Can Kicking

The upcoming can kick by the politicians will make NFL kickers envious.  There will be no fiscal cliff.  Politicians only care about the short term, and getting re-elected, and even though Obama doesn't have to, he's yielded to Republican desires over and over.  That was apparent in the debt ceiling debate last year.  That is why you continue with these temporary tax cuts that always get renewed.  House members are up for re-election every 2 years, they know that a bad economy during the next two years means it will be harder for them to get re-elected.  So they will never agree to any tax increases (Republicans) or spending cuts (Democrats)!  It is the easy way out, and Obama will cave in, like he always does. 

Anyway, Washington doesn't need to be fiscally disciplined.  It has the Fed printing all the money to buy the bonds that are being issued to pay for all the tax cuts and deficit spending.  So you have yields going down despite huge budget deficits.  And the foreigners (mostly just China) park their money in US debt in order to keep their own currencies in the same crapper, fearing their exporter golden gooses will get killed with a stronger currency.  They need to buy US dollars in order to manipulate their own currencies lower, preferring to hammer their working class for the benefit of the big corporations (state owned enterprises).  Hello crony capitalism, China Style.

So a situation which should lead to clear dollar weakness only leads to slight weakness, because of competitive devaluations. If on the very low chance that we see actual fiscal discipline and a repeal of most of the tax cuts, the market will be carpet bombed in 2013. 

We have one more push lower coming soon, down to around 1360, which is buyable for a couple day trade.