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