Futures dropped a bit as Sen. Bob Corker (R.-Tenn.) said "we're not close to a deal" on our air, but no matter: A deal of some sort is coming. The president offer is getting closer to the Republican plan. For the first time, President Barack Obama is talking about some measures that would slow the growth of entitlements.
House Republicans are meeting this morning. They will yell and scream, and there will be a final round of negotiations.
Traders are now trying to position themselves post-"fiscal cliff."
The bear position — to buy into an agreement, and sell after — is predicated on the simple idea that the era of American Austerity has arrived.
We will have higher taxes for the wealthy, and slower spending on healthcare and defense — the two biggest parts of the U.S. economy.
That is a headwind for stocks in 2013.
Is selling on the news the right strategy? That is the subject of debate. Some are arguing that the selling should take place later in 2013, when the real tightening takes place going into 2014.
Elsewhere:
1) Global markets rally. Japan closes at an eight-and-a-half month high, China finishes at a four-month high, and Germany rallies to a 52-week high (up 29 percent in 2012!). The euro is at 7.5 month high.
2) Goldman Sachs is slightly more bullish on China, but don't get too excited. Goldman upped its fourth-quarter guidance on China to 7.8 percent from 7.6 percent, and raised its 2013 growth forecast to 8.1 percent. (Read More: China's Robust Growth May Need Help Next Year)
Those who argued that China would be in for a soft landing in 2012 were right; now the issue is, is the fourth-quarter the trough for China growth? There have been some encouraging signs recently. Industrial production and retail sales (and electricity generation — some believe this is more important) have all picked up. Home prices are rising. There's some hope commodity demand will pick up appreciably in 2013.
It's one thing to indicate a bottom, another to argue for a strong rebound. One thing's for sure: The era of 10 percent to 12 percent gross domestic product growth is over; we are now dithering over whether 2013 will be 7.5 percent or 8.5 percent. It's unlikely the new government will go for the massive stimulus and infrastructure spending along the lines of what was seen in 2008-2009.
3) It's getting Orwellian in Japan. Shinzo Abe, the incoming prime minister, is attempting a takeover of the supposedly independent Bank of Japan.
Abe is demanding the bank change its inflation target from 1 percent to 2 percent and wants the bank to begin "unlimited" monetary easing. That means buying a lot more government bonds. He also wants a weaker yen, which can be achieved if the BOJ starts buying foreign bonds. He has told the BOJ that it must "reach an appropriate decision, accepting the results" of the recent election, in which Abe's party won a landslide.
Just to make sure you understand this: Abe has said he will revise the law that makes the BOJ independent if it doesn't do as he says. He will be able to nominate successors for the top three BOJ officials in March and April.
Huh? This is a dictate, not a negotiation. You will remain independent, as long as you do what I tell you. Orwell would be proud.