“Genius is the ability to put into effect what is in your mind” — F. Scott Fitzgerald

1. Fitch Rating Agency threatens downgrade if U.S. falls off cliff — Fitch has warned that a failure to avert the fiscal cliff will increase the likelihood that it will strip the U.S. of its AAA rating.
2. House-Senate Defense Conference Agrees on $640.7 Billion — per Bloomberg, House and Senate negotiators reached a deal over a $640.7B defense budget for the current fiscal year, including $88.5B for operations in Afghanistan. However, the spending doesn’t account for the automatic cuts that are due to take place if the fiscal cliff is not averted.
3. BOJ adds to QE but doesn’t increase inflation target — the Bank of Japan has bowed to the demands of incoming Prime Minister Shinzo Abe and increased the size of its asset-purchase program by ¥10T ($119B) to ¥76T, the third hike in the last four months.
4. U.S. unveils plan to manage huge Alaskan oil reserve — Reuter, Interior Secretary Ken Salazar yesterday presented a plan under which the government will open up 11.8M acres of Alaska’s North Slope for energy drilling. The area holds an estimated 549M barrels of economically recoverable oil, or 72% of the crude in the 23M-acre reserve, and 8.7T cubic feet of economically recoverable natural gas.
5. Boehner’s Plan B fiscal cliff bill pulled amid dissension in GOP caucus — House Speaker John Boehner’s proposal to avert the looming fiscal cliff’s automatic tax increases failed to gain enough Republican support. The House will recess until after Christmas with Speaker John Boehner saying it’s now up to the president to work with Senator Reid to create legislation to help the U.S. avert the cliff.
6. Dogs of the Dow strategy in 2012 — per Bespoke, the Dogs of the Dow strategy says to buy the ten highest yielding Dow Jones Industrial Average at the start of each year. YTD, this strategy underperformed the major averages.

The week ahead — Economic data from Econoday.com: