March 8th, 2011
As the Russell 2000 index, better known to the Chairsatan as the US economy, surges on no news, except of course for the huge, massive 0.5% drop in the WTI, demonstrations in Iran are once again front and center, except in the US media, which deems it irrelevant to report on what is happening away from the NYSE Borse. From JPost: "Heavy police presence reported in Tehran; dozens of women rounded up, beaten in Khartoum while attempting to stage anti-rape protest." Being that it is international women's day, one can see why even Iranian women believe that something like rape may be a little anachronistic. Alas, the Tehran police did not take too kindly to these ridiculous demands for equal treatment, as the clip below shows.
Today's $32 billion 3 Year auction closed at a 1.298% high yield: a slight decline from last month's 1.349%, which coupled with the pick up in the Bid To Cover from 3.013 to 3.219, explains why the auction prices inside of the WI at around 1.305%. Overall, Primary Dealers and Directs once again were responsible for two thirds of the auction, with just 34.4% going to Indirects, which nonetheless was an improvement from February's 27.6% which was the lowest since 2006. It seems foreigners are willing to purchase a little more bonds than recently, although this was still well off the LTM average of 34.4%. Following in the model of last month's 7 Year auction, we expect Primary Dealers to flip at least 50% of today's take down within 3 weeks back to Fed, as the check kiting game continues with absolutely no supervision from the Fed (which explains the low hit rate of 22.9% for the PD bid).
"It does not get any clearer which way Wall Street is trying to take oil," says Stephen Schork. The Schork Report notes that speculators now own nearly six times as many barrels of oil... as can be stored at the WTI trading hub in Cushing, Okla.
Following the earlier news that Facebook is now entering the virtually no barriers to entry market of content streaming, Goldman has just released a note that will make even more of the longs very to quite very nervous. "on a longer-term basis, we think that Facebook could become a credible threat as its video business evolves for three reasons: (1) Facebook has more than 500 mn active users, 50% of which log on to Facebook in any given day, according to its website, which compares with Netflix’s 20 mn subscribers; (2) We believe that the “wisdom of friends” could be a bigger driver of movie viewership than the “wisdom of crowds”; and (3) We believe that many of the issues outlined above could be fixed over time, including the gap to the living room TV."
Will The Day Of Rage In Saudi Arabia On March 11 Send The Price Of Oil Into Unprecedented Territory?Submitted by ilene on 03/08/2011 13:49 -0400
Speculation in oil futures is absolutely rampant.
And Now It Gets Religious: Al Jazeera Reports That Clashes Break Out In Cairo Between Christians And MuslimsSubmitted by Tyler Durden on 03/08/2011 13:46 -0400
So far religion was luckily very much removed from the MENA revolutions. If this Al Jazeera update is to be believed, that is no longer the case. And as everyone knows, the biggest threat in the Muslim crescent is religious warfare, which would immediately bring up questions of how long before Israel is involved. More as we see it.
RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 08/03/11
And Americans are complaining at an average gas price in the mid $3 range. In Europe, gasoline has just hit an all time record of $8.632 per gallon! As HLN.be reports: "tomorrow the price of gas will reach an absolute record. Petrol 95 can hit €1.624 per litre. This breaks the 2008 record of €1.61 per liter." Translated into American this means that a gallon of gas in Europe is now an unprecedented $8.632 per gallon, which will certainly result in Europe literally and metaphorically grinding to a halt.
Bulk Of Libyan Oil Infrastructure Now In Rebel Hands As Paralyzed Libyan Oil Trade Threatens European EconomiesSubmitted by Tyler Durden on 03/08/2011 12:57 -0400
In David Greely's note which we noted earlier, in addition to debunking speculation that OPEC has much if any spare excess capacity, confirming Jim Rogers' point from a week earlier, he observes that more than half of the country's oil infrastructure may already be in the hands of rebels. Whether this will merely reinforce Gaddafi's resolve to let everything burn in his wake is still unknown - repeated rumors that he is seeking to hand over power peacefully have so far been squashed, as the offensive against rebels accelerates. In the meantime Reuters reports that European oil imports are about to get very complicated, making life for Italy, which is most reliant on Libyan oil, quite complicated: "Libyan oil trade has been paralysed as banks decline to clear payments in dollars due to U.S. sanctions, trading sources told Reuters on Tuesday. The move follows a decision by major U.S. oil firms to halt trade with Libya and will complicate deals for European firms to buy Libyan oil. Around half of Libya's oil output, or more than 1 percent of global supply, has already been choked off by lethal clashes between rebels and forces loyal to Libyan leader Muammar Gaddafi. . Oil prices hit their highest levels since September 2008 on Monday." We anticipate that NATO forces with GCC backing, will find a way to institute a no fly zone to prevent an all out "Saddam" response which could see all the oil holdings in rebel hands be destroyed in retribution by the Gaddafi regime, which we are skeptical will result in dropping oil prices.
When the Treasury issued $29 billion in 7 Year bonds (CUSIP: 912828PY0) thirteen days ago, in an auction which we described as "unremarkable", the Primary Dealers took down $13.9 billion of the total issue, or 45.9% of the entire issue. Fast forward to today's POMO, which just concluded, and we learn that the Fed monetized $7.657 billion in bonds maturing between 09/30/2016 -
02/28/2018, or a 3.85 Submitted to Accepted ratio. As usual the internals are what matter. A quick scan shows that PDs could barely wait two weeks before they flipped more than half, or 53% of the full take down, right back to the monetizing hands of Brian Sack: 92.8% of the entire POMO consisted of just one issue - the just issued PY0 from last week. And so the shell game continues, especially since the interest paid on this $7.657 billion to the new holder, the Federal Reserve, will promptly be remitted back to the Treasury to be counted as revenue.
Microsoft Finally Making Smart Moves – Is It Too Little Too Late, Though? Here’s How To Make Money RegardlessSubmitted by Reggie Middleton on 03/08/2011 12:04 -0400
Microsoft effectively purchases Nokia's entire hardware platform from an economic perspective for just over a billion dollars, while Nokia solves the sinkhole that was OS R&D and the quandary over how to compete with the free OS that has taken over the world - Android. Now, the big question is, "Will it work?"
BLOOMBERG: BOFA'S KRAWCHECK SAYS MERRILL'S BULL TRAVELS WELL GLOBALLY
When the deposed president of the world's biggest cocoa exporter says he is nationalizing the cocoa and coffee industry, the natural response is for cocoa to continue its nosebleed climb higher. However, when one considers that cocoa exports have already been banned from the now civil-war torn Ivory Coast, one wonders just what incremental impact this latest move of pure desperation will have going forward. From BusinessWeek: "Laurent Gbagbo has announced on state TV that the government will now be the only entity authorized to buy or sell coffee and cocoa, the country's two main exports. The move to nationalize the country's lucrative cocoa and coffee sectors comes as financial sanctions begin to take effect against the rogue leader who has refused to leave office. International pressure has resulted in a ban on cocoa exports and Gbagbo has also been frozen out of the state's accounts at the regional central bank. The decree made public late Monday states: "The purchase and sale of coffee and cocoa will be undertaken exclusively by the state." That said the punchline is quite hilarious and has led to speculation that Al Qaeda may now be providing halluciongenic drugs to the deposed tyrant: "It's unclear how nationalizing the sector will help the Gbagbo government, with the ban on cocoa exports already in effect." Luckily, in this market where nothing makes sense any more, the move was sufficient to get cocoa and coffee futures to be one of the only commodity products that are up on the day for now (yet with everything going bidless to offerless and vice versa in a manner of minutes this will likely not be the case by lunchtime).
There's a scenario that could play out between May and September in which commodities (including my beloved silver) and the stock and bond markets could all sell off between 20% and 40%. The trigger will be the cessation of QE II and a multi-month pause before QE III. This is a reversal in my thinking from the outright inflationary 'buy with both hands' bent that I have held for the past two years. Even though it's quite a speculative analysis at this early stage, it is a possibility that we must consider. Important note: This is a short-term scenario that stems from my trading days, so if you are a long-term holder of a core position in gold and silver, as am I, nothing has changed in my extended outlook for these metals. The fiscal and monetary path we are on has a very high likelihood of failure over the coming decade, and I see nothing that shakes that view. But over the next 3-6 months, I have a few specific concerns.
Hot money is good for the big US banks. But not so good for the folks in Libya. Congress wants to keep it that way.