Israel

With the market still hopeful of some deus ex resolution to the Fiscal Cliff will take place in the last few trading sessions of the year (one where the market itself will not have to be the catalyst for such a resolution, because once the selling starts in earnest, who knows if and when it stops, hence the loading up on prodigious amounts of puts), here is Iran out of left field, adding yet another known unknown to the inequality, announcing that it will begin six days of naval drills in the Straits of Hormuz on Friday. In other words a one year flashback deja vu, as Iran held a similar 10-day drill last December, when everyone was expecting an imminent escalation out of the endless Israel-Iran foreplay and was analyzing which were the new moon days allowing Israel unobstructed access to the greatest distraction of all - Iran's nuclear facility being moved under a mountain: a catalyst which Israel repeatedly said is the only reason to attack a weaponizing, nuclear Iran, and which took place some time in 2012. Now that the official window of opportunity is closed, will Israel tone back on the aggressive rhetoric? Hardly: after all that is precisely why the Syrian "outlet valve" has been put in play over the past 6 months.

Worldwide, more than eight-in-ten people identify with a religious group. A comprehensive demographic study of more than 230 countries and territories conducted by the Pew Research Center’s Forum on Religion & Public Life estimates that there are 5.8 billion religiously affiliated adults and children around the globe, representing 84% of the 2010 world population of 6.9 billion. These five charts sum up the age, size, geography, and power of the world's major religions.

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.

Why Did We Lose Our Rights if the Government Isn’t Even Keeping Us Safe?

Update 3: Adam had Aseprger Syndrome - a high functioning form of autism. In other words, watch as the debate rages over the traditional bogeyman of gun control, in a country with over three hundred million weapons, when we may well simply be talking about a mentally ill young adult.

Update 2 : NY Post now refuting CNN's initial report, and stating that the shooter's real name is Adam Lanza, not Ryan Lanza, who is instead brother of the latter. At this point there appears to be a ridiculous amount of confusion who did what, so it perhaps would be prudent on behalf of the authorities to double check this information before releasing it to the media.

Update: According to CNN the shooter's name is Ryan Lanza, out of New Jersey. Based on a White Pages reverse lookup there is an 18-24 year old Ryan Lanza living in Hoboken, NJ whose FaceBook profile lists Newtown, CT as his home city. Whether it is the same person remains to be confirmed officially.

Sadly, increasingly it appears that not a day, and certainly not a week can pass, in the US without news of some mass killing somewhere. Several days ago its was a mall in Oregon, and today it is a shooting rampage at the Sandy Hook Elementary school in Newtown, Connecticut. Here is what is known: the shooter, who CBS reports is a 20 year old from New Jersey, is reported to be dead. According to CBS 27 people are dead, of whom 18, Connecticut Post 27 people are dead, of whom 20 tragically, children. Among the dead are the principal and the school psychologist. The AP has already dubbed it "the worst school tragedy in American history."

2012 has been a stellar year for oil and gas. From East Africa to North America, new technology, major new discoveries, an unparalleled appetite for exploration and a metamorphosing perception of risk have changed the playing field. We’re looking at potential rather than existing production, and here are our Top 5 picks for this year.

• Fed Seen Pumping Up Assets to $4 Trillion in New Buying (BBG)
• China New Loans Trail Forecasts in Sign of Slower Growth (BBG)
• U.S. "fiscal cliff" talks picking up pace (Reuters)
• Insider-Trading Probe Widens (WSJ)
• U.K.'s Top Banker Sees Currency Risk (Hilsenrath)
• Three Arrested in Libor Probe (WSJ)
• Nine hurt as gunmen fire at Cairo protesters (Reuters)
• Egyptian President Gives Army Police Powers Ahead of Vote (BBG)
• Pax Americana ‘winding down’, says US report (FT)
• Japan Polls Show LDP, Ally Set for Big Majority (DJ)
• HSBC to pay record $1.9 billion U.S. fine in money laundering case (Reuters)

• Central Banks Ponder Going Beyond Inflation Mandates (BBG)
• Bloomberg Weighs Making Bid for The Financial Times (NYT)
• Hedge Funds Fall Out of Love with Equities (FT)
• Obama and Boehner resume US fiscal cliff talks (FT)
• Italy Front-Runner Vows Steady Hand (WSJ)
• Spanish Bailout Caution Grows as Business Lobbies Back Rajoy (BBG)
• Japan sinks into fresh recession (Reuters)
• China economic recovery intact, but weak exports drag (Reuters)
• Greece extends buyback offer to reach target (Reuters)  ... but on Friday they promised it was done
• Basel Liquidity Rule May Be Watered Down Amid Crisis (BBG) ... just before they are scrapped
• Irish, Greek Workers Seen Suffering Most in 2013 Amid EU Slump (BBG)

The upcoming week is comparatively less loaded with policy events, though the ongoing fiscal cliff negotiations in the US remain one of the key developments to follow. Important is also the FOMC meeting on Wednesday, where Goldman and everyone else now expect the Fed to increase their monthly asset purchase target under the QE3 program to $85bn per month, up from $45bn per month; this will keep the pace of asset purchases constant after the Operation Twist expires at the end of December, as Zero Hedge predicted the day QE3 was announced. There are is a handful of other central bank meetings in emerging economies (Russia, Indonesia, South-Korea, Philippines, Chile) although consensus expects no change to the base-rate in most cases. On the data front industrial production numbers for October will be released around the world including in the Euro-area, US and China. We also get the US retail sales number and December flash PMIs for the Euro-area and China.

Your comprehensive yet concise, one-stop summary of all the bullish and bearish events of the past week.

The 8 day mini war between Israel and Gaza has come and gone and any attempts at provoking a wider regional conflict, one involving Iran (if indeed this was the intention), have failed. Which means the fallback plan - Syria - is back in play. And sure enough, as both the most recent naval map update, which shows a US aircraft carrier and a big deck amphibious warfare ship, both of which house thousands of troops and numerous offensive aircraft, and an RT news flash, indicating that thousands of troops have amassed near the Syrian shore confirm, the time for a US invasion may be near. The alibi? "Chemical weapons" of mass or non-mass destruction. In other words the Iraq playbook all over again.

The world no longer makes sense to most people over forty years of age. Much of what we thought was true is now denied. What to us is obviously false (or at least always was) is now accepted as being true. Truth cannot be changed by repeating falsehoods. Nor can it be altered by more people believing untruths. But, when these fantasizers overwhelm society with their false beliefs, society will no longer function. As Ayn Rand stated:

You can avoid reality, but you cannot avoid the consequences of avoiding reality.

The avoidance of reality has overtaken our society. The consequences of doing so have been building for decades and will soon overwhelm us. On our current path, much of what we knew and cared about will be destroyed.

Rand Hated Libertarians ... and Many Libertarians Despise Rand

Currency wars are set to intensify as the US Senate is considering new sanctions against Iran that would prevent Iran getting paid for its natural resource exports in gold bullion. The new sanctions aimed at reducing global trade with Iran in the energy, shipping and precious metals sectors may soon be considered by the U.S. Senate as part of an annual defense policy bill, senators and aides said on Tuesday, according to Reuters. The sanctions would end "Turkey's game of gold for natural gas," Reuters reported a senior Senate aide as saying, referring to reports that Turkey has been paying for natural gas with gold due to sanctions rules. The legislation "would bring economic sanctions on Iran near de facto trade embargo levels with the hope of speeding up the date by which Iran's economy will collapse," the aide said. Last week Turkish Deputy Prime Minister Ali Babacan has revealed a critical detail about a widely discussed Turkey-Iran gold trade boom, disclosing that the Islamic republic was exporting gas to Turkey in exchange for payment in gold bullion. It is also reported that Iranians are buying Turkish gold with the Turkish Lira, which is deposited into their bank accounts in exchange for Turkey’s natural gas purchases, the deputy prime minister said at midnight Nov. 22 during a parliamentary session. Iran cannot transfer monetary payments to Iran in U.S. dollars due to U.S sanctions against the country’s alleged nuclear weapons program. Iran has been forced to shun the international financial system and the petrodollar as means of payment and turn to the international gold market to ensure it gets paid for its natural resources in order to prevent absolute economic collapse.