Archive - Feb 25, 2011

Was it Mugabe in the abattoir?

On several occasions over the past couple of years, thousands of you have taken the time to write to The Commodity Futures Trading Commission (CFTC) concerning the issue of position limits in COMEX silver. Now the CFTC has solicited your opinion again for what will be the last time. The current open comment period, through March 28, is the culmination of all the public hearings and commentary over the past two years. Your comments on silver position limits make a difference. Private legal counsel and even sources within the Commission have assured me that there can be serious consequences for the CFTC should they ignore the will of the public, when that public opinion is reasonable.

Curious to know just how liberal or conservative your representative politician (either in the Senate or the House) has been in the past year? Courtesy of the National Journal, now you can. In the following list, members and senators are assigned separate scores for their roll-call votes on key economic, social, and foreign-policy issues during 2010. The senators are rated in each of the three issue categories on both liberal and conservative scales, with the scores on each scale given as percentiles. An economic score of 87 on the conservative scale, for example, means that the senator or member was more conservative than 87 percent of his or her colleagues on the key votes in that issue area during 2010. Composite scores are calculated based on the issue-based scores. Members with the same composite scores are tied in rank.

Target Corp. (NYSE:TGT) & Kohl’s Corp. (NYSE:KSS) reported yesterday that revenues and profits rose in the 4th quarter behind strong holiday season sales, helping lift their share prices in yesterday’s trading. Shares of Target rose 3.5% to $52 and shares of Kohl’s rose 3.4% to $53.80.

These days the Fed is blamed for everything: from liberating the world from oppressive regimes, to the resultant genocide that accompanies such a process, not to mention to reflating record bubbles that guarantee to wipe out another generaton's wealth as soon as this latest and greatest episode of central planning fails. Yet one thing the Fed can not be blamed for (yet) is the weather. And unfortunately for the Chairsatan, storm clouds are (literally) building up for the next five years. While some have blamed the recent surge in food prices on inclement weather, including floods here, droughts there, and massive conflagrations in Russia, the case is, as UBS points out, that weather over the next five years will likely be very unpredictable, and result in increasingly supply shocks and commodity price imbalances (at least for those commodities that are harvested; that the Fed's liquidity is at base reason for the surge in everything not nailed down, just look at the price action in items that do not need watering, or direct sunlight). Enter the Pacific Decadal Oscillator, and if UBS is right, things will continue to be ugly at least until 2016.

While over the past week we finally got confirmation that while the Swiss franc reserved its place at the top of the foreign exchange pantheon as the last flight to safety currency (with dollar concerns expressing themselves in the form of accelerating DXY selloffs predicated by fears of QE3 should oil continue rising higher or the world economy deteriorating), the one surprising discovery has been the stunning resilience of the Euro in light of relentless bad news. We have already noted our concern that March is rapidly coming, and brings with it a vicious calendar of European political upheaval and debt maturities, which should only be ignored at the peril of other people's money. Confirming our Euro-skepticism is Citi's Steven Englander who has released an extended note earlier titled "EURUSD - why so strong" which seeks to explain why the EURUSD is not trading a few hundred pips lower. Englander's conclusion: "we still find it hard to sweep away sovereign issues, especially if private sector positions continue to creep up. Under a benign global outcome, we continue to see better currencies to buy than the EUR, and under a not-so-benign outcome, we expect that the run-up in risk aversion will be a significant EUR negative. At these prices we are not buyers." Yet someone is...

An interesting take at measuring global fiscal risk and why France and Germany are more screwed than Greece and Japan

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 25/02/11

A significant extension to my 3 minute Q&A on CNBC's Fast Money show yesterday that, in my opinion, provides irrefutable evidence that commercial real estate is about to enter a cyclical bear market. Then again, what do I know...

After we presented a micro-themed, static primer on the impact of the price of oil on the US consumer earlier, here is a macro picture perspective from Reuters, which correlates the change of oil prices to the corresponding change in world GDP (indicatively every $10 change in in crude results in an estimated range of 0.5-1.0% inverse change in global GDP).

Of course, what sucks for the American worker is great for our Multi-National Corporate Masters and we all love a good puppet show, so they bought out the President to say "U.S. companies shouldn't worry about inflation if they're planning on expanding their business."

Is it about the time that everyone agreed that all "consumer confidence" is politicized, circular, irrelevant, and just as credible as the next lie to come out of Larry Yun's mouth? While a few days Thomson Reuters/University of Michigan "found" that Consumer Confidence had surged to a According to Rasmussen, "investor confidence sinks to another 2011 low." Ok, enough. It is more than obvious to anyone with half a brain that "confidence" is nothing more than a gamed, goal seeked indicator, which is a function purely and entirely of the political agenda of the entity collecting the data. Another great example: while the Consumer Comfort index was managed by ABC until last week, it was scraping all time lows. Then the week it starts being managed by Bloomberg, and, lo and behold: "Consumer Comfort Increases to Highest Level Since 2008." A surge in confidence? Really? On gasoline passing $4? Luckily even Bloomberg admits the credibility of this latest propaganda index is suggest to say the least: "The four-point gain last week follows a five-point increase
in early January. The gauge dropped five points in the week
ended Feb. 6, the biggest setback since January 2010. Movements of that magnitude are unusual because the index
is based on a four-week average, Langer said. Nonetheless, the
gauge is mimicking the shifts seen in a 10-week span in mid-
1993, when the economy was also recovering from a recession." Ah, the good old Bloomberg "assumption taken as fact" Jedi mind trick.  Last time we checked the only "recovery" was that in the debt ceiling, er, target, assuming its achievement of $100 trillion in under 10 years is considered "recovery." Was the "also recovery" driven by the biggest global deficit spend in the history of the world, and the first outright debt monetization episode since the advent of Weimar? Guess we won't read that in the Bloomberg piece.

Wondering how surging oil prices will impact the average American? Forgotten what life was like in the first half of 2008? Then this chart is for you.

Japan has found out the perils of a long term zero interest rate policy means the banks have no incentive to assume credit risk and lend to each other or anyone else, so they trade their own book. The performance of the FTSE 100 and S&P500 suggest the true extent of the banks continuing to use cheap government money to trade bonds and equities. Japan knows what happens when the “extend and pretend” gravy train stops rolling. Equities should continue to rise while government stimulus money can find no other home. This is why politicians are irked at bankers bonuses, because they wouldn’t be making fat profits without cheap government money raised at the expense of the tax payers. All tangible assets, commodities (metals, energy, agricultural) and rare artifacts are likely continue rising until growth is undermined. The threat of rampant inflation and civil unrest will eventually cause the US, UK, Eurozone, Japan and China to rethink stimulus packages.

As we reported yesterday, Saudi Arabia which following its latest recreation of Helicopter Ben's money parachuting experiment to buy its people's love, suddenly has found itself in a fiscal crunch, has no choice but to increase general oil sales revenues. Which is why as Reuters reports the kingdom, which many speculate may be next to see a spike in protests in early March, has just hiked its oil output by 8% to over 9 million barrels per day. The move, in addition to yesterday's margin hikes by both the CME and ICE, has forced oil prices to decline modestly, bringing some stability to an otherwise extremely jittery market, which would also further exacerbate geopolitical tensions. "The Saudi move follows reassurances from Riyadh earlier in the week that it was prepared to act to prevent shortages as a result of the rebellion in Libya against leader Muammar Gaddafi that has sharply reduced the fellow OPEC producer's 1.3 million bpd of exports." What is unclear is how Iran, an OPEC member, will respond to this unilateral action out of an otherwise "collective" oil cartel. We continue to expect that as a result of a widening political schism between the OPEC member nations, and the ongoing turbulence in Libya, that OPEC will be soon "restructured" materially.