EES: While The World Watches Fiscal Cliff, Shinzo Abe Creates Fiscal Disaster In Japan

The Yen is down 12% against the U.S. Dollar since September. While most are watching the fiscal cliff situation win Washington, Shinzo Abe is creating a fiscal canyon in Japan. Shinzo Abe has been elected with an effective platform of devaluing the Yen.

http://seekingalpha.com/article/1087451-while-the-world-watches-fiscal-cliff-shinzo-abe-creates-fiscal-disaster-in-japan

Shinzo Abe fuels fire of Currency War in Japan

What has been a building theme for some time, central bank intervention in the markets, is going to go into overdrive in 2013, with the brewing currency war among the major central banks as each tries to devalue its way to prosperity. But don’t blame central bankers (at least not completely). Political leaders deserve a big dollop of the blame as well.

The unappreciated spark to this currency-war trend is something noted today by Opinion page columnist Dan Henniger: “A reality has become too obvious for the world’s dazed inhabitants not to notice: The greatest threat to the upward arc of human progress is the collapse of public policy making. That is the biggest cliff of all.”

In Japan, they’ve elected the seventh prime minister in six years. In Europe, they’ve raised kicking the can to an art form. In the U.S., the fiscal cliff debate shows how deadlocked, and ineffective, the government has become. In the wake of this, central bankers are stepping into the breach.

Now, this isn’t necessarily a bad thing — for equities. Indeed, stocks have had quite a nice run since Fed Chairman Ben Bernanke launched his big quantitative easing program in March 2009. So long as the whole intricate Rube Goldberg machine doesn’t collapse, all this central bank pumping should be good for stocks. Indeed Wells Capital’s Jim Paulsen, one of the biggest bulls out there, sees the S&P 500 hitting a lofty, and record, 1700 in 2013.

In Japan, the new prime minister, Shinzo Abe, was put into office on a platform that was primarily based upon forcing the Bank of Japan to ramp up its stimulus efforts, indeed to run what amounts to unlimited easing until inflation hits a certain point (2%, in this case).

Not only is Abe pressing his thumb down on the BofJ, he’s also appointed a finance minister, former prime minister Taro Aso, who will be ready to spend all those freshly printed yen, as Dennis Gartman noted this morning:

With Mr. Abe pushing for aggressive fiscal spending and an aggressive Bank of Japan and with Mr. Aso at the helm of the Ministry of Finance…to which the Bank of Japan must report…it is certain the the bank will be forced to create yen that shall be spent aggressively and perhaps even shockingly over the course of the next several months.
It isn’t very different in Europe, where the Byzantine eurocrats seem able only to keep the euro crisis from spiraling out of control. In a long newspaper interview, Germany’s Jens Weidmann, president of the Deutsche Bundesbank, said “I find it strange that politicians, who should be leading the way and making the decisions, wish to file in behind us and be guided by us.”

Henninger gave a quick “no comment” to the fiscal cliff drama, but that is the best illustration of the failure of public policy: the United States, the world’s largest economy, is being brought to the brink because its political class can’t do two basic things: pass a budget and set tax tables. In the wake of that, the central bank is acting despite the misgivings of its leadership.

Bernanke has been cajoling, imploring, and warning D.C. about the dangers of inaction all year. He has been adamant about the fact that Fed policy can’t make up for political failures. But with D.C. unable to get past itself, the Fed is filling the vacuum as best it can.

As the world’s most important central bank, the Fed is leading the way on this one, and with Bernanke adopting an essentially unlimited stimulus program, other banks are following. Until the political class, however, gets its act together, it’s hard to see how or why the emphasis on monetary policy will wane.

Writing “come together” on the side of coffee cups is a nice gesture, but it’s going to take a lot more from voters to prod the squabbling politicians across the continents, and until then, central banks are going to be very active.

http://blogs.wsj.com/marketbeat/2012/12/27/a-story-about-central-banks-currency-wars-and-politicians/

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French court rejects 75 percent millionaires' tax

France's Constitutional Council on Saturday rejected a 75 percent upper income tax rate to be introduced in 2013 in a setback to Socialist President Francois Hollande's push to make the rich contribute more to cutting the public deficit.

The Council ruled that the planned 75 percent tax on annual income above 1 million euros ($1.32 million) - a flagship measure of Hollande's election campaign - was unfair in the way it would be applied to different households.

http://www.reuters.com/article/2012/12/29/us-france-tax-idUSBRE8BS05M20121229 

http://www.bloomberg.com/news/2012-12-29/french-court-says-75-tax-rate-on-wealthy-is-unconstitutional.html 

Will 'Fiscal Cliff' Accelerate Millionaire Deaths?

Because the "fiscal cliff" will not stop for death, it looks as if death's carriage may make a "kindly" stop to pick up some American millionaires this year, to paraphrase Emily Dickinson.

In 2010, after a year in which the estate tax was zeroed out altogether, Congress passed a law that set the estate tax at 35 percent and exempted all estates under $5 million, adjusted for inflation. That law expires in January 2013 when the exemption will fall to $1 million and the tax will rise to 55 percent.

Many families are faced with a stark proposition. If the life of an elderly wealthy family member extends into 2013, the tax bills will be substantially higher. An estate that could bequest $3 million this year will leave just $1.9 million after taxes next year. Shifting a death from January to December could produce $1.1 million in tax savings.

It may seem incredible to contemplate pulling the plug on grandma to save tax dollars. While we know that investors will sell stocks to avoid rising capital gains taxes, accelerating the death of a loved one seems at least a bit morbid—perhaps even evil. Will people really make life and death decisions based on taxes? Do we don our green eye shades when it comes to something this serious?

http://www.cnbc.com/id/100341727 

Marijuana Industry Support Grows - 2 Stocks To Own If It Hits

The news regarding the legalization of marijuana in several states hit usjust before the 2012 holiday season. While it is true that the focus of Washington, and much of the markets has been on the fiscal cliff, the legalization movement has been growing steadily.

http://seekingalpha.com/article/1084571-marijuana-industry-support-grows-2-stocks-to-own-if-it-hits

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EES: Euro Overvalued at current levels

Europe's demand for steel fell 8% in the last year, according to the world's largest steelmaker by volume.

Steelmaker ArcelorMittal (MT) on Friday took a $4.3 billion write-down on the value of its flailing European division and said it sees little prospect for an improvement in the region's sluggish economy any time soon.

Luxembourg-based ArcelorMittal, the world's biggest steelmaker by volume, said the goodwill-impairment charge will be included in its fourth-quarter earnings. The news resulted in a downgrade by Fitch Ratings, the third by a ratings firm since August.

The significance of this information is that it shows that real demand for steel in the 'real' economy (manufacturing, shipping, etc.) is down, whereas in the U.S. it's up. For Europe, this is a bad economic sign. Similar to the Baltic Dry Index, a decline in steel indicates a decline in the real economy.

http://seekingalpha.com/article/1081561-euro-overvalued-at-current-levels-and-due-for-a-sell-off

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Fiscal Cliff's Dirty Secret: It's Not About Taxes At All, But Too Much Spending

There's a lot of talk right now about an impending fiscal cliff. But we already went over a cliff economically in this country a long time ago.

The current debate over tax hikes is an empty one built upon a false premise. The debate is whether raising tax rates will address our current crisis. The premise is that it is a lack of taxation that has led to the crisis. Both are hopelessly wrong.

President Obama's proposed tax increases on the top 2% of earners would fund the federal government for about eight days. Even if we taxed Americans earning over $1 million on 100% of their income, we would raise only about $600 billion in revenue.

Taxing citizens at this level is a tyranny even Europe hasn't reached, and still it would only address about one-third of our deficit.

If one actually does the math, "taxing the rich" turns out to be no real solution at all, only fantasyland rhetoric.

Every dollar the government takes is another dollar used unproductively. Every dollar removed from the private sector and wasted in the hands of bureaucrats is a dollar that will not be used to purchase goods, to pay for services or to meet a payroll.

Every dollar the government ever takes — today, tomorrow and forever — is an attack on jobs and the economy.

Instead of sitting around trying to think of new ways to vote away someone else's money, Washington leaders should finally begin to address the real crisis that has threatened us long before the current handwringing: spending.

With a $16 trillion national debt and well over $1 trillion annually in deficits, we barreled over the edge of fiscal insolvency long before this month.

http://news.investors.com/print/ibd-editorials-perspective/121812-637557-fiscal-cliff-tax-debate-skirts-real-issue-too-much-spending.aspx 

Breaking: NYSE sold to ICE for 8.2 Billion

NYSE-Euronext is a 220 year old icon of global finance, but its 12 year-old Atlanta-based rival, IntercontinentalExchange (ICE) will buy it for $8.2 billion, according to a deal that has just been announced.

This revelation surprised a lot of people on the Street who thought all the exchange horse trading of 2010-2011 was over. In 2011, for example, the Justice Department blocked ICE and Nasdaq's attempt to buy the NYSE. NYSE was also stopped from merging with Germany's Deutsche Borse.

Read more: http://www.businessinsider.com/new-york-stock-exchange-acquired-2012-12#ixzz2FbY1vfFi

EES: Marijuana May Be The Next Big Growth Sector

We've all seen in the news US states such as Colorado legalizing and making marijuana smoking legal.

Public support for further legalization is building. There is also talk thatmore states could soon legalize. Since this is a new growth industry, we can only speculate in what direction it will grow. But what's clear, plans to keep Marijuana illegal have gone up in smoke.

Read More: http://seekingalpha.com/article/1067361-marijuana-may-be-the-next-big-growth-sector-in-the-u-s-stock-market 

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Fed Targets Foreign Banks With Stricter Capital Rules

More than two dozen foreign banks with at least $50 billion of global assets would face stricter U.S. capital rules under a Federal Reserve plan that’s aimed at lowering risks to the financial system.

The Fed staff proposed that most of the banks also be forced to comply with more stringent liquidity rules and pass stress tests analyzing how they would fare in a severe economic downturn, the central bank said today in an outline of the proposal. The board will vote today on whether to seek public comment on the plan, which would take effect in July 2015.

Deutsche Bank AG (DBK), based in Frankfurt, and London-based Barclays Plc (BARC) would be among the institutions that would have to keep more easy-to-sell assets in the U.S. and face restrictions on distributing capital to parent companies. The Fed provided $538 billion of emergency loans to the U.S. units of European banks during the financial crisis, almost as much as it did to domestic firms. That increased political pressure on lawmakers and regulators to tighten rules for all lenders.

http://www.bloomberg.com/news/2012-12-14/fed-targets-foreign-banks-with-stricter-capital-rules.html