Saudi Arabia

Israel Versus Iran: What’s REALLY Going On …

Will Israel Launch a False Flag Against Iran to Start War?

The divergence in crude oil and gasoline supply fundamentals could mean not even an SPR oil release, unilateral by the U.S. or not, would significantly bring down gasoline prices as people might expect.   

The first concern of the Emir of Qatar is the prosperity and security of the tiny kingdom.  To achieve that, he knows no limits. Stuck between Iran and Saudi Arabia is Qatar with the third largest natural gas deposit in the world.  The gas gives the nearly quarter of a million Qatari citizens the highest per capita income on the planet and provides 70 percent of government revenue.  How does an extremely wealthy midget with two potentially dangerous neighbors keep them from making an unwelcomed visit?  Naturally, you have someone bigger and tougher to protect you. Of course, nothing is free.  The price has been to allow the United States to have two military bases in a strategic location.  According to Wikileak diplomatic cables, the Qataris are even paying sixty percent of the costs. Having tanks and bunker busting bombs nearby will discourage military aggression, but it does nothing to curb the social tumult that has been bubbling for decades in the Middle Eastern societies.  Eighty-four years ago, the Moslem Brotherhood arose in Egypt because of the presence of foreign domination by Great Britain and the discontent of millions of the teaming masses yearning to be free.  Eighty-four years later, the teaming masses are still yearning. 

Must-See Pictures

So what will QE 3 bring? The short answer is: nothing pretty. Gas and food prices were already high before the Fed announced QE 3. They will be going much higher in the future (Oil is currently falling based on Saudi Arabia working with the US Government to suppress prices).

While the US is only now embarking on QE3, on Tuesday night, to much fanfare, the Bank of Japan, in sympathy to the Chairsatan, launched QE 8. As we reported, the entire JPY10 trillion incremental intervention was fully priced in and digested less than 9 hours later, confirming that monetary policy is now completely helpless to do anything but destabilize currencies for a brief period of time (and at every greater dilutions). Here is how this farce of central-planner hubris looked through the eyes of UBS' veteran trader Art Cashin.

• Deposit Flight From Europe Banks Eroding Common Currency (Bloomberg)
• BOJ eases monetary policy as global slowdown bites (Reuters)
• Stalled Rally Puts Pressure on Spain (WSJ)
• Missed Chances Stoke Skepticism Over EU’s Crisis Fight (Bloomberg)
• Germany's big worry: China, not Greece (Reuters)
• Goldman names new CFO, heralding end of an era (Reuters)
• Russia Demands U.S. Agency Halt Work (WSJ)
• Fed’s Dudley Says Easing Vital to Spur Too-Slow Growth (Bloomberg)
• Romney under fire from all sides (FT)
• Poland cuts red tape to spur growth (FT)
• IMF to Put Argentina on Path to Censure Over Inflation Data (Bloomberg)

One of the more curious conspiracy theories that has appeared in the past 24 hours, or since yesterday's so far unexplained crude oil flash crash without a subsequent corresponding jump (those only happen in equities it appears), is that Saudi Arabia has decided to come to the aid of the Obama administration two months ahead of the election, and to pump enough crude into the system to offset the pricing in of the inevitable liquidity tsunami from the now global QEternity, or at least until such time as the election passes. Partially confirming this speculation was the FT's report that Saudi Arabia has offered its main customers in the US, Europe and Asia extra oil supplies through the end of the year, a sign the world’s largest exporter is worried about the impact of rising prices on the global economy. Reuters adds, citing a Gulf source that "We would like to see the price coming down and we are working to bring it down... The price now, we believe is high, and it's not supported by fundamentals at all. It's just speculation and geopolitics." "The majority of OPEC countries prefer around $100, including Saudi Arabia," he said, adding that $100 per barrel was "right now the ideal price for the majority of OPEC countries ... the majority is all except one or two." "We think the oil market is well balanced," the Gulf source added. This comes a day after fellow OPEC member Iran, whose output has been substantially curtailed in recent months as a result of a global embargo (with notable exemptions for key Iran clients India and China) made it clear that it would be happy with crude rising to $150 for obvious reasons. Obviously Iran is in the "minority" according to the Gulf source. And while the reasoning for Saudi Arabia to do all in its power to promote amicable relations with America's leadership is easily explainable, it is far less clear if Saudi Arabia can actually do much if anything to really prop up crude production, prop down the price of crude and gas at the pump, and support Obama's reelection chances.

Stocks fell in Europe today, that’s in spite of the fact that German investor confidence rose the first time in 5 months (ZEW), as market participants focused on somewhat unfavourable auction schedule for Spain, which may force the Treasury to raise its T-bill issuance in order to meet its zero-net funding target. As a result, Bunds traded higher throughout the session, with the shorter-dated Spanish and Italian bonds underperforming (Italian and Spanish 2s up by c.3bps). Of note, Spanish 10y bond yield has risen back above 6% and given the upcoming supply, there is a risk that yields will continue to rise and flatten the curve. On that note, the Spanish Treasury is set to sell a new 3y benchmark and a 10y re-opening this Thursday, which proved notoriously difficult to sell in the past. Spain is also planning to issue EUR 8bln in private placements with EUR 3bln on Sep-21st and EUR 5bln in mid-October.

Here is a summary of where the world stands:

• Unable to reach a compromise over the weekend, South Africa is now in an all out labor strike, with the police again firing rubber bullets at miners with lethal escalation guaranteed
• Back from vacation, the once again penniless citizens of Spain, Greece, and Portugal have resumed protesting austerity
• US embassies attacked, in many cases with numerous casualties, in Egypt, Libya, Tunisia, Morocco, Sudan, Lebanon, India, Balgadesh, Indonesia, and others.
• Japan "appropriating" China-contested islands provoking a firestorm of retaliation including demands for "war with Japan"
• The Japanese ambassador to China dying mysteriously
• Netanyahu telling Meet the Press Iran will have a nuke in six-seven months and must be stopped beforehand
• Warships from more than 25 countries, including the United States, Britain, France, Saudi Arabia and the UAE, launching a military exercise in the Straits of Hormuz
• A third US aircraft - the CVN-74 Stennis - carrier is en route to Iran with an ETA of about 10 days
• And finally, a potential catalyst to light this whole mess on fire, Iran's Revolutionary Guard announcing that its troops are now on the ground in Syria.

America Was Founded on Courage ... What Hapened?

The YouTube video depicting Mohammed is nothing more than the straw that broke the camel’s back. This kind of violent uprising against American power and interests in the region has been a long time in the making. It is not just the continuation of drone strikes which often kill civilians in Pakistan, Yemen, Somalia and Afghanistan, either. Nor is it the American invasions and occupations of Iraq and Afghanistan. Nor is it the United States and the West’s support for various deeply unpopular regimes such as the monarchies in Bahrain and Saudi Arabia (and formerly Iran). Nor is it that America has long favoured Israel over the Arab states, condemning, invading and fomenting revolution in Muslim nations for the pursuit of nuclear weapons while turning a blind eye to Israel’s nuclear weapons and its continued expansion into the West Bank.

Equities traded lower in Europe today as market participants continued to book profits after a rally to 13-month highs on growing concerns that even though the Constitutional Court in Germany will dismiss the injunction, it may enforce certain conditions. In addition to that, yesterday’s comments from Spain’s Rajoy who said that the new ECB backstop makes a bailout for his country less urgent. As a result, there is a risk that markets may scale back their expectations of an imminent full-scale bailout and in turn lead to another speculative attack on Spanish bonds. This, together with touted profit taking, saw the short-end in Spain and Italy come under pressure (2y Spanish yield up 8bps and 2y Italian yield up 7bps). In turn, this supported duration assets throughout the session. Looking elsewhere, the looming elections failed to deter investors from the latest DSL tap, which drew a record low yield. Going forward, the second half of the session will see the release of the latest Trade Balance data from the US, as well as the weekly API report. In addition to that, the US Treasury will sell USD 32bln in 3y notes.