National Weather Service

The devastation from what is being described as a mile-wide tornado is horrifying according to local news. The live feed and raw footage of the aftermath suggests casualty rates will be significantly higher as the evening progresses... "The tornado on the ground right now is huge and has hit through populated areas,"

Just as it was all tropical storm Sandy's fault for somehow impacting the national economy from California, to Florida, to Oregon and all the way to Vermont, but more importantly - giving economists a scapegoat on which to blame the acute weakness in economic data in the November timeframe, so tomorrow's "historic" blizzard will be the inevitable reason for which the economy will once again perform "below expectations." It will have nothing to do with the ongoing reign of authoritarian terror conducted by the residents of the Marriner Eccles building, which has made a baseline growth rate of 1% in the artificial economy an optimistic outcome. Because, as everyone knows, in a centrally-planned, priced to absolute perfection economy, no exogenous variables, such as snow storms in the middle of winter, can possibly be allowed or certainly factored for. Which is why expect to hear a whole lot more in the next 24 hours about Blizzard Nemo: after all propaganda patterning demands that everyone has a clear image of the perpetrator when the time comes to cast all blame on one single event and to distract from the real cause of now structural underlying economic weakness.

Today it is all about the elections. It is not about last night's relatively surprising RBA decision to not cut rates (on an attempt to create a reflexive feedback loop when it said that China has bottomed; it hasn't, and the RBA will be forced into another "surprising" rate cut as it did previously). It is also not about Europe missing its Service PMI estimate (just like the US), with the composite printing at 45.7 on expectations of a 45.8 print (with both core countries - Germany and France - missing badly, at 48.4 and 44.6 on expectations of 49.3 and 46.2, respectively).  It is not about reports that the EU believes Spain's GDP will again contract more than expected (it will, and certainly without any reports or beliefs). It is not about Greece selling €1.3 billion in 26-week bills even as, according to ANA, its striking power workers have taken 5 power plants online just as winter approaches. It is not about Jean-Claude Juncker telling the truth for once, and saying that Europe is still in crisis, and is facing the viability of the Euro (after saying weeks ago that the Euro is unshakable) and that some countries aren't facing up to their responsibilities. It most certainly isn't about German factory orders finally collapsing as the country is no longer able to delay its slide into full-blown recession, with a September decline of 3.3% on expectations of a modest drop of -0.5%, from the previous decline of 0.8% (the German ministry said that a weak Eurozone and lack of global growth are taking its toll; they will continue taking its toll for years and decades longer). No. It is all about the US elections, with the peak frenzy starting as soon as polls officially close at 8 pm. Everything else is noise.

First the flood, now the freeze (and the lack of fuel and gas and heating just making it much worse). And for tens of thousands of residents of New York and New Jersey this means that as many as 40,000 will need to find alternative housing, especially ahead of Wednesday when a Nor'easter formation is expected to hit the Tristate area and bring even more freezing rain and cold to the region. From Reuters: "Tens of thousands of people affected by superstorm Sandy could soon need housing as cold weather descends on the state of New York, Governor Andrew Cuomo said on Sunday. Cuomo, in a televised press conference nearly a week after the storm hit the U.S. East Coast, said the fuel shortages are improving but problems will persist for "a number of days."" Elsewhere, and also from Reuters: "Victims of superstorm Sandy on the U.S. East Coast struggled against the cold early on Sunday amid fuel shortages and power outages even as officials fretted about getting voters displaced by the storm to polling stations for Tuesday's presidential election. Overnight, near-freezing temperatures gripped the U.S. northeast. At least two more victims were found in New Jersey, one dead of hypothermia, as the overall death toll from one of worst storms in U.S. history climbed to at least 112. Fuel supplies continued to rumble toward disaster zones and electricity was slowly returning to darkened neighborhoods after a storm that hit the coast last Monday. New York Mayor Michael Bloomberg said it would be days before power is fully restored and fuel shortages end."

As meteorologists have been repeating all day, the biggest threat for NYC is not so much the rain, or even the wind, dangling cranes hundreds of feet above ground notwithstanding, but the storm surge. The threat here is that Hurricane Sandy will hit land just as the tide comes in, resulting in a double whammy which Wunderground has called a "gigantic bulge of water that will raise waters levels to the highest storm tides ever seen in over a century of record keeping." Add to this the impact of the full moon, which means that high tide will be 5% higher than average for the month, and Wunderground's conclusion is inevitable: "This is a higher destructive potential than any hurricane observed since 1969, including Category 5 storms like Katrina, Rita, Wilma, Camille, and Andrew." How high are we talking: Sandy's storm surge will be capable of overtopping the flood walls in Manhattan, which are only five feet above mean sea level... According to the latest storm surge forecast for NYC from NHC, Sandy's storm surge is expected to be 10 - 12' above MLLW. Since a storm tide of 10.5' is needed to flood the subway system, it appears likely that portions of the NYC subway system will flood." Luckily for all, the NY Fed's tungsten gold, which is 50 feet below sea level (and 80 feet below the surface) and is in the Zone C flood evacuation area, will be perfectly "safe." And after all tungsten gold will never just float away.

As a reminder in 20 minutes we will have the first ever Nationwide Emergency Alert System Test. Just in case, you know, the internet fails and various websites can not be accessed after the test...

Anyone living in New York may want to read this Bloomberg article as it is important stuff, unlike anything coming out of Jim Cramer, who told everyone an hour ago that "this is a turning point, Buffett's bailout marks the beginning of a massive multiday short-covering rally in the financials" - naturally the XLF is about to turn red.

Don't sell those corn futures just yet. Despite last week's surprising announcement by the USDA that there has been much more expansive planting of corn, and other crops, than expected, which in turn set the price of corn tumbling by the most in years, one thing the USDA did not specify is whether said plantings are currently underwater. And if not now, how about in a week or two. Because according to the National Oceanic and Atmospheric Administration (NOAA) the floods America has experienced so far are nothing compared to what may be coming. "Many rivers in the upper Midwest and northern Plains remain above flood stage, and the threat for more flooding will continue through the summer, forecasters at NOAA’s National Weather Service said today. With rivers running high and soils completely saturated, just a small amount of rain could trigger more flooding, including areas that have already seen major to record flooding. NOAA’s Climate Prediction Center is forecasting above-normal rain in most of these vulnerable areas in the next two weeks, and above-normal rainfall in much of the region in the one- and three-month outlooks. Adding to the flood threat will be the rising temperatures over the Rockies, which will release the water from the remaining snowpack. “The sponge is fully saturated – there is nowhere for any additional water to go,” said Jack Hayes, Ph.D., director of NOAA’s National Weather Service. “While unusual for this time of year, all signs point to the flood threat continuing through summer. Forecasters say this season could rival the Great Flood of 1993, when the upper Midwest endured persistent, record-breaking floods from April through August, impacting nine states and causing more than $25 billion in damages (adjusted for inflation)." If indeed this occurs, look for corn, and other softs, to surge to few all time highs, just in time for the much anticipated collapse in food prices to never happen.

Following what appears to be just the beginning of a major market flush which could well bring the S&P to triple digits in order to serve as a catalyst for QE3, the word inflation has become taboo: after all, it is expected that Bernanke will have snapped his fingers, and the 15 minute count down to deflation will start. Alas, no. There are at least three products in which inflation has proven to be particularly stubborn, all due to a unique set of factors. The first one is Coke (the drink, although probably not isolated thereto), which just announced plans to hike prices 3 yo 4% due to still surging commodity costs. The second is pasta, whose prices are also set to soar, this time due to adverse climatic conditions. Per Bloomberg, "Unrelenting rainfall may have slashed U.S. planting of durum wheat to the lowest level in more than 50 years, fueling a surge in the price of pasta and noodles as mills scramble for supply of the grain." And the last, and possibly most perverse price spike, is the one which will actually hike the CPI, due to an increase in the shelter, or rents, component, as more and more Americans forgo owning a home in exchange for renting, in the process pushing up the one component that accounts for 41% of core CPI. In this way we see three completely unrelated channels in which inflation will continue to push through even as stocks plunge: an event which most MMT theorists always perceive as inherently deflationary.

What's happening in Nebraska?

United States, Egypt and Japan ...

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.

And while the open warfare between speculators and the administration, senators and exchanges continues, the gasoline fundamentals are poised to take another turn for the worse. As Reuters reports, "Valero Energy Corp's and Motiva Enterprises refineries in St. Charles Parish Louisiana, west of New Orleans, will be flooded if the Morganza Spillway is not opened, the St. Charles Parish emergency preparedness director said on Wednesday." Alas, the decision is not a simple one, and diverting the water from Louisiana, and attendant surge in gas prices once refining critical capacity is taken off line, would result in the flooding of Morgan City. From KFLY: "Officials say a decision on opening the
Morganza spillway could come soon.  The Morganza Spillway is upriver
from Baton Rouge and could be opened today, or this weekend. The floodway pours into the Atchafalaya River, and on to the Gulf of Mexico. Right now, inmates are filling sandbags to protect properties that could
be damaged if the spillway is opened.  If the Morganza spillway is
opened, Morgan City could see up to 20 feet of water. Mark Bernucho owns a fire and safety supply business across the street
from the 22-foot seawall, and he said it's the only thing keeping the
water away. The U.S. Army Corps of Engineers installed water gauges
Wednesday, to monitor the rising river waters." So the administration is faced with another dilemma: not divert and potentially see a surge in gas prices, or divert, and risk flooding and be accused of pandering to the oil lobby, one short year after the same lobby was villainized for the biggest oil spill in history. The biggest loser, however, is all the real estate in proximity to the flooded Mississippi river.

The media is still banging the nuclear fear drum over and over again to keep people watching but the reality is that the chance of a catastrophe, at this point is very slim...

Earl is picking up speed as it is approaching the Turks and Caicos Island, having just been upgraded from Cateogry 3 to Category 4. It appears that while New York and its immediate environs may avoid Hurricane speed winds on late Friday, the city will at a minimum be flooded as it enjoys a 50 mph+ lashing. Either way, this will be a good way to New York City's emergency response system in insolvent conditions. Upon hitting Wall Street, however, Earl may finally meet its match as to who can blow more hot air. Of course, in keeping up with the trends set forth by the administration in which nobody takes any responsibility for their actions, there is nothing like a Hurricane for the upcoming Empire State Manufacturing Index to blame its imminent record plunge on.