Chillin' out till it needs to be funded
His second term will expire at 11:59 pm on January 20, 2017 till when if the gridlocked Congress is not resolved in his favor some form of the fiscal cliff
budget cuts will continue to be needed to bridge the fiscal deficit gap. The larger deficit though does aid the continued weakness in the Dollar, Global Liquidity and still fortunately for the United States of America, it pushes yields upward for a more concave yield curve as the 3 year auction failed to sho the same interest as earlier pushing yields to 0.392%.
The Japanese are invested only in the 10 year paper and they are unlikely to let today’s $24 B 10Y UST Auction fail for lack of demand. In the 3 year auction, as much as 62% of the paper was unloaded on the primary dealers themselves as the world watched the clear re election mandate sprung by the American citizens on the Presidency.
Meanwhile the Aussies were shocked by the RBA refusal to cut rates earlier and the Australian Dllar is also free falling thence to breach 1.04 levels today and probably go to 1.02 levels while the Yen and the Euro probably start back from 80 and 1.275 levels to regain ground on the US Dollar. The British Pound has been cranky too on month end data but remains positive right behind the US, China and India while the Koreans have spent 2012 investing $41 Bn in foreign securities ( both stocks and bonds)
Though fact check may later say otherwise Obama seems to have won 50.2% of the popular vote and Romney’s 48.x% makes him unable to catch up with Obama even if Florida, unlike the Republican claims for Wisconsin, Pennsylvania and Ohio, vote counts ramp him up on that count. Democrats maintained the Senate stronghold in the few ‘by elections’ held but the Congress remains gridlocked till the next term is put up for elections in 2014
A global handshake for Obama’s second term also means however that the American citizens are unlikely to let arbitrary spending cuts rule the roost and may yet coach the undecided to vote for a Democrat Congress despite the more vocal Tea Party allowing the $7 Tln in tax increases already registered in the “fiscal cliff” compromise to come out as a full fledged strategy as it would avoid the pulling out of $500B in arbitrary cuts from the Economy even as Obama deprioritises Defence and reprioritises Education, Clean Energy and Infrastructure spending from taxes on the wealthy.
Obamacare also wins. Pharma research will probably be nodding in satisfaction even as Senior citizens and the poor get covered by Medicare for America. Meanwhile Europe remains in recession and account for most degrowth in global trade even at individual country levels in US India, China and even Africa. The correction in refi and even fresh purchases in US continues in the US home market after a freakishly positive spree in early October.
However, Existing home Sales data and fresh mortgage data is unlikely to get significantly weaker in October or even November as HARP continues at a fast clip to reclaim fresh mortgages and while banks such as Citi struggle to show their presence as the Global investment Banking markets ppick up the recovery in income is good enough for mortgage market winners like Wells Fargo and JP Morgan to make a statement. However unless Crude prices refuse to pick up for another six – eight months there could be a significant risk of the much watched for recession indeed making America and Obama’s second term difficult to live in 2013 as the inflation monster lurks behind the latest victory of the American Spirit and imports continue to make a mark.