Obama Turns Hard Right

Charts: For over 120 years the strongest time of the year for stocks (on average) has been from Christmas through January. When this strength is manifest traders say we are in a Santa Claus Rally (SCR). Historical data shows that a true SCR does not start until after Christmas. Some people attribute the SCR to America's tax code, but this cannot be the case because the modern tax code of the late 20th century neither strengthened nor weakened the SCR. What then is the cause of this seasonal strength? Since it has existed for so long and is seemingly immune to outside historical factors like the tax code, the SCR must be like Fibonacci retracement levels, i.e. something that taps into the fundamental fabric of the stock market. As such it is an important technical indicator.

Fundamentals: Because of Tea Party Republicans and remarkable support from Pres. Obama, Congress for the first time in decades refused to pass a budget filled with pork laden earmarks. Yields on US government debt had been spiking before the pork got skewered. But yields came down after the porky omnibus spending bill failed, a train wreck averted. Obama has shifted harder to the right after the mid term election losses than Clinton did under similar circumstances. This is what we learned from the Clinton Presidency: A liberal Democrat in the White House that shifts to the right can get things done that a conservative Republican never could. Clinton examples: NAFTA and welfare reform. Think about the Bush tax cut extension that Obama shoved through. It contains the most aggressive accelerated deprecation schedule ever. History shows that accelerated deprecation is the only stimulus program that actually works in America.

Geopolitics: The Long War is looking good. A few months ago Al-Shabab controlled 60% of Mogadishu (Capital of Somalia). Now the super bad guys control only 40%. The African Union Army and the CIA supported Islamic militia Ahlu Sunnah are slowly dismantling the super bad guys. This helps the situation in Yemen and all of North Africa and puts the CIA in the running for an unprecedented 3rd Golden Bull Award!
The Pentagon just gave its big review of the Afghan war to Obama and it basically said progress is being made everywhere except in the Pak tribal lands. Obama responded with a new policy calling for US Special Forces to get more involved in the tribal lands and even greater emphasis on drone strikes.
There has been a lot of noise about the Pak ISI supposedly unmasking the CIA Pak station chief. But the day after this supposedly happened one of the biggest and juiciest drone strikes ever occurred in a part of the tribal lands where the drones had been forbidden to fly. Obviously the ISI gave up a huge number of Taliban leaders to the CIA. Pretend for a moment that you are a midlevel Taliban commander and you are informed that every one of your superiors has been blasted away by CIA drones and your next, but oh wait there is good news: the CIA station chief has been outed and is flying back to America for a little R&R. Are you happy? I didn't think so.
The Long War is going swimmingly but Cold War II is off to a bumpy start. Cold War II is what I am calling the nascent conflict between China/N. Korea and America with all its Asian allies. South Korea is conducting artillery drills from the island that North Korea shelled a few weeks ago on Monday. The North says that these drills mean war and yet the South is carrying them out anyway, which it absolutely must do. Cold War II started with China's attempt to wrest an island away from Japan a couple months ago. While the media portrays the Long War in defeatist terms it does the opposite with Cold War II, downplaying it. For instance, the Chinese fishing trawler that rammed two steel hulled Japanese warships a while back was itself a warship with a steel reinforced ramming hull. In other words, there has already been a minor naval engagement between Japan and China. Obama's response to Cold War II has been spot on so far. Just because he is doing the right stuff doesn't mean CW II won't get hairy. Once again the world has two antagonistic nuclear superpowers (scary).
All foreign policy events must be seen through the twin lenses of the Long War and Cold War II. Take the new START treaty limiting Russian and American nuclear weapons. Without looking through our two lenses you might (truthfully) say that Russia has ten times more tactical nuclear weapons in Europe than America and this yawning disparity is not addressed in START and so it is a bad treaty. But look through the twin lenses and you would say, "So what? We need Russia to defeat Iran, China, and Al-Qaeda. The USSR doean't exist anymore. Get with the program and ratify START."