Archive - Feb 2011 - Story

Reuters reports that authorities have arrested a 20-year-old Saudi national on charges he tried to use a weapon of mass destruction and potentially targeted former President George W. Bush, the Justice Department said on Thursday. Khalid Ali-M Aldawsari, who was admitted into the United States in 2008 on a student visa, was arrested in Texas on Wednesday by FBI agents. He was accused of purchasing chemicals and equipment to make an improvised explosive device, the Justice Department said. Last time we weapons of imaginary destruction surfaced, Iraq got bombed back to the stoneage. It is so difficult to see where Obama is going with this...

Congratulations Centrally Planned Garbage Motors: GM slides to below its IPO price, hitting $32.75. And now we get to see if GETCO has been swimming with no bathing suit on the entire time.

Add another lunatic to the roster:

• BULLARD SAYS 'NEVER SAY NEVER' REGARDING POSSIBILITY OF QE3
  
• BULLARD SAYS INFLATION EXPECTATIONS ARE HIGHER, A SUCCESS OF QE
• BULLARD SEES OPTION OF BUYING BONDS MORE GRADUALLY INTO 3RD QTR
• BULLARD SAYS INFLATION WILL PROBABLY ACCELERATE

And Ahuel "Foley" Weber chimes in:

• WEBER SAYS INTEREST RATES CAN ONLY MOVE TO NORTH

While the quant funds are desperately seeking modelers for a "deranged middle east dictator" algo, the US economy continues to prolapse. From the release: "Sales of new single-family houses in January 2011 were at a seasonally adjusted annual rate of 284,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.6 percent (±11.2%) below the revised December rate of 325,000 and is 18.6 percent (±15.4%) below the January 2010 estimate of 349,000. The median sales price of new houses sold in January 2011 was $230,600; the  average sales price was $260,300. The seasonally adjusted estimate of new houses for sale at the end of January was 188,000. This represents a supply of 7.9 months at the current sales rate." Less than 500 homes (Z) sold in the over $750,000. And the stunner: only 19k non-annualized homes were sold. The lowest monthly total ever. (and as JT Smith points out, of the 19K, 53% were vacant lots or under construction).

FmxConnect uses several proprietary indicators to predict volatility trends. One indicator, the TrendVol actually gives directional signals as well. Simply stated, if this week closes above 1416, there is a high likelihood of a 75 to 175 move higher in gold over the next 2 months. Although if the indicator hits, we'd expect the move to happen in a more compressed time. The signal does not usually waste time letting you know if it is right or wrong. The indicator combines Bollinger bands, implied volatility, skewness, and historical volatility to determine speed and direction of a potential move. The actual calculations involve using these indicators to create and proprietary oscillators.

The latest news from the ABC.net.au should come as no surprise to those who know all too well that one can't eat gold: "Gaddafi own private plane is loaded with gold bullion and lots of hard currency, mainly dollars, and is preparing to flee to Zimbabwe to stay there with his friend Robert Mugabe." Yet there is speculation that instead of pulling a Ben Ali, Gaddafi may pull a Hitler: "Earlier, one of Mr Gaddafi's former ministers predicted the Libyan leader will follow in Adolf Hitler's footsteps and commit suicide rather than give up power. Mustapha Abdeljalil, justice minister until he quit over the bloody crackdown on protesters, says he expects Mr Gaddafi to make good on his pledge to die on Libyan soil rather than slink into exile. "Gaddafi's time is up. He is going to go like Hitler. He is going to commit suicide," Mr Abdeljalil told Swedish media." In either case, we are skeptical that much of Libya's oil infrastructure will survive the binary outcome. As a reminder, Libya had 143.8 tonnes of gold (or Tungsten as the case may be) as of December 31, per the WGC.

"Libya is not Egypt or Tunisia" ... where have we heard this before. The Libyan leader continues to blame the protests on hallucinogenic pills, and now adds it is Al-Qaeda's fault.

As we pointed out yesterday, while the US navy is seriously starting to amass in the Persian Gulf region, it has left the Mediterranean and more importantly, the Libyan coastline unguarded. With concerns that Gaddafi will follow through with what we speculated on Monday was a Saddam-like "after me the flood" act and burn his oil facilities, this may not be the most prudent thing. Luckily, here comes Germany. According to Spiegel, Germany has sent three warships to Libya which may possibly get involved in a "military engagement."

Initial Claims, which were obviously revised higher from 410K to 413K, dropped well below expectations, printing at 391K, on expectations of 405K.  With claims continuing to hug the 400K line, this means that unfortunately the economy is not creating nearly enough jobs: as a reminder per the CBO, the US needs to create over 100K jobs a month just to stay in line with population growth. Continuing claims dropped from an (upward) revised 3935K to 3790K, as more and more people hit the 6 month continuing benefits cliff. They also are hitting the end of their 99 week extension period: those on extended benefits dropped by -111,087. That said, with California claims data partially estimated, and all of Massachusetts, Hawaii and Oklahoma data based entirely on the wind, this data has the credibility of an NAR report. And while the employment picture was better than expected, the capital goods data was a total disaster: January US Capital Goods orders non-defense ex. aircraft plunged by -6.9% M/M on expectation of just a -1.0% drop (Prev. 1.4% Rev. 4.3%). And just excluding Transportation, durable goods collapsed by 3.6% on expectations of a 0.5% increase. Time for those downward GDP revisions.

Full initial claims report.

That latest entrant to the "whorism" political class, Saudi Arabia, is getting desperate. After yesterday's attempt to prostitute itself out to its people by literally handing out $37 billion in a glaring demonstration that it has never heard the "money can't buy you love" saying, now the FT is reporting that "Saudi Arabia is in “active talks” with European oil companies to meet the production shortfall left by Libya, the clearest indication to date that the leader of the Opec oil cartel is about to boost supplies to stop further rises in the oil price, which surged to near $120 a barrel on Thursday." The FT's commentary is partially correct: "You can only expect the price to go up. It is fear of the unknown. The risks are all to the upside,” one senior oil trader said. "Saudi Arabia needs to respond." It does, but not to fill the gap. Following the latest attempt at recreating Helicopter Ben's monetary policy, Saudi Arabia suddenly finds itself clutching at cash straws.As UBS' Andrew Lees points out: "Saudi's USD37bn bonus to the population equates to USD10.45bbl on its 2009 production of 9.7m bpd. Saudi already needed USD74bbl to balance its budget in 2008. In December last year the talk was that its budget deficit would be 40bn riyals having been 86.5bn riyals the previous year as it spent heavily on salary increases for soldiers. With this increased spending it seems Saudi will need about USD85 - USD95bbl to balance its budget, or it will need to ramp up production by about 10% (more capital spending) without prices falling." Oops. Do you see what happens Larry when a country hands out money it doesn't have? We hope for Saudi's sake that it has some POMO desk interns running things there as effectively as in the US. But until we get some confirmation, we continue to back the truck up with Saudi CDS, a process which started when these were first quoted in the double digits.

Markets sluggish this morning. Kansas City Fed president Thomas Hoenig, an outspoken critic of the Fed, warned yesterday that the central bank’s easy money policy may lead to another financial crisis through increased speculation. The comments came on the same day as the release of President Obama’s optimistic economic report to Congress, which plans on a doubling exports by 2014. Treasury Secretary Timothy Geithner also complimented the current recovery in a separate statement. Mortgage applications rose 13.2% last week after slipping 9.5% the week prior, the lowest since November 2008. Existing home sales grew in January by 2.7% MoM v -1.1%E. The unexpected increase occurred with the lowest median price in almost nine years as the number of foreclosures and short sales reached a twelve month high. Similarly, consensus estimates expect new home sales to decline 7.3% MoM. Look for that release later this morning as an additional metric for the slow recovery in housing.

• Gadhafi Flails as Libya Splinters (WSJ)
• As reported on Zero Hedge two days ago... Libya placed billions of dollars at U.S. banks (Reuters)
• Bullard Is ‘Bellwether’ as Fed Weighs Duration of Asset Buying (BusinessWeek)
• Is Stevie Cohen the Feds' Moby Dick? (Reuters)
• Those delusionary brits...Miles Says BOE Outlook Warrants ‘Very Gradual’ Rate Increase (BusinessWeek)
• Bonuses on Wall Street Declined 8% in 2010, N.Y.'s DiNapoli Says (Bloomberg) The average Wall Street employee took home a cash bonus of $128,530 in 2010
• Fleeing Egyptians Tell of Qaddafi's `Bloodbath' Across Libya (Bloomberg)
• Senator Wyden's Son Starts Hedge Fund After D.E. Shaw Internship (Bloomberg)
• Indian Rally Raises Pressure on Singh (FT)

There are many different kinds of revolution; some more effective than others. Telling the difference between a successful revolution and a failed revolution can be tricky. Often, on the surface, they look exactly the same. The secret is to set aside what we would “like” to see, and be brutally honest about what was actually accomplished in the course of the dissenting action. Has power been fully rescinded by the offending government or regime to the people, or, to yet another corrupt bureaucracy with a slightly different face? Have the puppet strings of corporate globalists been severed from your country, or do they remain strong as ever? Has ANY corrupt official actually been punished for the crimes that led to the insurgency in the first place, or, did they fly off scot-free to their million dollar villas in Ecuador, drinking mojitos in wicker recliners and watching the disaster they created unfold on CNN? Who ultimately benefited from the event?

Global stagflation has moved from knocking gently on the door to pounding with a battering ram. Brent touched just south of $120 overnight, the highest level since the summer of 2008, just before the global economy imploded, after reports circulated that the oil facilities of CNPC, the largest Chinese oil producer, were attacked in Libya. "News of the attack will heighten concerns among oil industry executives that the turmoil in Libya may lead to widespread sabotage of oil facilities and that it would take many months or even years to return the country to full production capacity even if a semblance of peace returns. In a speech earlier this week, Seif al-Islam Gaddafi, the son of Colonel Muammer Gaddafi, warned that in the event of a civil war, Libya’s oil wealth would be “burned”. In a terse announcement, CNPC said it was in the process of evacuating its 391 Chinese employees from the country and had already repatriated 24 of them. Contacted by phone, CNPC confirmed the attack but did not provide details, saying that it was still waiting for the latest news out of Libya." Unfortunately, as we first suggested three days ago, it is now only a matter of time before the Libyan madman decides to set his oilfields on fire in recreation of Saddam's parting gift to Kuwait, as retaliation against the world. In the meantime, US GDP has just lost another $300 billion in 12 hours, wiping out the gains all the gains in the last quarter.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 24/02/11