December 30, 2012
Weekly Market Outlook
By Keith Schneider
As 2012 and the markets melt/wind down with no deal yet on the fiscal cliff, one might believe that it's getting a bit late to make a deal. But, it isn't over till the fat lady sings. Although not too late for some sort of deal, we are dangling over the edge and the markets are not happy. Bonds and the dollar both firmed in a flight to quality; but that logic is perverse. We could be on the edge of another debt downgrade which has been threatened by the ratings agencies Moody's and Fitch. If we dally too long, the flight to quality this time may not be greenbacks and US denominated debt instruments.
The science experiment of exponential sovereign debt has yet to play out and there are signs that the greenback is losing its status as a reserve currency. China has been increasing its holdings of gold and slowly shifting its cash hoard out of dollars. Other countries are following suit. The travesty playing out on Capitol Hill makes it hard to have much conviction either bullish or bearish.
However, on a more positive note, the US economy has been doing quite better. A deal could set off a sharp rally.
Meanwhile, while the US equity markets chop, the new mega trend is coming from Japan. An aging population, huge debt load, an overvalued currency and a slowing economy are enough to cause a surge in Sake consumption by Japanese politicians with a further sell off in the yen a given. Watch this week's video as we cover this emerging trend as well as the usual coverage.
Happy New Year!
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