With ICE and CME margin hikes - that last bastion of supply/demand imbalance suppression - no longer having an impact on crude price, it was only a matter of time before the last theatrical measure in the price arsenal was used. Per Dow Jones: "White House Chief of Staff Bill Daley said on Sunday the Obama administration is considering tapping into the U.S. strategic oil reserve as one way to help ease soaring oil prices." Speaking on NBC television's "Meet the Press," Daley said: "We are looking at the options. The issue of the reserves is one we are considering. ... All matters have to be on the table." There has been support among Senate Democrats for tapping the reserves. Senator Jay Rockefeller on Thursday became the third Democrat to ask President Barack Obama to tap America's emergency oil supply to cool prices that have risen past $100 a barrel on the strife in Libya." What our esteemed politicians fail to realize that tapping the SPR is analogous to Lehman filing an 8K declaring to the world it is now tapping directly into the Fed's discount window for its liquidity - that didn't end too well. The problem with the SPR is that as a non-marginal replacement of supply it is largely a puppet: with a capacity 726.7 million barrels, the SPR holds a 34 day reserve at the US daily consumption of 21 million barrels. The picture is slightly better when considering that the US only imports 12 MMbd, meaning there is a 58 day supply. But the biggest issue that nobody is considering, is that the maximum total withdrawal capacity is physically limited to just 4.4 million barrels per day. In other words, should the MENA escalation flare up, there is no way to physically replace all the lost output. Yet what is most troubling is that even as the US is about to start using up its reserves, Asia is actively shoring up its oil, meaning that as our own oil buffer gets ever smaller, Asia could easily dictate economic terms over the OPEC cartel as soon as a few months from now if the Bernanke liberation wave does not end any time soon.
And now, for a break from our regularly scheduled Fed-bashing programming. The latest social phenomenon is 85k viewers in and rising at 1k per 30 seconds. Time for a new iBorg?
The political class and their mouthpieces in the corporate controlled mainstream media are desperately trying to spin the oil price surge as a temporary inconvenience that will not derail their phony recovery story. Brent crude closed at $116 per barrel yesterday. West Texas crude closed at $104 per barrel. Unleaded gas has risen by 22% in the last month and 60% since September 1, 2010. I’m sure this slight increase hasn’t impacted Ben Bernanke or Lloyd Blankfein. Their limo drivers just charge it to their unlimited expense accounts. Joe Sixpack, driving his 15 mpg Dodge RAM pickup, is now forking over an extra $1,200 per year in gas expenditures, not to mention more for everything impacted by oil such as food, utilities, and anything transported to their local Wal-Mart by truck (everything). Luckily, the Federal Reserve and crooked politicians only care about their comrades in the top 1% elitist society, for whom oil is an investment, not an expense.
Two weeks ago Zero Hedge claimed that Saudi Arabian "gestures" to hike crude output were about as hollow as the heads of those suggesting that dealing with surging oil prices involves reducing interest rates even more (which just happen to be at zero already), mostly as a result of the country's recent adoption of "whorism" or its doomed strategy to buy the love of its citizens. The reason is that as UBS' Andy Lees noted, Saudi "will need to ramp up production by about 10% (more capital spending) without prices falling" to fill the suddenly gaping budget hole left from literally throwing $37 billion out of Bernanke's leased helicopter. Yesterday, BusinessWeek's Peter Coy essentially reaffirmed our theory verbatim in the piece "Saudi Arabia Must Keep Pumping Oil to Buy Stability"... needless to say we completely agree with this. Obviously, the bigger issue here is that as WikiLeaks recently suggested, and was reconfirmed by Jim Rogers, Saudi Arabia is simply lying about its excess capacity. Because if Saudi had indeed raised output as many have hoped for, and as Saudi has represented, it would have made up for the funding differential simply by the hike in export volume. Instead, as Reuters reports, Saudi Aramco just hiked prices on oil to customers in Asia and Europe up substantially. This, at least to us, does not appear like the rational action of a player seeking to moderate surging oil prices to avoid further social conflict, and one who can plug offline capacity.
For those who need a good laugh this Saturday evening, we turn our attention to the man who singlehandely made frontrunning the Fed a (somehow legal) artform: Macroeconomic Advisors' Larry Meyer. This so-called pundit, who recently was caught in a debate with David Einhorn (if one may call the complete and utter mauling of someone for his absolute lack of comprehension of anything finance related, a debate), exposing him for the hollow chatterbox he is, and who only receives consultancy fees due to his close relationship with the Fed, which allows him to leak privileged Fed information to the likes of Bill Gross, Larry Fink and others who deem his services relevant, was on CNBC telling the heptabox panel that an oil shock is disinflationary, and that the way to deal with surging oil prices is to CUT interest rates. That's right: cut rates, which at last check were at 0-0.25% (6 minutes into the clip below). While we feel embarrassed for anyone who shares the same perspective as Meyer, who confirms that monetary groupthink is the deadliest form of contagion possible, what stuns us is how anyone could possibly pay to get this person's input on anything aside from what the Fed will do at any point in the future (an arrangement which should be made illegal as of yesterday). Which in itself begs the question: are the Feds finally bugging Macroeconomic Advisors' phone conversations with their clients? After all Gerson Lehrman et al are getting crushed as no hedge fund wants to get their inside information from the "expert networks" any more. Why should Larry Meyer's firm fare any different? Please somebody at the SEC or the DA office: explain that one to us...
Goldman's Noyce On How To Play The "Large S&P Correction Coming" Through FX, (And All The FX Charts That Matter Next Week)Submitted by Tyler Durden on 03/05/2011 14:51 -0400
In addition to all the traditional technical observations on all the key crosses from Goldman's only must read technician John Noyce, which include the EURUSD, the EURCHF, the AUDUSD, the NZDUSD, and the AUDNZD, the NOKSEK, and the GBPUSD, and a quick look at 2 year USD swaps, Noyce's key technical observation has to do with a pattern emerging in the S&P vis-a-vis trendlines. To wit: "There are a few signals on the daily chart of the S&P which argue that a larger correction could be developing." The key support line according to Noyce: 1,291-1,294 on the S&P, below which the next support is the 200 DMA, which is all the way down at 1,174. The key catalyst: a market that is riduclously overbought at 129 days above the 55-DMA (128 as of the day of Noyce's report which was on Thursday). So how to play the coming correction in FX? The AUDJPY may be the best bet and the Goldman chartist explains why...
Proving that Saudi Arabia is a fast learner from both China's and America's experience, today Saudi's interior minister announced he is banning all protests, marches and strikes following the world's realization courtesy of the clip posted on Zero Hedge yesterday, showing that not all is well in the kingdom in which protests are banned. Dow Jones reports: "Top oil exporter Saudi Arabia has banned all protests, marches and strikes in the kingdom after small protests continued over the weekend in the oil-rich Eastern province towns of al-Ahsa and Qatif, interior ministry said Saturday, according to state-owned channel al Ekhbariyah. These activities don't conform with the Islamic laws and harm the interests of the nation and the society, the Saudi channel quoted the ministry as saying." What does, however, comply with Islamic law is openly using your plunge protection team to bid up the market: "Saudi stocks rose for the first time in three weeks, rallying the most in more than two years, after the finance minister said the Arab world’s largest economy is benefitting from higher oil prices and in “excellent” shape... The state-run General Organization for Social Insurance also purchased stocks, according to Ajeej Capital’s Fuad Aghabi." Not letting a crisis go to waste, Saudi has quickly learned Econ 101 and is now advising its citizens that America's massive economic contraction is its personal gain. And if that doesn't work, it will just use its pension fund to bid up stocks, as a massively Marked to Myth market is apparently in everyone's interest: just ask the Chairsatan.
The chart which we presented a few weeks ago courtesy of Sean Corrigan sees a few additional components added to it. Whereas before the chart focused on the Adjusted Austrian money supply and commodity prices, it now sees the addition of the S&P and Junk spreads. In a word: every single asset class correlates 1:1 with the Fed's balance sheet. If the Fed is really planning on ending QE2 on June 30, the market collapse will be epic. And, yes, this should not come as a surprise to anyone.
We have heard much from the propaganda machine just how much better the jobs situation has gotten under president Obama three years into his term. We would like to interject with two very simple charts...
As Gas Prices Surge By 28 Cents A Gallon In The Last 10 Days To $3.47, The APTA Informs Us How This Is Actually Great NewsSubmitted by Tyler Durden on 03/04/2011 19:04 -0400
As the bruised and battered US consumer continues to be fornicated at the pump, there is, we are told, an amazing silver lining to this inflationary catastrophe: according to the American Public Transportation Association, as gas prices spike they bring with them the
savings for U.S. commuters who rely on public transportation, a transit
group said on Friday. See: and now the surge in price has been spun. Soon, when gas is $5 then $10/gallon, the administration will tell us how we are all saving so much money by using the subway... Of course until such time as the already insolvent MTA (and other regional transportation authorities) are "forced" to hike prices due to retaining those workers which even Wal Mart decided to pass on.
With $5 Trillion In US And European Funding Needs Over The Next 3 Years, How Long Until The Global Monetization Tsunami Hits (Again)?Submitted by Tyler Durden on 03/04/2011 18:23 -0400
While we have presented the below charts in the past in some form or another on various occasions, since everyone's memory is at most 1 trading day strong these days, we are happy to recycle content while continuing to "surprise" our readers. Below, we present the chart showing European maturities over the next three years. It should be sufficient to convince anyone that while the US needs ongoing QE to not only to keep stocks rising past May/June (Fed's 3rd and only mandate) but to monetize trillions in gross debt issuance (without rates needing to surge to make up for demand shortfall as Bill Gross pointed out so well on Wednesday), Europe is in an even worse predicament. Among the Eurozone's banks, there is roughly $2.4 trillion in funding requirements until 2014. And as our disclosure yesterday on the massive Irish capital shortfall notes, nobody has yet answered the question where all this funding will come from, short of the ECB pulling a Fed, and starting to monetize everything from the bottom of the capital structure upward in the primary markets instead of only through secondary market interventions. Keep in mind this excludes actual sovereign funding needs. Which is not to say the US is immune from the same problem. It isn't. But looking at the problem globally confirms everyone's greatest nightmare: where, in the absence of ongoing central bank monetizations (with or without the assistance of major financial black holes like Europe's EFSF), will the world be able to find buyers for roughly $4-5 trillion in debt to keep the self-funded Ponzi going?
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/03/11
In what can be only described as a total gutting of all silver shorts everywhere, including those with infinite Fed funded balance sheets (wink wink Blythe), all one can do is commiserate. With silver hitting $35.55 intraday, not even a last ditch attempt to spread the ridiculous Chavez rumor once more (this time the two dictators will really get peace ironed out, we promise) will prevent a battery of margin calls from forcing all the silver market timers to liquidate assets to keep their primer brokers happy. That's ok: all those market timer will sooner, or much, much later, get the top right.