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All this talk about some Super Cycle turn in the economy is putting the proverbial cart ahead of the horse.

• CAT beats ex-Chinese fraud: $1.91, Exp. $1.70; Warns 2013 could be a "tough year"; sees 2013 EPS in $7.00-$9.00 range, Exp. $8.54, sees Q1 sales well below Q1, 2012
• Yi Warns on Currency Wars as Yuan Close to ‘Equilibrium’ (BBG)
• Monte Paschi seeks new investor as scandal deepens (Reuters)
• Assault Weapons Ban Lacks Democratic Votes to Pass Senate (BBG)
• Toyota Again World's Largest Auto Maker (WSJ)
• Curious why all those Geneva Libor manipulators moved to Singapore? Bank probes find manipulation in Singapore's offshore FX market  (Reuters)
• Japan eased safety standards ahead of Boeing 787 rollout (Reuters) - so like Fukushima?
• Goldman is about to be un charge: Osborne cools on changing inflation target (Telegraph)
• Abe Predicts Bump in Revenue as Japan Emerges From Recession (BBG) - actually, "hopes" is the correct verb here
• Toxic Smog in Beijing Fueling Auto Sales for GM, VW (BBG)
• Fed waits for job market to perk up (Reuters) ... any minute now that S&P to BLS trickle down will hit, promise
• BofA shifts derivatives to UK (FT)

The platinum group of metals (PGMs) have received some perhaps unwarranted attention in recent weeks as the 'coin' idiocy came and went; but, it is noteworthy, as Eric Sprott points out that with demand rising and supply under pressure, the outlook for investment in physical platinum and palladium is increasingly compelling. The following infographic (and various supply and demand dynamics) provides a succinct picture of what these metals are used for, where they are produced, and the supply/demand imbalances.

Good news, bad news on the economic front this morning. The good news: December advance retail sales rising 0.5% on expectations of a 0.2% increase, up from a 0.4% revised November print. Excluding the volatile auto sales, the number was up 0.3% on expectations of a 0.2% increase, and up from a 0.1% decline. Excluding autos and gas, the print was 0.6%, on expectations of a 0.4% increase. The biggest increase in December retail sales by category was in food services and drinking places which rose 1.2% in December, the same as November. Strong numbers were posted at clothing and accesory stores (+1.0%) and health and personal care (+1.4%) - all very low margin sales. Yet where the report was undisputedly weak, and where many were hoping for a boost but did not get it, was in the higher margin electronics and appliance stores, which dropped -0.6% in December, down big from the 2.3% increase in November, and further weakness for those hoping that December saw a surge in spending over gadgets and gizmos.As for the bad news: it was all in the Empires State Manfuacturing Index which missed expectations big, and in fact posted a decline from the abysmal November miss, revised to -7.30, and now down to -7.78, the sixth negative print in a row, on expectations of an unchanged print. This was the 5th miss in the series in the last 6 reports, the worst miss in 4 months, and the lowest number in 4 months. Alas there was no hurricane in December to blame this major miss on.  Oh yes, we remember, "the fiscal cliff."

• Just like last year: A Postholiday Letdown for Retailers (WSJ)
• Obama Fights Republicans on Debt as Investors Seek Growth (BBG)
• Housing a Sweet Spot for U.S. Economy as Recovery Expands (BBG)
• House chooses Boehner as speaker again despite dissent (Reuters)
• Backlash pushes Republicans to seek cuts (FT)
• Jobs Lost Hit 5 Million With Rigged Currencies (BBG)
• Chavez still has "severe" respiratory problem (Reuters)
• Paris promises flurry of economic reforms  (FT)
• Investors Sour on Pro Stock Pickers (WSJ)
• Abe moves to ease South Korea tensions (FT)
• Wildfires Hit Australia Amid Worst Heatwave in Decade (BBG)
• Monti attacks ‘extremist’ rivals (FT)

US Vice President Biden and Senate Minority leader McConnell brokered an agreement that was approved by the Senate that seems to avoid the full fiscal cliff.  It now is before the House of Representatives.  

While the Jan 1 deadline is passed, the more significant one, we had argued was Jan 3, when a new Congress is sworn in.  A failure by the 112th Congress to finalize the legislation would mean that process would have to begin anew with the 113th Congress. 

After what is likely to be intense though short debate, the House of Representatives can either approve the same exact bill the Senate approved, which be the quickest resolution.  It can seek to amend the bill, in which case it must return to the Senate for their approval.  The process could be cumbersome and require reconciliation and would risk the Jan 3 deadline.  Alternatively, a majority of the House could fail to ratify the Senate bill, in which case, it will be up the next Congress to claw back from the other side of the cliff.

The holiday week saw the dollar consolidate against most of the major currencies.  The yen was the main exception as its losses were extended under the aggressive signals coming from the new Japanese government.   

At the end of the week, the other key consideration, the US fiscal cliff made its presence felt.  The recent pattern remained intact.  News that gives the participants a sense that the cliff may be averted encourages risk taking, which means in the foreign exchange market, the sale of dollars and yen.  

News that makes participants more fearful that the political dysfunction failed to avert the cliff and send the world's largest economy into recession, generally see the dollar and yen recover.  This is what happened in very thin markets just ahead of the weekend as Obama's ling last ditch negotiating stance seemed to reflect a retreat from his earlier compromises.

• Two weeks ago here: The Latest Greek "Bailout" In A Nutshell: AAA-Rated Euro Countries To Fund Massive Hedge Fund Profits... and now on Bloomberg: "Hedge Funds Win as Europe Will Pay More for Greek Bonds" (BBG)
• Oracle sends shareholders cash as tax uncertainty looms (Reuters)
• GOP Makes Counteroffer In Cliff Talks (WSJ)
• Iran says captures U.S. drone in its airspace (Reuters)
• IMF drops opposition to capital controls (FT)
• Vogue Editor Wintour Said to Be Possible Appointee as U.K. Envoy (BBG)
• Juncker Stepping Down French Finance Minister to Head Euro Group? (Spiegel)
• Australia cuts rates to three-year low (FT)
• Europe’s banking union ambitions under strain (Reuters)
• EU Nations Eye New ECB Bank Supervisor Amid German Doubts (BBG)
• Frankfurt's Ambitions Get Cut Back (WSJ)
• House Republicans Propose $2.2 Trillion Fiscal-Cliff Plan (BBG)

Remember Michael Feroli? The JPM economist who "predicted" US Q4 GDP would be boosted by 0.5% due to iPhone sales (don't laugh: yes, US GDP, not that of China where the iPhone is actually produced, but the US where the consumer merely incurs more record student loans to be able to afford it)? Well, the same JPMorganite has now cut his Q4 GDP expectation to 1.5% for all the same reasons why we penned the second Q3 GDP revision: namely ugly internals, a surge in hollow government and inventory contributions to "growth", and a collapse in the purchasing power of the US consumer (who somehow is still expected to boost Q4 GDP with iPhone sales). And while there is no mention of the iPhone in his just released downward revision, he still believes the cell phone will provide a boost to Q4 GDP. In other words, of the 1.5% in GDP growth in Q4, the iPhone will account for 33% of this! One really can not make this up.

Guess which country German officials claim will be a bigger problem than Spain or Greece? Answer: France.

The US Presidential election has ended and the market is beginning to return to reality. And reality is not pretty...

Do we have what it takes to get from here to there? This apparently simple question offers profound insights into the dynamics of individuals, households, enterprises and nation-states. If we answer this question honestly, it establishes a "road map" of what must be in place before a progression from here to a more sustainable future ("there") can take place. For most of the world's economies and societies, the answer is a resounding "no." The U.S. Status Quo is as intellectually bankrupt as it is financially bankrupt. Our "leadership" cluelessly clings to the only model they know: incentivize "consumers" into borrowing more money to buy more "stuff" from China, in the magical-thinking belief this churn will somehow lead to sustainable "growth." This is akin to handing a parched alcoholic a fresh bottle of whiskey to wean him of his addiction. There are more than a few lessons to be learned from Japan...

Whilst the economic data shows at least some signs of an anaemic turnaround, China’s corporate results are demonstrating just how difficult things have been. During a slowdown, it is common for payments to be delayed as everyone hangs on to cash. Some companies, though, can be tempted to avoid curtailing production by offering reluctant customers much easier credit to encourage sales, the hope being that the slump will soon end and “natural” demand will pick up again. The trouble of course is that if the slowdown is prolonged, or the recovery weaker than expected, these accounts receivable (A/R) might turn “un-receivable”, and thus have to be written down as losses.  An increase in A/R is expected, but such a large increase suggests that some companies have been staying in operations through this vendor financing. In the struggling coal sector, at the end of June, accounts receivable had jumped 52.8 % for the 90 biggest coal firms. The need for a stronger turnaround is becoming more and more urgent!

The people have spoken. It’s seen as a solution.