It was heinous. It was underhanded. It was beyond the bounds of international morality. It was an attack on the American way of life. It was what you might expect from unscrupulous Arabs. It was “the oil weapon” -- and back in 1973, it was directed at the United States. Skip ahead four decades and it’s smart, it’s effective, and it’s the American way. The Obama administration has appropriated it as a major tool of foreign policy, a new way to go to war with nations it considers hostile without relying on planes, missiles, and troops. It is, of course, that very same oil weapon.
While the western world couldn't care less about the fate of some backwater town on the border between Syria and Turkey, it certainly cares about what happens to the Iraqi oilfields located south of Baghdad (which serve to determine the marginal price of oil around the world). Well, the world may not care, but crude traders certainly do, and the reason why oil appears to be rising in recent trade is due to news that ISIS militants have infiltrated one of Baghdad's outer suburbs, Abu Ghraib which is only eight miles from the runway perimeter of Baghdad's international airport.
- It wasn't Obama this time: Pakistani teen, Indian activist win Nobel Peace Prize (Reuters)
- Surging VIX Shakes Bulls as S&P 500 Charts Go Haywire (BBG)
- Global shares hit six-month low as growth worries mount (Reuters)
- Police, protesters clash in St. Louis ahead of weekend of rallies (Reuters)
- We're Sitting on 10 Billion Barrels of Oil! OK, Two (BBG)
- Spain seeks answers as seven more enter Ebola isolation (Reuters)
- Iran will sell its oil to Asia in November at the biggest discount (BBG)
- Redefining honeypot: U.S. DEA 'most interested' in U.S. investors in Canadian marijuana firms (Reuters)
- UKIP Wins First Commons District With Conservative Defector (BBG)
- Fake Ebola Patients Help Hospitals Prepare for Next Case (BBG)
And just like that. everything is crashing. Whether it is Asia, Europe, or even US futures, an entire generation of traders are waking up to something few have seen in the past 6 years: a very rare sea of red only this time with the main difference that the perpetual backstop of all risk, the Fed and/or "Edward Quince", may not be there to halt the collapse.
Ebola Pandemic Hits Germany, Turkey, And Australia As Infected Spanish Nurse Went Un-Quarantined For A WeekSubmitted by Tyler Durden on 10/09/2014 09:12 -0400
Despite the still confident exclamations from officials that the Ebola pandemic is 'contained', more and more nations are admitting to Ebola-symptomatic cases or bringing infected patients back from Africa for treatment. Australia has its first potential case of the deadly disease, as Bloomberg reports a nurse who returned from volunteering in Africa has developed Ebola-like symptoms. Despite claims that Nigeria's outbreak is over, a Turkish worker there has been hospitalized in Istanbul after signs of high fever and diarrhea. Health officials from Germany confirm a 3rd Ebola patient has arrived in the country - having contracted the disease in Liberia. And finally, just as in the sad case of Thomas Duncan in Dallas, The Guardian reports the infected Spanish nurse went untreated and unquarantined for a week despite reporting symptoms at least three times to hospital officials. It seems the world is ill-prepared for this...
While geopolitics has largely dropped of the front news page, replaced by updates on the global Ebola epidemic (which until recently was considered nothing but fearmongering by those who prefer to avoid reality ews until it is far too late), things in the Middle East are getting worse, and while the US attack against ISIS has achieved absolutely nothing (in fact, the revelation of US strategies may have facilitated the incursion of ISIS into the town of Kobani, a mostly Kurdish city in north Syria), the latest geopolitical hotspot over the past few days has become NATO member Turkey (we provided a big picture summary in "Turkey, The Kurds And Iraq - The Prize & Peril Of Kirkuk"). It is here that violent clashes broke out across the southeast of the nation with several people reported dead and curfews imposed, as the region’s Kurdish people protested the advance of Islamic State just across the border with Syria.
- Turkey says Syria town about to fall as Islamic State advances (Reuters)
- Only now? Growth worries grip stocks, oil (Reuters)
- Hong Kong Protest Leaders ‘Furious’ at Agenda for Talks (BBG)
- Earthquake Damages Thousands of Homes in Southern China (BBG)
- Keystone Be Darned: Canada Finds Oil Route Around Obama (BBG)
- Where Is North Korea's 31-Year-Old Leader? (BusinessWeek)
- Australia to Revise Employment Data (WSJ)
- Americans Living Longer as Fewer Die From Heart Disease, Cancer (BBG)
- A 401(k) Conundrum: Can You Make Cash Pile Last for Life? (BBG)
- China Services Sector Slows in September (WSJ)
And it all started off so promisingly, when after the biggest selloff in US stocks in two months, the BOJ and its preferred banks once again sold 6J (i.e., bought USDJPY) in the morning Japan session (while collecting CME liquidity rebates of course), sending the pair from below 108 to half the way to 109, and naturally taking global futures higher while pushing yields lower when as ITC says a "large TY seller knocked USTs to lows during the session" - hmmm, wonder who the large seller was. And then... the "rebound euphoria" fizzled a la Sodastream, sending the Nikkei sliding 1.2%, and US equity futures back to unchanged with the bond surge returning and sending German Bunds to new all time highs once again, while the Dax briefly broke below under 9000 before stabilizing at the key support level. It is unclear what caused the failure in central bank euphoria, although some suggest that the latest bevy of disappointing economic news wasn't quite bad enough.
The modern Turkish government is looking at Iraq and Syria in a way similar to how Damat Ferid did almost a century ago when he sought in Paris to maintain Turkish sovereignty over the region. From Ankara's point of view, the extension of a Turkish sphere of influence into neighboring Muslim lands is the antidote to weakening Iraqi and Syrian states. However, the Turkish vision of the region simply does not fit the current reality and is earning Ankara more rebuke than respect from its neighbors and the West. The Kurds, in particular, will continue to form the Achilles' heel of Turkish policymaking. This is the crowded battleground that Turkey knows well. A long and elaborate game of "keep away" will be played to prevent the Kurds from consolidating control over oil-rich territory in the Kurdish-Arab borderland, while the competition between Turkey and Iran will emerge into full view.
Having accidentally stumbled upon the awkward truth - that many governments in the Middle East are either implicitly or explicitly funding terrorist organizations, such as ISIS, to fight Syria's al-Assad regime - Vice President Joe Biden has been doing the rounds the last few days apologizing for any inconvenience his Harvard speech last week may have caused. As Biden's spokeswoman explained, "the vice president apologized for any implication that Turkey or other allies and partners in the region had intentionally supplied or facilitated the growth of ISIL or other violent extremists in Syria." Today it was Saudi Arabia's turn (following Turkey and UAE) to hear Biden "clarify his recent remarks," and as Al Arabiya notes, "the two parties agreed that the issue was closed." Of course, one can hardly blame him for the gaffes, juggling who are friends, frenemies, and foes remains a tricky task for anyone.
Relative to stock market indices, broad commodity indices are now at their lowest levels since the late-1990s dot com boom. Key commodity price ratios, such as those between precious and industrial metals, are already at levels associated with financial crises such as that of 2008. In other words, there is already ‘blood on the commodity streets’, presenting investors and commodity traders with potentially attractive opportunities.
"Right now we have the executive branch making a claim that it has the right to kill anyone, anywhere on Earth, at any time, for secret reasons based on secret evidence, in a secret process undertaken by unidentified officials. That frightens me."
- Ebola Patient Fights for Life as Contacts are Monitored (BBG)
- GPIF Unlikely To Announce New Portfolio Until November: Delay Could Rattle Investors Hoping Fund Will Invest More in Stocks (WSJ)
- High risk Ebola could reach France and UK by end-October, scientists calculate (Reuters)
- Neves to Face Rousseff in Brazil in Surprise Comeback (BBG)
- Hong Kong democracy protests fade, face test of stamina (Reuters); A Hong Kong Protest Run on Fumes and Instant Noodles (WSJ)
- Putin Clans Said Gridlocked Over Arrest as Sanctions Bite (BBG)
- Surging dollar may be triple whammy for U.S. earnings (Reuters)
- Lloyds Said to Cut Thousands of Jobs as CEO Cuts Costs (BBG)
Another humanitarian catastrophe may be just hours away at Kobani - a Syrian Kurdish town on the border with Turkey that is now surrounded by ISIS tanks and is being pounded day after day by ISIS heavy artillery. Already this lethal phalanx, which fuses 21st century American technology and equipment with 12th century religious fanaticism, has rolled through dozens of Kurdish villages and towns in the region around Kobani, sending 180,000 refugees fleeing for their lives across the border. Self-evidently the lightly armed Kurdish militias desperately holding out in Kobani are fighting the right enemy - that is, the Islamic State. So why has Obama’s grand coalition been unable to relieve the siege?
“The crude is transported by tankers to Jordan via Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria's local market and to the Kurdistan region of Iraq, where most of it gets refined locally... Turkey has turned a blind eye to this and may continue to do so until they come under pressure from the West to close down oil black markets in the country's south.”