Russia is back. President Vladimir Putin wants the world to acknowledge that Russia remains a global power. He is making his stand in Syria. The Russians are troubled by what they see as a growing trend among the Western Powers to remove disapproved administrations in other sovereign countries and a program to isolate Russia. Again, Russia is seeing Washington’s hand in Syria in the conflict with Iran. The Russians are backing their determination to block another regime change by positioning and manning an advanced air defense system in what is becoming the Middle East casino. Putin is betting that NATO will not risk in Syria the cost that an air operation similar to what was employed over Libya will impose. Just in case Russia’s determination is disregarded and Putin’s bluff is called, Surface to surface Iskander missiles have been positioned along the Jordanian and Turkish frontiers. Putin is certain that he is holding the winning hand in this very high stakes poker game. When the Turks and U.S see that there is little chance of removing Al-Assad, they will have no option other than to negotiate a settlement with him; and that would involve Russia as the protector and the mediator.
February has been an odd month for precious metals to say the least. On-again, off-again fears of Bernanke removing the punchbowl (and endless sell-side strategists discussing Great Rotations and the end of the gold cycle) have led to prices for gold and silver sliding notably. However, while all this price deterioration has been going on, demand for physical gold and silver has surged - entirely disconnecting from January's apparent demand-to-price correlation - and Silver set to break all-time record demand highs for a February. We know who was buying in January, as Reuters reports Russia and Turkey were significantly adding to their bullion reserves; and while the divergence between demand and price coincided with Chinese New Year - leaving a large marginal buying nation on the sidelines - we suspect the drop is more to do with hedge fund reflexive selling - now caught offside. It seems at least one smart player was using lower prices to build their stack; manipulation or no manipulation.
Waste and Fraud Are the Real Causes of the Deficit
- Risk of instability hangs over Italy poll (FT), Protest votes add to uncertainty in close Italy election (Reuters), and... Risk On
- Czech inspectors find horsemeat in IKEA meatballs (Reuters)
- China’s Slower Manufacturing Casts Shadow Over Recovery (Bloomberg)
- So much for reform: China Prepares for Government Shuffle as Zhou Stays at PBOC (Bloomberg)
- France to pause austerity, cut spending next year instead: Hollande (Reuters)
- Sinopec to buy stake in Chesapeake assets for $1.02 billion (Reuters)
- White House warns states of looming pain from March 1 budget cuts (Reuters)
- China Quietly Invests Reserves in U.K. Properties (WSJ)
- Osborne Keeps Austerity as Investors See Downgrade as Late (BBG)
- South Korea's new president demands North drop nuclear ambitions (Reuters)
- Russia accuses U.S. of double standards over Syria (Reuters)
It appears the tensions between Turkey and Syria are far from easing, as evidenced by the just reported car bomb explosion at the Turkish-Syria border where at least 9 people have been killed according to TV24. According to AA, the blast happened in a vehicle with a Syrian license plate, which is certain to inflame tensions between the two countries even more. Keep an eye on the already soaring Brent-WTI spread.
A week ago we described the sad tale of one Mahmoud Bahmani, who until recently supervised the unilateral destruction of the Iranian Rial, which on Friday just hit an all time low against the dollar down 21% in two weeks, as head of the Iranian central bank. While his currency-crushing performance would have been enough to get Mahmoud the "congressional medal of inflating away the debt" (not to mention a lifetime corner office at a TBTF bank of his choosing) at any self-respecting "developed world" banana republic, all of which have just one goal - to crush their currencies as Iran just did, in Iran it had precisely the opposite effect and let to his prompt termination. Yet this story is merely a trifle compared to the recent developments surrounding his predecessor, Tahmasb Mazaheri's, who led the Iranian central bank for just one year until September 2008, at which point Ahmadinejad fired him to make way for the recently laid off Bahmani. It is this same Mazaheri, who had been off the world's radar for over 4 years, until he trimumphantly resurfaced yesterday, when German Bild reported that he was caught last month trying to enter Germany with a check for 300 million Venezuelan Bolivars (some $70 million USD) issued by the Venezuelan Central Bank.
- 'London Whale' Sounded an Alarm on Risky Bets (WSJ)
- Deadly Blast Strikes U.S. Embassy in Turkey (WSJ)
- Abe Shortens List for BOJ Chief as Japan Faces Monetary Overhaul (BBG)
- Endowment Returns Fail to Keep Pace with College Spending (BBG) - More student loans
- Mexico rescue workers search for survivors after Pemex blast kills 25 (Reuters)
- Lingering Bad Debts Stifle Europe Recovery (WSJ)
- Peregrine Founder Hit With 50 Years (WSJ) - there is hope Corzine will get pardoned yet
- Deutsche Bank to Limit Immediate Bonuses to 300,000 Euros
- France's Hollande to visit Mali Saturday (Reuters)
- France, Africa face tough Sahara phase of Mali war (Reuters)
- Barclays CEO refuses bonus (Barclays)
- Edward Koch, Brash New York Mayor During 1980s Boom, Dies at 88 (BBG)
- Samsung Doubles Tablet PC Market Share Amid Apple’s Lead (BBG)
Russia, Kazakhstan and Turkey expanded their gold holdings in December, seeking to diversify their foreign reserves and protect from currency devaluation risk. Russian gold holdings climbed 2.1% to 957.8 metric tons or 30.793 million ounces, according to data on the International Monetary Fund’s website. The increase in December takes the increase in Russian gold reserves in 2012 to 8.5%. The Russian central bank has said that they will continue buying gold. The pace of the purchases may vary, First Deputy Chairman Alexei Ulyukayev told reporters this month. He denied that there is a 10% target for gold’s share in the reserves according to Bloomberg
- Geithner allegations beg Fed reform (Reuters)
- BOJ Adopts Abe’s 2% Target in Commitment to End Deflation (BBG)
- Bundesbank Head Cautions Japan (WSJ)
- In speech, Obama pushes activist government and takes on far right (Reuters)
- Atari’s U.S. Operations File for Chapter 11 Bankruptcy (BBG)
- Israel goes to polls, set to re-elect Netanyahu (Reuters)
- Apple May Face First Profit Drop in Decade as IPhone Slows (BBG)
- EU states get blessing for financial trading tax (Reuters)
- Indian Jeweler Becomes Billionaire as Gold Price Surges (BBG)
- Europe Stocks Fall; Deutsche Bank Drops on Bafin Request (BBG)
- Algeria vows to fight Qaeda after 38 workers killed (Reuters)
- GS Yuasa Searched After Boeing 787s Are Grounded (BBG)
- Slumping pigment demand eats into DuPont's profit (Reuters)
An overview of the key factors and events that are shaping the investment climate in the week ahead. It looks at some emerging market developments as well. These are the main talking points and considerations that ought to be on your radar screen as investors or pundits.
How effective have the sanctions been in moderating Iran’s behavior up to now? Current indications are not much, despite the damage inflicted on the country’s economy. On 9 January Iranian President Mahmoud Ahmadinejad said that Iran should establish more processing industries in the oil and gas sectors to reduce dependency on exports of crude oil and that the budget plan for the next Iranian year of 1392 (to start on 21 March) envisaged less dependence on crude oil revenues as the government intends to replace crude oil exports with oil derivatives to allow the nation’s economy to participate in the oil sector’s lucrative downstream industry.... A regime that has weathered more than three decades of tumult in its efforts to construct an Islamic society seems unlikely in an energy-starved world to ameliorate its behavior solely to please the dictates of Washington, Brussels, the UN and Canberra. And oh, on 14 September 2012 the United States exempted Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, and Japan from complying with the sanctions for another 180 days, a list that was expanded on 8 December to include China, India, South Korea, Malaysia, Singapore, South Africa, Sri Lanka, Turkey, and Taiwan.
- Obama Picking Lew for Treasury Fuels Fight on Budget (BBG)
- Deutsche Bank Bank Made Huge Bet, and Profit, on Libor (WSJ)
- Spain Beats Maximum Target in First 2013 Debt Sale (BBG) - In other news, the social security fund is now running on negative?
- "Icahn is also believed to have taken a long position in Herbalife" (NYPost) - HLF +5% premarket
- Lew-for-Geithner Switch Closes Era of Tight Fed-Treasury Ties (BBG)
- Turkey Beating Norway as Biggest Regional Oil Driller (BBG)
- Greek State Firms are Facing Closure (WSJ)
- Draghi Spared as Confidence Swing Quells Rate-Cut Talk (BBG)
- China’s Yuan Loans Trail Estimates (BBG)
- SEC enforcement chief steps down (WSJ)
- CFPB releases new mortgage rules in bid to reduce risky lending (WaPo)
- Japan Bond Investors Expect Extra Sales From February (BBG)
- Secret and Lies of the Bailout (Rolling Stone)
- Banks Win 4-Year Delay as Basel Liquidity Rule Loosened (BBG)
- Hedge Funds Squeezed With Shorts Beating S&P 500 (BBG)
- Bankruptcy regime for nations urged (FT)
- Is the Fed Doing Enough—or Too Much—to Aid Recovery (WSJ)
- Cracks widen in US debt ceiling debate (FT)
- McConnell Takes Taxes Off the Table in Debt Limit Negotiations (BBG)
- Abe Seen Spending 12 Trillion Yen to Boost Japan’s Economy (BBG)
- Monti, Berlusconi Spar on Taxes in Weekend Media Barrage (BBG)
- Cameron Sets New Priorities for U.K. Coalition (BBG)
- Defiant Assad Rules Out Talks With Rebels (WSJ)
- Korea Seen Resisting Rate Cut as Won Threatens Exports (BBG)
Several hours ago, Syrian president delivered his first public speech in months, addressing the internal military conflict that has gripped his country, and whose key excerpts can be found here. In it he called for a "full national mobilisation" to fight against rebels he described as al Qaeda terrorists. "We meet today and suffering is overwhelming Syrian land. There is no place for joy while security and stability are absent on the streets of our country," Assad said in a speech at the opera house in central Damascus. "The nation is for all and we all must protect it." Assad once again blamed the west for provoking and "facilitating" the rebellion, which even the NYT admits is being orchestrated by Al Qaeda, which naturally begs the question: just what is Al Qaeda to the US and to its intelligence agencies - foe or ally? But while providing fodder for the pundits, the speech was largely irrelevant. What does merit attention is the follow up to the story from two weeks ago the Russia sent two squadrons of ship to Syria in mid-December. It appears they have arrived, and just in time to offset the positioning of NATO Patriot missiles along the Turkish-Syria border.
The bipolar mood swing over the short-term band aid Fiscal Cliff non-solution may be over, and finally the market, which yesterday saw the official breach of the debt ceiling on the final day of 2012 on paper may be starting to look forward 58 days to that day in February, or more likely March, when the real catalyst as we have said all along- the increase of the US debt ceiling by another $2.4 trillion - has to be resolved. Futures are down a modest 5 points even as the EURUSD slide continues now that year end window dressing repatriation means European banks no longer need to show the currency on their books - at some point the EURUSD-ES correlation algos will kick in but not yet. Keep in mind that in the summer of 2011 the debt ceiling negotiations started some two months before the D-Day in early August, this time around politicians, who have learned nothing, will likely leave all debate until the very last moment once again, as the democrats assume the GOP will fold like a cheap lawn chair once again, even as the tensions at the GOP to do just the opposite hit a fever pitch. Which is why not even Goldman Sachs, as confirmed in a note by Alec Philips last night (coming shortly), cares to predict what (or when) the "debt ceiling 2013" outcome will be.