Goldman Sachs.  Let’s review the record.

GS was involved with the Mexican bailout of 1995. Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds

GS was led by Jon Corzine in the 1990s, the guy who bet $1.6B of his client’s money as CEO of MF Global from 2010 to 2011. MF Global went belly up in 2011.

In 2001-2003 Goldman engineers currency swaps with Greece  designed to conceal part of the country’s ballooning debt-to-GDP ratio in order to conform to the rules. The Goldman swap was akin to a ‘liar loan’, where Greece could keep its troubles secret.  I am sure Greece does not miss $5.1 B Euros right now do they ?

Made a profit of $4 billion by “betting” on a collapse in the sub-prime market. Let me guess… advising clients to invest in sub-prime mortgages helped.

Former GS Chairman Paulson then Treasury Secr. leads a $ trillion bail out of banks including Goldman Sachs . Goldman also received a $10 billion preferred stock investment from the U.S. Treasury in October 2008. Goldman Sachs, alongside other major US and international financial institutions, had received billions of dollars during the unwind of credit default swap (CDS) contracts purchased from AIG, including $12.9 billion from funds provided by the US Federal Reserve to bail out AIG.

Goldman Sachs received preferential treatment from the government by being the only Wall Street firm to have participated in the crucial September meetings at the New York Fed, which decided AIG’s fate. Goldman Sachs was one of the heaviest users of these loan facilities called (PDCF), the first Fed facility ever to provide overnight loans to investment banks, loaned Goldman Sachs a total of $589 billion against collateral such as corporate market instruments and mortgage-backed securities.

The former head of Goldman Sachs US equity derivatives who left GS in March stated that ”…senior management described clients as “muppets” and colleagues callously talked about “ripping their clients off”.

Now Goldman Sachs has suggested its clients sell Gold on the basis that the gold cycle will turn in 2013 thanks to improving US growth offsetting the need for further Fed easing. I wonder if I should believe them ?

Gold miners have been beaten up rather badly of late.  I would hold off buying gold or gold stocks until January.

There are more reactors planned or under construction today than before the Fukushima Daiichi disaster.  There are about 438 nuclear reactors in the world now (104 in the US) and this will rise to 527 in the next 6 years.  Emerging markets are going to be the real growth story, specifically China, India and Russia.

China’s currently has 15 reactors in operation, 26 under construction and 51 planned, according to the World Nuclear Association. Chinese nukes. How to play this as an investment ?

Today there is excess short-term uranium supply and low discretionary demand mainly from utilities. For much of the summer, China was not buying uranium on the spot market, and many utilities were covered for 2013 requirements. Prices and stocks have sucked all year. But that is about to change.

Demand for yellowcake aka U₃O₈  will increase as countries need the fuel for the reactors. One forecast sees 240–260 M lb of demand by 2020.

All these companies have low or no debt and have seen their share prices fade with uranium prices. These are plays for a turn around in 2013 as the economy picks up.

• UEX Corp. (UEX:TSX) $0.475 Money losing. No debt. Good projects /possible take-over target.
• Energy Fuels Inc. (EFR:TSX) $0.145 Risky penny stock. Money losing. Largest producer in US.
• Denison Mines (DML:TSX) $1.07. Money-losing klutz of a company. But $500M in assets.
• Cameco Corp. (CCO:TSX or CCJ:NYSE) $18.26. $7B market cap. Yld 2.1%. Second largest producer in the world—in 2009 produced 21 million lbs U₃O₈.

I was just kidding about the nuclear weapons part.

Then they had a spat and could not agree on anything. There will be no deal.

According to the rules in the House of Representatives, the very last day any bill can be introduced to Congress before adjourning is December 18th. Not the 31st, but the 18th. And, Congress is expected to adjourn for the year on December 21st.

On December 17^th President Obama and his family leave Washington, D.C. for their annual family vacation in Hawaii.

So come January….

$607 billion in automatic annual tax increases and spending cuts kick in. Half of the scheduled annual cuts ($109 billion/year from 2013-2021) will come directly from the national defense budget, half from non-defense.

The “Bush tax cuts,” will expire on December 31, 2012, raising all income tax rates (top will go from 35 to 39.6 percent), as well as rates on estate and capital gains taxes.

The Social Security payroll tax holiday will expire December 31, raising the rate from 4.2 to 6.2 percent.

Next year the U.S. economy could most benefit from a reduction in the federal budget deficit, and that’s what no deal means. The economy will grow next year by an anemic 1.5 %, according to the top forecaster.

How to invest.

Avoid and reduce US equities generally.  Try BA listed on the TSX. $27.20 share Yields 7%, fair prospects of being bought out in 2014 (ie. upside potential).

Kate Middleton, the Duchess of Cambridge, is in the hospital for her second day for observation.

President Obama spoke to Bloomberg news at 12:30 Eastern, about the fiscal cliff. Two hours before the Dow was up 27 points. Obama spoke and the market is in the red. We are going over the ‘cliff’.

These two events are conceptually unrelated, but hey, you visited the blog.

• The CBO predicts that the U.S. economy will shrink by 0.5 percent in 2013, and unemployment will spike up to 9.1 percent from its current level of 7.9 percent, if no fix is passed.
• The ‘parties’,  the Obama administration and the House Speaker are posturing but not negotiating. The days are few and the likelihood of a ‘deal’ decrease by the day. Uncertainty is bad for the stock market.
• Let’s consider a few countries. Greece – down 88% in 2012 due to austerity/debt problems; China – the Shanghai Composite at a 43 month low since investors do not trust their leaders. Egypt, $6 B loss in the last two weeks.
• The headwinds are looming austerity, not trusting leaders, uncertainty = lower markets.

Usually, December is a strong month for the markets. My strategy is to stay in mostly cash until we have a better idea on how this will all play out.