And so it starts, as the first of the shipping giants decides evacuation is the better part of valor. Reuters reports that shipping conglomerate Maersk has suspended shipping activities in Egypt. But fear not. The Suez Canal is open. For now. From Reuters: "Danish shipping and oil group A.P. Moller-Maersk has suspended its Egyptian port terminal operations and closed its shipping offices in the country rocked by turmoil, the company said on Monday." Surely this is bullish for stocks.
Geopolitical risk takes center stage following the weekend's geopolitical headlines and Friday's slight disappointment on GDP. The Fed does seem to be getting some consumer stimulus to go along with the commodity price inflation as the consumer contributed 3.04%age points of the 3.2% preliminary number on Friday. Today will see more critical consumer data points in PCE and consumer spending/income.
The one commodity which has so far sneaked quietly between the cracks of rampant limit up opens and overnight price surges, just happens to be the most important one: rice. If the price of rice were to follow the same fate as wheat, not to mention chocolate, and if the world starts getting visuals of what is happening in Egypt transposed a few thousand miles east, smack in the middle of Guangdong province, then not even the Sack Frost dynamic futures lifting duo will be able to do much to instill confidence that the revolution is progressing "better than analyst estimates." And it appears that the seeds of rice's price surge may already have been planted. Bloomberg reports that "U.S. farmers are planting the fewest acres with rice since 1989 just as global demand surpasses production for the first time in four years, driving prices as much as 12 percent higher by December. Plantings in the U.S., the third-biggest shipper, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers. Rice, the staple food for half the world, declined 4 percent last year, extending a 2.9 percent drop in 2009. The other crops jumped 34 percent or more." Zero Hedge predicted in October of last year that the next real bubble will be rice. We stand by this prediction, which has so far not been validated presumably due to some quite interesting behind the scenes PM-for-food arrangement between China and one of the very popular US TBTFs. As the chart below shows, rice is poised for an imminent break out.
Forget Egypt ATMs running out of cash. A far bigger problem for the country is starting to materialize, one which would promptly shift the revolution into overdrive: the disappearance of all staples. CNN reports: "While discontent, resentment and nationalism continue to fuel demonstrations, one vital staple is in short supply: food. Many
families in Egypt are fast running out of staples such as bread, beans
and rice and are often unable or unwilling to shop for groceries. Everything
is running out. I have three children, and I only have enough to feed
them for maybe two more days. After that I do not know what we will do."
school administrator Gamalat Gadalla told CNN." And while the world is merely concerned about whether the Suez canal is still open, perhaps it is time for a little food paradropping exercise, because if the 80+ million strong population realizes there is nothing to eat, we may just see the kind of Somali ship piracy in the Red Sea we have all grown to love, move just a little bit inland.
Personal spending and income, Chicago purchasing managers, and the Dallas Fed index…. And then the traditional 11am POMO of course- must monetize those bonds.
As Perfectly Expected, Moody's Cuts Revolutionary Egypt From Ba1 To Ba2, Outlook Negative, CDS SpikesSubmitted by Tyler Durden on 01/31/2011 07:08 -0500
The most predictable, (and certainly worthless: see Mark Zandi) entity in the world has gone ahead and done precisely what Zero Hedge said 24 hours ago it would. Moody's has just downgraded Egypt's bond rating from Ba1 to Ba2, with the outlook changed from stable to negative. The move which was as a surprise to idiots everywhere comes as "Moody's notes that Egypt suffers from deep-seated political and socio-economic challenges. These include a chronic high rate of unemployment, elevated inflation and widespread poverty. These, together with a desire for political change, have fueled popular frustrations." And as we predicted yesterday, Egypt CDS continues to slide ever higher, pushing around 460 on the offer side, in those rare occasions it is actually offered.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 31/01/11
Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.
Readers will recall that three months ago I had reported that "something was happening" in the economy. After several years of ultra-bearish reporting, I said that at the very least the economy was not declining further. The GDP report tends to support this, but in final analysis it is much ado about not much. Here's why.
A week after Zero Hedge first speculated what may happen to oil prices should the Suez Canal be shut down, Goldman arrives on the scene... And as expected, to Goldman it is all (mostly) priced in - the risk of contagion to Saudi is zero. After all, rich people never revolt... And things must always evolve according to what only Goldman Sachs has foreseen.
With all the hoopla over Egypt some have forgotten that this is merely a geopolitical event (one of those that absolutely nobody, with a few exceptions, was talking about less a month ago, so in many ways this is a mainstream media black swan which once again exposes the entire punditry for the pseudo-sophist hacks they are), and that the actual mines embedded within the financial system continue to float just below the surface. Below we present the five key fat tail concerns that keep SocGen strategist Dylan Grice up at night, which happen to be: i) long-term deflation, ii) a bond market blow-up, iii) a Chinese hard-landing, iv) an inflation pick-up, and v) an Emerging Markets bubble. Far more importantly, Grice provides the most comprehensive basket of trades to put on as a hedge against all five of these, while also pocketing a premium associated with simple market beta in a world in which the Central Banks continue to successfully defy gravity and economic cycles. For all those who continue to trade as brainless lemmings, seeking comfort in numbers, no matter how wrong the "numbers" of the groupthink herd are, we urge you to establish at least some of the recommended trades in advance of what will inevitably be a greater crash than anything the markets experienced during the depths of the 2008 near-cataclysm.
Complete market commentary of Friday's shocking events.
And so the long anticipated incursion by the PBOC, whose holdings of gold are behind even those of GLD, begins. Bloomberg has just reported, that "China central bank adviser Xia Bin said the country should increase its gold and silver reserves, the Economic Information Daily reported today, citing an interview with Xia." But how can this be: after all China has trillions in USD-denominated reserves, and any indication that it believes these are based on a currency that may actually be impaired will be an act of Mutual Assured Destruction. Well, yes and no. China is merely taking the next defection step in what is already failed Nash equilibrium. The first? The Fed's gross monetization of all US debt. The observant ones will realize that Chinese holdings in November were lower than they were in June of 2009! Who has picked up the slack? Why the Federal Reserve of course. Simply said, the Fed is explicitly making China's creditor status increasingly less relevant. Zero Hedge has long been wondering how much longer China will take this direct defection in what previously had been a stable equilibrium balance in which China provides the US vendor financing, while the US imports China's crap. As the Criminal Reserve is increasingly taking away the leverage that China used to enjoy as Creditor numero uno, it is only a matter of time before China fires back. And it may have just done that.
Wrapping up last week, and what we're looking at next week.
The effort in Washington State draws heavily on the success of the 92-year-old Bank of North Dakota (BND), currently the only state-wide publicly-owned U.S. bank.