Crude

So much for the US trade renaissance. After posting a better than expected October trade deficit of ($42.1) billion, November saw the net importer that is the US revert to its old ways, with a massive deficit of some $48.7 billion - the worst number since April, far more than the $41.3 billion in expectations, which makes it the biggest miss to expectations since June 2010, driven by a $1.8 billion increase in exports to $182.6 billion, and a surge in imports which rose from $222.9 billion to $231.3 billion. Specifically "The October to November increase in imports of goods reflected increases in consumer goods ($4.6 billion); automotive vehicles, parts, and engines ($1.5 billion); industrial supplies and materials ($1.3 billion); foods, feeds, and beverages ($0.6 billion); capital goods ($0.4 billion); and other goods ($0.1 billion)." And with this stark reminder that the US has to import the bulk of its products, something which a weak USD does nothing to help, expect a bevy of lower Q4 GDP revisions, as this number may push Q4 GDP in the sub-1% category.

• Obama Signs Bill Enacting Budget Deal to Avert Most Tax Hikes (BBG)
• GOP Leaders Take Political Risk With Deal (WSJ)
• Basel Becomes Babel as Conflicting Rules Undermine Safety (BBG)
• Portugal Faces Divisions Over Austerity Measures (WSJ)
• The Fiscal Cliff Deal and the Damage Done (BBG)
• Cliff deal threatens second term agenda (FT)
• Deposits stable in euro zone periphery in November (Reuters)
• Fresh Budget Fights Brewing (WSJ)
• China Poised for 2013 Rebound as Debt Risks Rise for Xi (BBG)
• Who's Afraid of Italian Elections?  (WSJ)
• China services growth adds to economic revival hopes (Reuters)
• Asian Economies Show Signs of Strength (WSJ)
• Japan’s Aso Targets Myanmar Markets Amid China Rivalry (Bloomberg)

• Introduction – Gold’s Gains In All Fiat Currencies in 2012

• Much of Gold’s Gains in 2012 On 11% Price Gain in January 2012

• Japanese Yen Shows How Gold Protects From FX Devaluations

• Food Inflation Risk As Wheat and Soybeans Surge in Price

• Currency Wars and Competitive Currency Devaluations

• Gold Remains Historically and Academically Proven Safe Haven

• Conclusion – Gold in 2013

While the predictions of Blackstone's Byron Wien (born in 1933), who may not be in the senate or "sleep-deprived", but this year will become an octogenarian, may have been all over the place in the past 10 years, some correct, but most miserably wrong (with a recent hit rate of about 25%), he always does provide entertainment value. Which is the only value in the latest release of his 10 forecasts for 2013. Naturally, take all of these with a salt mine.

Even if the US economy really takes off in 2013, don`t look for oil and gasoline demand to overtake supply in the equation.

My thoughts on what is headed our way

As we reported previously, today Iran decided to launch a rather impromptu "massive" naval drill dubbed the Velayat 91, which will take place in the Oman Sea, North of Indian Ocean, in the Persian Gulf and East of Strait of Hormuz, and will cover an area of one million square kilometers right in the sweet zone of the US 5th Naval Fleet's AOR, where in addition to other resources, both the Stennis aircraft carrier and Peleliu amphibious warfare ship group are located. As PressTV reports, "On the first day of the drills, ships and submarines, will go to their locations and get ready for the tactical stage of the maneuvers. Forces in shores will also get ready for the tactical phase of the drills. In addition our 23rd fleet will be deployed to the high seas to protect commercial ships and oil tankers and to counter piracy in Gulf of Aden." All this will be taking place within kilometers of both the busiest seaborne transit corridor of crude oil in the world, as well as the headquarters of the US 5th Navy in Bahrain. What could go wrong.

Enjoy your job in North Dakota while you can as in four years, those shale oil projects are no longer sustainable.

Perhaps one of the most startling and telling charts of the New Normal, one which few talk about, is the soaring difference between bank loans - traditionally the source of growth for banks, at least in their Old Normal business model which did not envision all of them becoming glorified, Too Big To Fail hedge funds, ala the Goldman Sachs "Bank Holding Company" model; and deposits - traditionally the source of capital banks use to fund said loans. Historically, and logically, the relationship between the two time series has been virtually one to one. However, ever since the advent of actively managed Central Planning by the Fed, as a result of which Ben Bernanke dumped nearly $2 trillion in excess deposits on banks to facilitate their risk taking even more, the traditional correlation between loans and deposits has broken down. It is time to once again start talking about this chart as for the first time ever the difference between deposits and loans has hit a record $2 trillion! But that's just the beginning - the rabbit hole goes so much deeper...

Good news for all those who have nightmares about the prospect of peak oil: scientists have discovered an oil field which has a gargantuan 155 quintillion barrels of oil, or about 200 times more hydrocrabons than there is water on earth. There is however, a catch: the field is located some 1,300 light years away.... The good news, for all the Keynesians out there, is that the idea to build the Death Star, as proposed first on Zero Hedge, may finally get some life, especially if the Death Star is provided with some exploration and production capacity. And what self-respecting Keynesian wouldn't salivate at the prospect of injecting $852 quadrillion of debt growth into the economy at this time?

• IMF Demands Partial Default for Cyprus (Spiegel)
• Boehner's 'Plan B' Gets Pushback (WSJ)
• Beijing criticises US ‘political checks’ (FT)
• White House Said to Tell Business Groups Talks Stall (BBG)
• NYSE tries to get hitched again: IntercontinentalExchange in talks to buy NYSE (Reuters) -> N-Ice coming?
• Greece faces ‘make or break’ year (FT)
• Fed rejects idea of consensus forecasts, "maybe forever": Fisher (Reuters)
• Rajoy Drives Spanish Revolution With Low-Cost Manufacture (BBG)
• Italian Senate Set for Budget Vote Before Monti Resigns (BBG)
• BOJ Loosens With Pledge to Review Inflation Objectives (BBG)
• Bowing To Abe, BOJ To Review Price Goal (WSJ)

Meanwhile in the always efficient crude oil markets... another asset class joins the inverse-Baumgartner crowd... Daniel Day-Lewis would be proud of this gusher...

Following on the heels of Byron Wien, Morgan Stanley's Surprises, and Saxo's Outrageous Predictions, Deutsche Bank's FX strategy team has created a who's who of 13 outliers for 2013. Quite frankly, given the extreme nature of monetary (and now fiscal) policy, asset allocation decisions, and bankers' and politicians' willingness to go into the media and lie directly to our faces, the comprehension of the possible (no matter how improbable) is far more important for risk management than the faith in the centrally-planned unreality our markets (and therefore ourselves) currently find themselves in. As they note, all too often, the tendency to not stray too far from a self-anchoring recent-history-extrapolated consensus (while apparently highly profitable for some for a microcosm of time) leads to unrecoverable drawdowns exactly when career-risk was the limiting factor. From Malaysian elections and EM bubbles bursting to Fed monetizing equities and South China Sea escalation, these outliers seem all to 'normal' in our brave new world.

Our biggest concern here on the cusp of 2013 is the current odd combination of extreme complacency about the risks presented by extend-and-pretend macro policy making and rapidly accelerating social tensions that could threaten political and eventually financial market stability. Before everyone labels us ‘doomers’ and pessimists, let us point out that, economically, we already have wartime financial conditions: the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II. We may not be fighting in the trenches, but we may soon be fighting in the streets. To continue with the current extend-and-pretend policies is to continue to disenfranchise wide swaths of our population - particularly the young - those who will be taking care of us as we are entering our doddering old age. We would not blame them if they felt a bit less than generous. The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore. We have all been reduced to a bunch of central bank watchers, only ever looking for the next liquidity fix, like some kind of horde of heroin addicts. We have a pro forma capitalism with de facto market totalitarianism. Can we have our free markets back please?

It seems wherever you look today, markets are going vertical. Whether its Citi and BofA +15% for December, Gold and Silver cliff-diving today, WTI crude surging in a v-shaped recovery or EURUSD and S&P 500 futures ramping in the most wonderfully linear manner - the market has gone a little wild today...