Archive - May 19, 2011 - Story

Analysts expects today's Jobless claims to decline from last week's soon to be upwardly revised 434,000 to 420,000. We believe that there is a risk the number will be worse than expected due to ongoing layoffs in the auto sector as the "Japan" effect refuses to go away. If this does not happen, rain, flooding, drought, snow and UV lamp exposure will be blamed, not necessarily in that order. But not the economy. Never the economy. We also get existing home sales and the Philly Fed index.

First twitter and facebook took down several North African regimes where Ben Bernanke drove the people to a hunger-based desperation, now twitter is poised to topple the Spanish government. At least that appears to be the conventional wisdom in Spain, where for the fourth day people across the country are protesting record high (21%) unemployment and various other economic slowdown after effects. CNN reports on the latest out of Spain.

Contrary to conventional wisdom, America does not import the bulk of its crude from the volatile middle east region, but from its sleepy and unremarkable northern neighbor (by a factor of two compared to the second largest source of crude). Which is why the recent eruption of pervasive wildfires in Alberta, which have substantially disrupted production, probably should have far more of an impact on crude risk perception than what happens to 2 million of daily crude output out of Libya, most of which does not even reach the US. From Reuters: "Canadian heavy crude prices have changed little despite wildfires raging in northern Alberta and forcing production cuts, showing there is plenty of supply in storage, market sources said on Wednesday. Western Canada Select heavy blend for June delivery fetched around $17.30 a barrel under benchmark West Texas Intermediate crude, close to levels of a week ago. Dozens of forest fires that have spread in recent days have led to the shutdown of more than 100,000 barrels a day of output in the north-central Alberta region, most of it due to the outage of the 187,000 barrel a day Rainbow pipeline. The southern leg of the line, operated by Plains All American Pipeline LP, was shut due to the blazes. The northern leg has been out of service since a rupture and oil spill in late April." Perhaps the reason why none of this is perceived as a risk is that for about a decade now neither supply nor demand have actually been factors in determining equilibrium prices, which in turn is defined almost exclusively by the amount of free liquidity in the system, and correspondingly, speculator, and margin, scapegoating.

The most anticlimatic news of the week is that, as everyone expected, DSK has resigned his post as IMF head. "“I want to devote all my strength, all my time, and all my energy to proving my innocence,” Strauss-Kahn said in a statement released by the Washington-based IMF four days after his arrest on sexual-assault charges. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had been leading polls for France’s 2012 presidential election." And with his passage, the Feudal (as defined by El-Erian) "conclave" to pick his successor begins. Per Bloomberg: "European officials, who have picked IMF heads for 65 years under a deal that also gives the U.S. the lock on the top World Bank post, moved to retain the privilege, with Sweden backing French Finance Minister Christine Lagarde. Russia and South Africa have called for an emerging-market candidate, while some Asian policy makers suggested someone from their region." And now the specter of mutual assured destruction posturing shifts to selecting a desired candidate quickly. "Time is of the essence,” said Julie Chon, a senior fellow at the Washington-based Atlantic Council and former adviser to the U.S. Senate Banking Committee. “The longer the IMF allows the specter of uncertainty to hang over its leadership, the more exposed it becomes to the jittery actions of sovereign debt and foreign-exchange traders who have been speculating on what the leadership vacuum means for their portfolios."

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