Kuwait

If stock markets really do their best to discount earnings six months ahead of time, then it’s beginning to look a lot like Christmas.  ConvergEx's Nick Colas' monthly review of analysts’ revenue expectation for the Dow 30 companies finds that hopes for growth in the second half of 2013 continues to diminish.  The upcoming Q2 2013 results won’t be much to write home about either, with average top line growth versus last year of just 1.1% and (0.7% ex-financials), the lowest comps analysts have put in their models since they started posting expectations last year.  Back half expected sales growth is down to an average of 3.0 – 3.2%, where these estimates were over 5% just three months ago.  If you are hoping for 3-4% revenue growth – the kind that allows profit margins to expand – you’ll have to wait until 2014, at least according to Wall Street analysts. The bottom line is that this data provides a less-discussed reason for all the recent stock market volatility.

Previously, when looking at the real underlying national interests responsible for the deteriorating situation in Syria, which eventually may and/or will devolve into all out war with hundreds of thousands killed, we made it very clear that it was always and only about the gas, or gas pipelines to be exact, and specifically those involving the tiny but uber-wealthy state of Qatar. Needless to say, the official spin on events has no mention of this ulterior motive, and the popular, propaganda machine, especially from those powers supporting the Syrian "rebels" which include Israel, the US and the Arabian states tries to generate public and democratic support by portraying Assad as a brutal, chemical weapons-using dictator, in line with the tried and true script used once already in Iraq.On the other hand, there is Russia (and to a lesser extent China: for China's strategic interests in mid-east pipelines, read here), which has been portrayed as the main supporter of the "evil" Assad regime, and thus eager to preserve the status quo without a military intervention. Such attempts may be for naught especially with the earlier noted arrival of US marines in Israel, and the imminent arrival of the Russian Pacific fleet in Cyprus (which is a stone throw away from Syria) which may catalyze a military outcome sooner than we had expected. However, one question that has so far remained unanswered, and a very sensitive one now that the US is on the verge of voting to arm the Syrian rebels, is who was arming said group of Al-Qaeda supported militants up until now. Now, finally, courtesy of the FT we have the (less than surprising) answer, which goes back to our original thesis, and proves that, as so often happens in the middle east, it is once again all about the natural resources.

• Controversies give Obama new governing headaches (Reuters)
• About that Capex... BHP to Rein In Investment, Chief Says (WSJ), considers returning cash to shareholders (FT)
• Bloomberg users’ messages leaked online (FT)
• Japanese mayor sparks China outrage with sex-slave remarks (Reuters)
• Economists Cut China Forecasts (WSJ)
• U.S. oil boom leaves OPEC sidelined from demand growth (Reuters)
• U.S. banks push back on change in loan loss accounting (Reuters)
• Fed’s Plosser Says Slowing Inflation No Concern for Policy (BBG)
• Watchdog probes 1m US swap contracts (FT)
• Used Gold Supply Heads for ’08 Low as Sellers Balk (BBG)
• Ex-BlackRock Manager Said to Be Arrested in U.K. Probe (BBG)

Exactly ten years ago to the day, Simon Black was in the Kuwaiti desert waiting for George W. Bush to ‘make his decision’. He knew it was going to happen. At the time, he was a rising intelligence officer, his head still filled with ideals of national duty from my time at West Point. It all came crashing down ten years ago today. On February 5, 2003 Colin Powell, four-star general turned US Secretary of State, made a case to the United Nations that Saddam Hussein had weapons of mass destruction. Now, we won’t bother delving into the inaccuracies of the intelligence he presented. In Powell’s own words, making that presentation to the UN was “the lowest point in [his] life” and a “lasting blot on his record.”For Black, it was pivotal. At that instant, he knew without doubt that his government had reprehensibly lied through its teeth. And if they were lying about this... what else were they lying about? As destructive as these politicians are, though, they’re easy to defeat. Individuals who take action early have plenty of options to buy precious metals, move a portion of their savings abroad to a stable banking jurisdiction, and scout out locations overseas in case they ever need to get out of dodge.

You truly have to be mentally challenged if you follow the gold/silver market action and cannot appreciate something is very amiss, as per the confused Mitsui gold people, as brought to your attention the other day.

CME Group declared a force majeure at one of its New York precious metals depositories yesterday, run by bullion dealer and major coin dealer Manfra, Tordella and Brooks (MTB), due to “operational limitations” posed by Hurricane Sandy. MTB has “operational limitations” following Hurricane Sandy and can’t load gold bullion, platinum bullion or palladium bullion, CME Group Inc., the parent of the Comex and New York Mercantile Exchange, said today in a statement. MTB must provide holders with metal at Brinks Inc. in New York to meet current outstanding warrants in relevant delivery periods with compensation for costs, Chicago-based CME said. The CME said that MTB will not be able to deliver metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy. MTB is one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex. In a notice to customers on Monday, CME declared force majeure for the facility, a contract clause that frees parties from liability due to an event outside of their control.

• Rough start for fiscal cliff talks (Politico)
• Europe Fails to Seal Greek Debt-Cut Deal in IMF Clash (Bloomberg)
• Japan’s Exports Reach Three-Year Low as Recession Looms (BBG)
• Beggars can be angry: Greek leaders round on aid delay (FT)
• More financial blogs launching soon: Financial Times Deutschland closing (Spiegel)
• China's backroom powerbrokers block reform candidates (Reuters)
• BOE Voted 8-1 to Halt Bond Purchases as QE Impact Questioned (Bloomberg). In the US the vote is 1-11
• UK heads for EU budget showdown (FT)
• Eurodollars - another epic scam: How gaming Libor became business as usual (Reuters)
• Clinton Shuttles in Mideast in Bid for Gaza Cease-Fire (Bloomberg)
• Fed Still Trying to Push Down Rates (Hilsenrath)

• Millions still lack power (WSJ); New York Region Transit Tracker (WSJ), Blackouts Remain for 6.1 Million as Power Repairs Begin (Bloomberg)
• U.S. regulator seeks $470 million from Barclays (Reuters)
• J.P. Morgan Sues Whale's Ex-Boss (WSJ)
• London Frets Future as Financial Hub Outside Bank Union (Bloomberg)
• SNB now selling EUR: Swiss Central Bank Pulls Off Euro Sleight of Hand (WSJ)
• United Said to Study Biggest Airbus A350 to Replace Jumbos (Bloomberg)
• Draghi expands role in fight to save euro (FT)
• Panasonic Plunges by Daily Limit on Loss Forecast, CDS Soars (BusinessWeek)
• Italy risks economic ‘vicious circle’ (FT)
• Starbucks's European tax bill disappears down $100 million hole (Reuters)
• Bernanke Depression Guru Seeks Roosevelt Well-Being (Bloomberg)

There is a popular belief in the Middle East that Washington’s foreign policy, particularly as it relates to this precarious region, is largely driven by America’s dependency on, and insatiable appetite for Arab oil.  One can make a good argument for that. Had Syria been a major oil producing country chances are the US would have already dispatched military forces to impose a pax Americana and to put a stop to the horrific fighting that has been slowly, but without any doubt, ripping Syria apart and dismantling the infrastructures that make the Syrian state what it is today. Even if the war was to end today it would take years for Syria to return to its pre-war position from an economic and military perspective.

• China carrier a show of force as Japan tension festers (Reuters)
• Draghi Rally Lets Skeptics Dump Spain for Bunds (Bloomberg)
• China’s Central Bank Injects Record Funds to Ease Cash Crunch (Bloomberg)
• Obama warns Iran on nuclear bid, containment 'no option' (Reuters)
• When Would Bernanke’s Successor Raise Rates? (WSJ) that's easy - never
• Italy's Monti Downplays Sovereignty Risk (WSJ)
• Portugal swaps pay cuts for tax rises (FT)
• Madrid faces regional funding backlash (FT)
• Berlin Seeks to Push Back New Euro-Crisis Aid Requests (WSJ)
• Race Focuses on Foreign Policy (WSJ)
• China Speeds Up Approvals of Foreigners’ Stock Investment (Bloomberg)

It ain't safe no more???

After a volatile morning’s trade, European equities are making gains. Having progressed through the session, markets saw a distinct period of volatility wherein peripheral 10-yr government bond yield spreads tightened markedly with their German counterpart, with the Spanish 10-yr yield making a test, but stopping short of a break below the 7.00% handle. The moves came in the wake of a relatively smooth Spanish T-Bill auction, which saw decent bid/cover ratios albeit with markedly higher yields on their 12- and 18-month lines. A modest relief rally was also observed when markets received confirmation that a recent ruling from the top German court regarding information on the ESM’s configuration does not bar the fund from coming into action and taking effect. In terms of data, markets have shrugged off a particularly poor ZEW survey from Germany, however a substantial weakening was observed in GBP following the release of the first deflationary May reading of CPI since records began. The pullback in cost-push inflation has given markets further reason to believe the BoE may conduct additional QE, as the price-level pressures have eased across the past two months.

The absence of the UK from today’s trade is particularly evident, with volumes remaining particularly light across all asset classes. Nonetheless, European equities are largely seen drifting higher with the exception of the DAX index, which is yet to move over into positive territory. News flow remains light with the highlight of the day so far being comments from the Troika, confirming that Portugal remains on track with its bailout program, and have confirmed that the country will receive the next EUR 4.1bln tranche in July. FX moves remain in a tight range, with EUR/USD looking relatively unchanged, with the USD index slightly weaker as the US comes to market. Looking ahead in the session, participants can look forward to US ISM New York and Factory Orders data as the next risk events of the session.

There's a big, fat "I told you so" coming down the pike. 

• It just get worse and worse: After McClendon's trades, Chesapeake board gave blessing (Reuters)
• Iran Accepts Renminbi for Crude Oil (FT)... which is not news: recall China and Iran Bypass Dollar from July 2011
• As Gas Prices Fall, a Sigh of Relief  (WSJ)... so now people can direct their disability payments to where they belong: extra fries
• Greece Braces for a Repeat of Elections (FT), as first predicted by Zero Hedge, this will be a recurring affair
• China dissident Chen says officials must face justice (Reuters)
• Merkel Urges Athens to Stick With Reform (FT)
• Hollande’s Win is a Chance for Change (FT)
• U.K. Manufacturers Expect Exports to Rise (WSJ)
• U.S. Says Bomb Plot Disrupted Before Public Threatened (Bloomberg)
• Santorum Endorses Romney as Republican Nominee (Bloomberg)
• Beijing May Host OTC Market (China Daily)
• India Delays Tax Avoidance Laws (FT)