/articles/4451/when-the-payroll-tax-holiday-ends-in-2013-taxes-will-go-through-the-roof

Obama continues to give high school dropout unemployables free cell phones, food stamps, housing stipends and other gifts to avoid riots like the USA saw in 1969 under President Johnson.  Roughly 50% of Black students drop out of High School.  Now the habit is spreading to college.  The Organization for Economic Co-operation and Development report "Education at a Glance 2010" said that among 18 countries tracked by the OECD, the United States finished last (46 percent) for the percentage of students who completed college once they started it.  That is right, 54% of Americans now drop out of college and who do you think pays for that?  When it costs nothing there is no incentive to finish and earn back the cost.

http://www.freegovernmentcellphones.net/

Raising taxes on individuals will reduce consumer spending.  Raising taxes on business will reduce business investment and American jobs and thus reduce consumer spending as well.  Reduced consumer spending will further reduce jobs.  Consumers are already spending most of their disposable income so higher taxes translate directly into reduced consumer consumption.  We are already seeing deflationary pressure and are tip toeing around a great double dip Obama depression like the on the socialist FDR had.  He is not considered a socialist today but was considered one in his time.  It just shows the USA is slowly creeping toward socialism with its poverty, class warfare and its union violence. 

But by April 15, tax revenue will be increasing because people are taking profits now before the tax increase.   Taxes on those profits come due next year.  So the benefits of the surge in tax revenue will sharply reduce deficits because it will be exaggerated two fold in 2013 mostly because people are taking profits before 2013 begins.  But that extra tax in 2013 will not be available in future years and the extreme increase in taxes next year will cause people to try to postpone taking 2013, 2014, 2015 and 2016 profits.  That will make 2014 a disaster because deficits will rise sharply in a likely deeper 2013-16 recession.  The USA will look much like Greece if Obama does not cut spending.  But if he cuts spending the recession will initially be deeper.  Still it will at least come to an end sooner.

At the moment there is heightened activity because investors are taking profits now because taxes will be higher next year.  Not only will Fed taxes be higher but also city and state taxes will no longer be deductible for computing Federal Taxes.  Cities in NY and CA will be in greater pain by 2014 than in states with lower taxes.  The bulk of the next slowdown will be felt by the Stock Market by the end of the first quarter 2013 but hope will begin to spring back as revenues top expectations.  We could have +_20% stock market swings.  The market could take off at the moment the revenues rise sharply.  So I would want to get invested before the good news is out and that could be just after the worst news is out.   

So at present many are taking profits before the new taxes but it may not be advisable to re-invest profits right now as they are doing.   We know that because volume is up but the market is just churning.  What Obama is doing will make things progressively worse.  He is not bright enough to know the revenue in 2013 is not his policy but the negative reaction to his negative policy (which is a positive tax windfall).  That revenue will be wasted again and tax revenue will plummet in 2014 because there will be few corporate profits in 2013.

The DJ Rails continue to contradict the DJIndustrials and there still no DOW buy signal. The DJI and DJR confirmed a sell signal together in August 2011and the DJR remains confirming that sell signal today.  But evidence is that the two are now converging and it is a matter of there being another rally.

http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=3m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

As predicted the market shows that Obama may be taking America into a profoundly deeper depression breaking 2009 lows since he was re-elected and we have little hope of a recovery with Obama in office.

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=5y;compare=;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Dow Theory Industrials and Rails sell signal of August 2, 2011 still holds. The Rails failed to meet even the last 3-month shoulder of the head and shoulder sell signal. But bulk trade is rising and October looks like a turn around beginning.

http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=1m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

The USA VIX is flat lined.  A low VIX normally precedes a sell-off. Once that starts the VIX needs to go up above 30 until bear markets normally end.  Volume is so low it implies Americans are fleeing stocks again.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c= 

Is the Baltic Dry Index is dropping toward a new low.  China probably hit bottom and has begun to bounce like a dead cat…unfortunately.   And Obama stalling the American economy will compound the worldwide recession.

http://www.bloomberg.com/quote/BDIY:IND/chart

Stock market update:

http://in.finance.yahoo.com/intlindices?e=asia

http://in.finance.yahoo.com/intlindices?e=europe

Republicans should smarten up and propose schedules for 1)the allowable growth in the Federal Government expenditures and 2), allowable level of Federal debt. They should first show the graphs for what Obama predicts. If that is acceptable to the Republicans they should hold him to his predictions and set the Federal Debt ceiling to what Obama promises. If they disagree with Obama they should set the annual allowable Federal Debt ceiling to their own level but never compromise to a position above what Obama targeted. Talk of a recovery in China or the USA or Brazil is ignorance on the part of analysts. Look at the bulk world trade and see how it has just collapsed again!!! And the long-shore unions have just gone on strike because there is no work and they want a guaranteed job!

http://www.bloomberg.com/quote/BDIY:IND/chart

The FED is a manipulator of American financial markets. Currently the FED is buying near worthless mortgage and other asset basis debt and borrowing against it to buy treasuries to keep interest rates low and propping up American markets flush with cash so that investors and businesses will continue to invest. But the economy is no longer growing so investors are now buying equities  at market highs. We are witnessing the silent dissolution of small and medium businesses and the major market indicators do not show the damage being done because the large companies are buying up the pieces for the present moment. American industrial capacity is being hollowed out with Obama’s socialism and class warfare that is turning more and more violent. Socialism is equality of poverty as opposed to the inequality of hard work and striving for a better education and a good job. 
Socialism is reverse slavery.  The hard workers support the people who's life stile is the easy life.  That is why the entitlements of socialism always destroy the incentive to strive, to learn. and to contribute to society.

As we said before we think Apple is a slowly sinking ship without Steve Jobs. Apple sank well below MSNBC/Pravda/ Cramer’s $556 buy target price level so Crammer is saying buy again. Apple’s Tim Cook has a face-off coming with Steve Jobs best ever quarter and the new insecure Apple president has fired several of the founders hand picked executives to eliminate any threat to his position. Tim Cook put a half-baked Apple map application on their latest product line against the advice of his developer, just to try to harm Google. Then he fired the person who was developing the Apple map application and put Google back in. Soon all the executives Steve picked will realize they are on a sinking ship just like the time Steve himself was fired from Apple. Samsung will now counter-sue Apple to the US Supreme court if necessary to fight the suit Tim Cook brought that was meant to bully, intimidate and silence Samsung. This alone could cost Apple $1Billion. Apple’s etch-a-sketch screen is an excellent toy as long as you can throw it away and get a new one every year. The average buyer is said to be a fourteen year old boy and it is used primarily as a toy for games which seems to be what the next generation wants for amusement. Apple has no business-oriented line of products and Cramer is a fool if he thinks Apple toys will destroy the PC business application industry. Voice commands will replace touch screens.

Obama is supporting unions that shut down several American ports at a cost of $1Billion lost revenue per day per port. At each port about "$760 billion worth of goods are just idled each day." As they continue to negotiate, both sides say wages, pensions, vacations and other benefits are not an issue. The union says average clerical salaries are about $87,000 a year. When benefits are factored in, that raises annual compensation to $165,000. Management has offered a new contract that would raise that amount to about $195,000 by 2016, along with providing 11 weeks of paid vacation. These are clerks mind you not the high paid union workers. They have high a school education. They say they elected Obama and now Obama owes them a favor and they want him involved now and forget the fiscal cliff. The union members realize they are all obsolete so they are striking for the socialist dream of a high paying job for life where they only are required to pretend they work. When the USSR collapsed they pretended to pay the their workers who pretended to work. It took from 1917 to 1989 for the Union of Soviet Socialist Republics and about 80million people imprisoned, tortured and executed for the USSR to disintegrate.

http://jobs.aol.com/articles/2012/12/04/los-angeles-port-union-striker-workers/

　

World Economies

http://www.bloomberg.com/news/

http://www.foxbusiness.com/index.html

U.S. Securities and Exchange Commission is stepping up scrutiny of Chinese companies for suspected "Enron" levels of accounting fraud. In a recent enforcement action, the commission accused affiliates of the four biggest Chinese accounting firms of refusing to produce documents needed for SEC investigations. Carson Block is shorting many stocks in China now and claims tattooed Chinese gangsters have threatened his people.

http://www.bloomberg.com/news/2012-12-10/carson-block-goes-short-unafraid-as-gangsters-in-china-chase-him.html

Chinese company won in an auction to purchase much of Obama’s failed bankrupt green crony socialist battery maker, A123 System Inc.'s business.

China’s market continues to fall but could be near a new bottom.

http://in.finance.yahoo.com/q/bc?s=000001.SS&t=5y&l=on&z=l&q=l&c=

Japan may finally be bottoming from their Quantitative easing they started in 1985 and collapsed their growth in 1990. It looks like the bottom has held for two years now.http://in.finance.yahoo.com/q/bc?s=%5EN225&t=my&l=on&z=l&q=l&c=

No, not even Germany has confirmed a bull market. However it is testing the previous high and could have a breakout soon. This could be the top of the world stock markets until the USA and Greece get their acts together.http://in.finance.yahoo.com/echarts?s=%5EGDAXI#symbol=^gdaxi;range=2y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

American Economy

The National Federation of Independent Business’s monthly optimism survey index fell to 87.5, the lowest reading since March 2010, from 93.1 in October, and one of the largest monthly drops since records began in 1986. The "expect better economy" gauge fell to -35 from a positive reading of 2, an unprecedented swing, and its lowest ever reading. At the height of the US debt-ceiling debate in August 2011, this component fell to -26. Roughly half of owners feel certain that things will be much worse next year than they are now. Between the $1Trillion possible Obama cut to defense spending, the higher healthcare costs with 40 million indigents added and the endless new business regulations; owners have found themselves in a state of pessimism. We are forced to ask: is this Zimbabwe redistribution or what? If it is socialism’s redistribution then there is no place for new start-ups. It certainly is not free enterprise with the right to keep the products of one’s labor.
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe　

http://biz.yahoo.com/c/e.html

If we continue on the current path we expect the US dollar to fall under pressure before the end of 2013 as the tax revenue falls off and the 2014 projected deficit explodes.

Last week
Dec 11
Trade Balance Oct -$42.2B worsened from -$40.3B

Wholesale Inventories Oct 0.6% improved from 1.1%

Dec 12

MBA Mortgage Index 12/08 6.2% improved from 4.5%

Export Prices ex-ag. Nov -0.7% dangerously deflationary from 0.2%

Import Prices ex-oil Nov -0.2% dangerously deflationary from 0.4%

Crude Inventories 12/08 0.843M increasing from -2.357M

FOMC Rate Decision Dec 0.25% 0.no change from 0.25%

Treasury Budget Nov $172.1B makes no sense from -$137.3B Obama manipulation of government statistics

Dec 13

Initial Claims 12/08 348K down from 370K adjusting for Obama manipulation of moving bad news in after reporting it good.

Continuing Claims 12/01 3214K up from 3205K adjusting for Obama manipulation

Retail Sales Nov 0.3% improved from -0.3%

Retail Sales ex-auto Nov 0.0% same bad news as 0.0%

PPI Nov -0.8% dangerously deflationary from -0.2%

Core PPI Nov 0.1% not significant -0.2%

Business Inventories Oct 0.4% still bad from 0.7%

Dec 14

CPI Nov -0.3% deflationary from 0.1% -

Core CPI Nov 0.1% flat 0.2%

Industrial Production Nov 1.1% improved from-0.4%

Capacity Utilization Nov 78.4% improved from 77.8%
　

Dec 14, 2012
It they do nothing, we would prepare for a sell-off of unprecedented magnitude that shakes the foundation of Wall Street. Raising taxes on individuals will reduce consumer spending. Raising taxes on business will reduce business investment and American jobs and thus reduce consumer spending as well. Reduced consumer spending will further reduce jobs. Consumers are already spending most of their disposable income so higher taxes translates directly into reduced consumer consumption. We are already seeing deflationary pressure and are tip toeing around a great double dip Obama depression like the on the socialist FDR had. He is not considered a socialist today but was considered one in his time. It just shows the USA is slowly creeping toward socialism with its poverty, class warfare and its union violence.

But by April 15, tax revenue will be increasing because people are taking profits now before the tax increase. Taxes on those profits come due next year. So the benefits of the surge in tax revenue will sharply reduce deficits because it will be exaggerated two fold in 2013 mostly because people are taking profits before 2013 begins. But that extra tax in 2013 will not be available in future years and the extreme increase in taxes next year will cause people to try to postpone taking 2013, 2014, 2015 and 2016 profits. That will make 2014 a disaster in that deficits will rise sharply in a deeper 2013-16 recession. The USA will look much like Greece if Obama does not cut spending. But if he cuts spending the recession will initially be deeper. Still it will at least come to an end sooner.

At the moment there is heightened activity because investors are taking profits now because taxes will be higher next year. Not only will Fed taxes be higher but also city and state taxes will no longer be deductible for computing Federal Taxes. Cities in NY and CA will be in greater pain by 2014 than in states with lower taxes. The bulk of the next slowdown will be felt by the Stock Market by the end of the first quarter 2013 but hope will begin to spring back as revenues top expectations. We could have +_20% stock market swings. The market could take off at the moment the revenues rise sharply. So I would want to get invested before the good news is out and that could be just after the worst news is out.

So at present many are taking profits before the new taxes but it may not be advisable to re-invest profits right now as they are doing. We know that because volume is up but the market is just churning. What Obama is doing will make things progressively worse. He is not bright enough to know the revenue in 2013 is not his policy but the negative reaction to his negative policy (which is a positive tax windfall). That revenue will be wasted again and tax revenue will plummet in 2014 because there will be few corporate profits in 2013.
　

The DJ Rails continue to contradict the DJIndustrials and there still no DOW buy signal. The DJI and DJR confirmed a sell signal together in August 2011and the DJR remains confirming that sell signal today. But evidence is that the two are now converging and it is a matter of there being another rally.
http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=3m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

As we predicted the market shows that Obama may be taking America into a profoundly deeper depression breaking 2009 lows since he was re-elected and we have little hope of a recovery with Obama in office.
http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=5y;compare=;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Dow Theory Industrials and Rails sell signal of August 2, 2011 still holds. The Rails failed to meet even the last 3-month shoulder of the head and shoulder sell signal. But bulk trade is rising and October looks like a turn around beginning. http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=1m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

The USA VIX is flat lined. A low VIX normally precedes a sell-off. Once that starts the VIX needs to go up above 30 until bear markets normally end. Volume is so low it implies Americans are fleeing stocks again.
http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

Is the Baltic Dry Index is dropping toward a new low. China probably hit bottom and has begun to bounce like a dead cat…unfortunately. And Obama stalling the American economy will compound the worldwide recession.
http://www.bloomberg.com/quote/BDIY:IND/chart

Stock market update:
http://in.finance.yahoo.com/intlindices?e=asia

http://in.finance.yahoo.com/intlindices?e=europe

Chief running deficit is taking a 21 day vacation in Hawaii at an estimated taxpayer cost of $12 Million while he insists Congress stay in session as America races toward the fiscal cliff.

40 years ago mankind left his last step on the moon. $1 Trillion spent and then abandoned.  Now we run a deficit each year that is as high as the entire NASA man on the moon program.

A study published last month in the Annals of Family Medicine found that medical students dread Obama Care. Only about 20 percent of students have chosen primary care since Obama dictated his brand of healthcare, down from about 50 percent said the study. If the trend continues, the U.S. could be short more than 52,000 primary care doctors in 12 years as Obamacare downshifts senior citizen care and broadens the coverage to indigents for whom Obama has never reimbursed their hospital emergency care costs. Forty million more hard core indigents who have always had "free" hospital emergency care will now get an Obama entitlement at taxpayer expense. It was always at taxpayer expense but charity was never abused and entitlements are always abused. Increasing the coverage for indigents while cutting end-of –life services for taxpayers will lengthen their life spans of those on the dole under the Obama health-care law. It entitles every American to go on the dole. In Europe a private clinic system has evolved and it picks up all the quality care while the hospitals are restricted under socialism and waiting lists for surgery at hospitals exceeds a year. That means most critical health conditions are privately paid because waiting an Obama year is often eternity.
Planned layoffs hit highest level since May, as a deep recession looms greater on the horizon. Yet once again after the layoff and the storm Sandy…Obama claims unemployment is down again. We have said it before that Obama is another incompetent president like Jimmy Carter was. Obama has set up America for an Obama malaise of chronic unemployment and increasing inflation. We expect stocks will trade in the range of previous highs and lows churning with no net positive movement until Obama is out of office. We are near the top of that range right now.

U.S. Household Net Worth Jumps $1.7T in 3Q as house prices begin to rise.
Read more: http://www.foxbusiness.com/industries/2012/12/06/best-and-worst-places-to-live/#ixzz2EKl8p8Tq

If right-to-work legislation passes, Michigan would become the second Midwest industrial state in the past year to adopt a ban on mandatory union dues, following Indiana in February.
The Senate unanimously passed a measure authorizing $631.4 billion for U.S. defense programs this fiscal year that sticks to President Barack Obama’s proposed spending total while drawing an Obama veto threat with its endorsement of the Pentagon’s request to buy 29 F-35 stealth jets made by Lockheed Martin. The Pentagon requested $9.1 billion for the F-35 program, including $6.1 billion for procurement. The 98-0 vote yesterday in the Senate advances legislation allowing about $543 billion for the basic defense budget in the fiscal year that began Oct. 1, and an additional $88 billion to fund wars in Afghanistan and elsewhere. The legislation next must be reconciled with a House- passed version that would spend $4 billion more than Obama wants for returning warriors. This means Obama will likely insist on $1Trillion total in defense cuts that are part of the cliff.

President Barack Obama says he is in favor of choosing another socialist or communist leaning business leader for his economic team in a second term if they can be convinced the democrat controlled U.S. Senate confirmation process isn’t too disheartening.

The plunge in US truck sales has General Motors sitting with more than double a typical supply of trucks and facing the prospect of cutting production or increasing discounts, threatening to squeeze 2013 profits. Clearing away that inventory is critical.

　
World Economies
http://www.bloomberg.com/news/
http://www.foxbusiness.com/index.html

U.S. Securities and Exchange Commission is stepping up scrutiny of Chinese companies for suspected "Enron" levels of accounting fraud. In a recent enforcement action, the commission accused affiliates of the four biggest Chinese accounting firms of refusing to produce documents needed for SEC investigations. Carson Block is shorting many stocks in China now and claims tattooed Chinese gangsters have threatened his people.
http://www.bloomberg.com/news/2012-12-10/carson-block-goes-short-unafraid-as-gangsters-in-china-chase-him.html

Greece’s economy has contracted every quarter for four years and one in four Greeks is jobless. Despair and crime rises.
http://www.bloomberg.com/news/2012-12-06/depression-deepens-greek-middle-class-despair-with-crime-rising.html

Dec 7 the WSJ had an article on the number of accounting fraud incidences found with Chinese firms that had been listed on American exchanges.
The Bank of England has given up made no new effort to ease the recession. The European Central Bank slashed its economic forecasts for 2013 and also took no new steps to spur business activity, offering little hope to the euro zone's weaker members as they struggle to emerge from the region's debt crisis.

Samsung is seen overtaking Apple in technology.
Data that shows the eurozone's services sector is continuing to contract is yet another worrisome sign for the EU currency.
Nokia the Finnish mobile-phone maker took on Apple Inc.’s iPhone using Google Inc.’s Android version of its smartphone for China’s largest wireless carrier. Finland’s economy just joined the euro area in the recession of the third quarter as the region’s debt crisis weighed on business confidence and sapped investments.
Chinese manufacturing returned to growth in November for the first time in over a year and the deep downturn in euro zone factories eased slightly, according to purchasing managers indexes. China, whose economy has misfired this year, is just showing signs of recovery going into 2013. If sustained, it could prove vital for the world economy next year since a meaningful recovery in Europe still looks a long way off. The decline among the euro zone hit an eight-month low in November and the latest PMIs showed the economy is on course for its worst quarter since 2009.
Chinese are cash rich buying real estate in the USA just as Japan was in 1988. The only difference is that Japan was buying at the peak of the housing boom and China is buying at the bottom. The supply of housing in the Los Angeles area has been unable to meet demand since April this year. Potential local buyers say they are unable to compete with Chinese buyers who turn up with cash, the US-based Chinese-language press as saying.

About 10% of China's stocks of small and medium enterprises will be worthless in five years due to local competition, say officials at the 2nd cross-strait forum for SMEs, which was held in central China this week.
A recent study reports the majority of the least livable cities are located in Africa. War-torn regions like Baghdad and Tbilisi, Georgia are also on the list, as is the earthquake-devastated and extremely impoverished Port-au-Prince, Haiti. Eight of the ten countries on the list are among the worst primarily because they are the most dangerous on earth. The U.S. Department of State has issued travel warnings for these countries due to extreme violence, robbery, and the murdering of tourists.
http://www.foxbusiness.com/industries/2012/12/06/best-and-worst-places-to-live/#ixzz2EKoD3pC5
China continues to fall.
http://in.finance.yahoo.com/q/bc?s=000001.SS&t=5y&l=on&z=l&q=l&c=

Japan may finally be bottoming from their Quantitative easing that started in 1985 and collapsed their growth in 1990.
http://in.finance.yahoo.com/q/bc?s=%5EN225&t=5y&l=on&z=l&q=l&c=

No, not even Germany has confirmed a bull market.
http://in.finance.yahoo.com/q/bc?s=%5EGDAXI&t=5y


American Economy
http://biz.yahoo.com/c/e.html
This week
Dec 3 10:00 AM ISM Index Nov 49.5 declined from 51.7 means US manufacturing is contracted last month.
http://www.martincapital.com/index.php?page=graph&view=ISM
Dec 3 10:00 AM Construction Spending Oct 1.4% up from 0.6% …definitely turned around now.
http://www.martincapital.com/index.php?page=graph&view=construction

We expect the US dollar to fall under pressure before the end of 2013 as the tax revenue falls off and the 2014 projected deficit explodes.
Dec 3
Producer CE Prices - Core Oct 0.1% very little price inflation 0.1%
Chicago PMI Nov 50.4 growth up while 49.9 last month was shrinking. 50 is no improvement in manufacturing.
Dec 5
MBA Mortgage Index 12/01 4.5% up greatly from -0.9%
ADP Employment Change Nov 118K down very bad, was 158K
Productivity-Rev. Q3 2.9% up from1.9%
Unit Labor Costs -Rev Q3 -1.9% pay dropped more from -0.1%
Factory Orders Oct 0.8% fell from 4.8% and near the point of falling off a cliff.
http://www.martincapital.com/
ISM Services Nov 54.7 slightly improved from 54.2
Crude Inventories 12/01 -2.357M down from -0.347M
Dec 6
Challenger Job Cuts Nov 34.4% up 200% from 11.6% last month.
Initial Claims 12/1 370K down from 393K but still high.
Continuing Claims 11/24 3205K down from 3287K
Dec 7
Nonfarm Payrolls Nov 146K down from 171K
Nonfarm Private Payrolls Nov 147K down from 184K
Unemployment Rate Nov 7.7% down absurdly from 7.9% with payrolls down and the perfect storm Sandy implying unemployment should be up not down.
Hourly Earnings Nov 0.2% up from 0.0%
Average Workweek Nov 34.4 constant at 34.4
Mich Consumer Sentiment Dec 74.5 plunged down from 82.7
Consumer Credit Oct $14.2B debt increased rapidly from $11.4B

Next Week
Dec 11 8:30 AM Trade Balance Oct
Dec 11 10:00 AM Wholesale Inventories Oct
Dec 12 7:00 AM MBA Mortgage Index 12/08
Dec 12 8:30 AM Export Prices ex-ag. Nov
Dec 12 8:30 AM Import Prices ex-oil Nov
Dec 12 10:30 AM Crude Inventories 12/08
Dec 12 12:30 PM FOMC Rate Decision Dec
Dec 12 2:00 PM Treasury Budget Nov
Dec 13 8:30 AM Initial Claims 12/08
Dec 13 8:30 AM Continuing Claims 12/01
Dec 13 8:30 AM Retail Sales Nov
Dec 13 8:30 AM Retail Sales ex-auto Nov
Dec 13 8:30 AM PPI Nov
Dec 13 8:30 AM Core PPI Nov
Dec 13 10:00 AM Business Inventories Oct
Dec 14 8:30 AM CPI Nov
Dec 14 8:30 AM Core CPI Nov
Dec 14 9:15 AM Industrial Production Nov
Dec 14 9:15 AM Capacity Utilization Nov

Dec 7, 2012
We would prepare for a sell-off of unprecedented magnitude that shakes the foundation of Wall Street. Raising taxes on individuals will reduce consumer spending. Raising taxes on business will reduce business investment and American jobs and thus reduce consumer spending as well. Reduced consumer spending will further reduce jobs. Consumers are already spending most of their disposable income so higher taxes translates directly into reduced consumer consumption.
http://www.martincapital.com/

But by April 15 tax revenue will be increasing because people are taking profits now before the tax increase. So the benefits of the surge in tax revenue will sharply reduce deficits because it will be exaggerated two fold in 2013 mostly because people are taking profits before 2013 ends. But that extra tax in 2013 will not be available in future years and the extreme increase in taxes next year will cause people to try to postpone taking 2013, 2014, 2015 and 2016 profits. That will make 2014 a disaster in that deficits will rise sharply in a deeper 2013-16 recession. The USA will look much like Greece if Obama does not cut spending, but if he cuts spending the recession will initially be deeper. Still it will at least come to an end sooner.
Right now there is heightened activity because investors are taking profits now because taxes will be higher next year. Not only will Fed taxes be higher but also city and state taxes will no longer be deductible for computing Federal Taxes. Cities in NY and CA will be in greater pain by 2014 than in states with lower taxes.
The bulk of the next slowdown will be felt by the Stock Market by the end of the first quarter 2013 but hope will begin to spring back as revenues top expectations. The market could take off at the moment the revenues rise sharply. So I would want to get invested before the good news is out and that could be just after the worst news is out.
So at present many are taking profits before the new taxes but it may not be advisable to re-invest right now. You can see the average daily volume is higher now showing people sell and then buy back in somewhere else so prices do not fall but volume is up. The cliff will not go away. What Obama is doing will make things progressively worse.
Obama needs to decide what to do with the new tax income next year. He will likely flush it down the sewer again by putting more people on food stamps, subsidized housing and subsidized utilities. As a communist Obama has no interest in strengthening the USA. He wants to crush the concept of private property and free competition. Under socialism when the government decides on windmills and that is all you get.
Socialism will generate no jobs and no income or growth.  We will have American debt stuck on the US Government books, as interest rates grow unaffordable. Stagflation will be at least twice as bad as Jimmy Carter produced in 1978-1980. Interest rates will hurt housing but the declining dollar will help American business and foreign investors will buy US real estate like never seen since the Japanese purchasing in the late 1980’s. By 2016 Americans and especially businessmen and Wall Street will be ready to clean out our big government and union mess. Today unions have cities in the poor house and in a form of 17^th century bondage. By 2016 the US Government will also have sold its soul to the unions. We will need a president like Ronald Reagan who fired the unionized Air Traffic Controllers who would have been making $180,000/yr today just like the unions in our shipping ports get today along with 11 weeks paid vacation. Obama wants to reduce inequality except if it requires unions and Federal Government workers to do a reality check.
The Flash Crash was so large that in some cases the sales were later cancelled. Rather than be greedy it would be better to offer a price after the bottom or create an uptick at a low price. That is better than under pricing and leading the ticker down. Your uptick could save a computer-orchestrated collapse.

The DJ Rails continue to contradict the DJIndustrials and there still no DOW buy signal. The DJI and DJR confirmed a sell signal together in August 2011and the DJR remains confirming that sell signal today. But evidence is that the two are now converging and it is a matter of there being another rally.
http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=3m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

As we predicted the market shows that Obama may be taking America into a profoundly deeper depression breaking 2009 lows since he was re-elected and we have little hope of a recovery with Obama in office.
http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=5y;compare=;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Dow Theory Industrials and Rails sell signal of August 2, 2011 still holds. The Rails failed to meet even the last 3-month shoulder of the head and shoulder sell signal. But bulk trade is rising and October looks like a turn around beginning. http://finance.yahoo.com/echarts?s=%5EDJT+Interactive#symbol=^djt;range=1m;compare=^dji;indicator=;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined;

The USA VIX is flat lined. A low VIX normally precedes a sell-off. Once that starts the VIX needs to go up above 30 until bear markets normally end. Volume is so low it implies Americans are fleeing stocks again.
http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

Is the Baltic Dry Index five-year trend finally showing a bottom? China probably hit bottom and has begun to bounce like a dead cat…unfortunately. And Obama stalling the American economy will compound the worldwide recession.
http://www.bloomberg.com/quote/BDIY:IND/chart
Stock market update:
http://in.finance.yahoo.com/intlindices?e=asia
http://in.finance.yahoo.com/intlindices?e=europe

Congress should support the President’s taxes on the rich and continuation of a middle class tax reduction.

Republicans made a big mistake! They thought the economy was in decline because government interference, government regulations, and unfair taxation were impeding the intelligent hard working wealth creators. 

Yet, the candidate that promised the most regulatory interference and higher income taxes won the hearts and minds of the rich!   Republicans thought the rich were unfairly taxed… but the rich voted with their check books and contributed considerably to the defeat of Mitt Romney.

Notice also that the blue states that support more taxes on the rich happen to be all of the rich states.

The executives that destroyed our banking system apparently knew all about the liar loan housing mortgages and willfully created the derivatives from the liar mortgages knowing full well they were selling their fiduciary clients time bombs. Then just as the scam peaked they created insurance derivatives to bet against their time bombs and made $billions as their derivative bombs exploded and destroyed the American banking system. Then the US government gave them a $700 Billion bailout for all their hard work. And yet not a single one of those executives was put on trial. And then they gave themselves more bonuses and supported the defeat of Mitt Romney! Now Wall Street is lining up to pay for Obama’s parties so Obama can save his money for Obama Memorial Center.

We cannot see into the minds of Warren Buffet or George Soros but apparently they are not alone and know our economic system is unfairly or corruptly rewarding many of them and they therefore feel guilty and actually want higher taxes.

The rich have collectively voted for higher taxes by donating more to the candidate offering them higher taxes. The Republicans should get out of the way and let President Obama give it to them.

As for the economy, let's see what happens.  We think we will get by the cliff, but the corruption in government and now Wall Street may already be at irreversible socialist levels.