Bernanke Downer Depresses Market
Discussing Bernanke Downer, even worse economic data flow and the newly spoiled OPEC. We also discuss the geopolitical risk of Iranian nuclear progression and the art of war and investing.
(Stocks in this article: NYSE: C, NYSE: BRK.A, NYSE: KFT, NYSE: GSK, NYSE: MBI, NYSE: ABK, Nasdaq: ATVI, NYSE: ANF, NYSE: N, Nasdaq: OGZPY.PK, AMEX: DBA, AMEX: FUE, AMEX: GRU, AMEX: JJA, AMEX: JJG, AMEX: RJA, AMEX: MOO, AMEX: SPY, AMEX: DIA, Nasdaq: QQQQ)
Ben Bernanke could fill in for Saturday Night Live's Rachel Dratch, after playing the SNL character "Debbie Downer" so well yesterday. Thanks a lot Ben (and the trombone sounds wah wahhhh). Ben was like, "we see the economy recovering, but we are revising our forecasts closer to private sector estimates." By the way, the private sector includes a bunch of economists forecasting recession. Then he said something like, "the risks are clearly to the downside though, and we may soon run out of room to cut rates if inflation heats up." Wah wahhhhh.....
Needless to say, the previously giddy market gave back ground quickly. This morning's economic data flow has offered more reason for antidepressant loading.
Economic Data & Analysis
Empire State Manufacturing
New York area manufacturing fell into contraction territory, as the Empire State Survey posted a reading of negative 11.7. Economists were expecting a positive reading of 5.75. That's quite a contrast, and not supportive data to offset the work of Bernanke Downer. Wait, it gets worse... This is the first time the measure hit negative territory since 2005. Both orders and shipments moved into contraction, while future employment hovered just above zero. Something did increase though, prices paid (wah wahhhh).
(Stocks in this article: NYSE: C, NYSE: BRK.A, NYSE: KFT, NYSE: GSK, NYSE: MBI, NYSE: ABK, Nasdaq: ATVI, NYSE: ANF, NYSE: N, Nasdaq: OGZPY.PK, AMEX: DBA, AMEX: FUE, AMEX: GRU, AMEX: JJA, AMEX: JJG, AMEX: RJA, AMEX: MOO, AMEX: SPY, AMEX: DIA, Nasdaq: QQQQ)
Ben Bernanke could fill in for Saturday Night Live's Rachel Dratch, after playing the SNL character "Debbie Downer" so well yesterday. Thanks a lot Ben (and the trombone sounds wah wahhhh). Ben was like, "we see the economy recovering, but we are revising our forecasts closer to private sector estimates." By the way, the private sector includes a bunch of economists forecasting recession. Then he said something like, "the risks are clearly to the downside though, and we may soon run out of room to cut rates if inflation heats up." Wah wahhhhh.....
Needless to say, the previously giddy market gave back ground quickly. This morning's economic data flow has offered more reason for antidepressant loading.
Economic Data & Analysis
Empire State Manufacturing
New York area manufacturing fell into contraction territory, as the Empire State Survey posted a reading of negative 11.7. Economists were expecting a positive reading of 5.75. That's quite a contrast, and not supportive data to offset the work of Bernanke Downer. Wait, it gets worse... This is the first time the measure hit negative territory since 2005. Both orders and shipments moved into contraction, while future employment hovered just above zero. Something did increase though, prices paid (wah wahhhh).
Counter to widespread belief, most manufacturers reported that the weak dollar played a net negative role on their business. While international sales benefited, domestic sales were hurt and input costs proved painfully more expensive.
Import Prices January
If you haven't committed suicide yet, maybe this will help. Import prices rose 1.7% in January, and this compared to expectations for a rise of just 0.5%. Petroleum prices rose 5.5%, and were the key driver behind aggregate price increase. Since cost of goods sold is on the rise, export prices might have become less competitive as they moved higher 1.2%. Non-petroleum import prices rose 0.6%, so perhaps we can take solace in that. However, they did still exceed expectations even after excluding oil (wah wahhh).
We should note one more thing, as you hold your head in your hands. The increase in prices over the last twelve months broke the old record, and just at a time when Bernanke (wah) says inflation is still anchored. This anchor is critical to his ability to fight recession. I look around from my old fishing boat and do not see anything recognizable; Bernanke better check that anchor, cause it sure seems like we're drifting to me.
Treasury International Capital
Foreign demand for long-term U.S. securities declined sharply in December on a relative basis. At $56.5 billion, the measure was 38% short of reported November investment demand. The good news is, that was two months ago. The bad news is, things got worse. (wah)
OPEC Gets Spoiled
Seems OPEC is not comfortable with $90 oil, and is now contemplating a production cut. An unexpected consequence of recently rich petroleum pricing, the Arabs got spoiled. These guys now expect insanely costly pricing. Between OPEC and the IEA, The Greek sees enough political perversion to rule both parties mute as reliable information providers. The good news here is in the fact that at least they offset each other. We know reality lies somewhere in between, and actually probably perfectly centered.
This is again another great illustration of where art meets science in the investment world. Slowing global economic demand, despite recently positive news out of Japan, should have oil prices moving toward $80 by now. Enter the art of the trade...
But, is there more to it...
Strange happenings overseas, like the rumored/reported loss of four undersea Internet cables, some of which are important to Iran, may offer hint of near-term shock to the oil market. Perhaps Mahmoud Ahmadinejad thinks so at least, and that would be enough for him to make a phone call to his buddy, Hugo Chavez. Hugo decides to up the oil ante, and cuts off Exxon Mobil (NYSE: XOM). OPEC reduces its demand forecast, which makes sense, but then also slows shipments informally, and despite expensive oil. One has to question whether political strategy is at play. We have to ask if Middle Eastern interests and allies sense something, and seek to allay that "something" by maintaining pressure on oil prices.
The Greek's Thesis
Democratic candidates are looking like highly probable victors in the upcoming general election in the U.S. This must not sit well with Israel. Iran, a developing nuclear power with unstable leadership that has announced its intent to completely destroy Israel would possibly not face military intervention under a Democratic Party regime in the U.S. There appears more likelihood for help at least from Clinton than Obama, but once again, Obama is the candidate with momentum.
President Bush began filling the strategic oil reserve last year, and by my estimation and the information offered at the time by the government, it should be nearing the lip of the tank by now (March). The United States has filled the strategic reserve before attacking Iraq on both occasions (1+1=2). If President Bush has effectively backed off of his promise to dismantle the "Axis of Evil," then, in my estimation, Israel will act.
At a recent conference, I listened to former Secretary of the Navy John Lehman discuss Iran (as an answer to a question I posed). I asked, "with the presidency effectively up for grabs, if we do not bomb Iran, will Israel do so?" John, who by the way impressed me greatly and also eased some of my concern regarding John McCain's perhaps extreme military mindset, responded in surprising fashion. He said that because a precision airstrike is in his view unrealistic, we will likely have to live with a nuclear Iran. While I had plenty going on in my mind, I did not respond, as there was a large audience with a list of questions for John.
He indicated that Iran has learned from Iraq's mistakes, an idea we've offered here often. He said that Iran has built many facilities underneath hospitals and schools. He stated that America would likely not induce that collateral damage. He said that we are more likely to blockade Iran.
The Greek expects this blockade to develop very soon. We also expect that if it is not effective and in short time, that Israel, the nation most threatened by Iran, will grow impatient. Israel, you recall, purchased a good number of bunker busting bombs from us recently and has bombed a nuclear development project in Iraq before. In order to protect the entirety of its population, we are confident Israel would destroy Iranian hospitals when necessary to remove nuclear capability. In the end, there may in fact be no way to stop Iran, since it has likely passed the point of no return. But, that does not mean Israel will not try. Meanwhile, a well-prepared American fleet or two sits in the Persian Gulf ready to put down any Iranian counter attack.
What most strategists are likely not considering is how far Russia or China might go to stop U.S. domination of the oil rich Middle East. We have witnessed both nations arming Iran with offsetting technology such as anti-aircraft missile systems. We've seen them sell submarines and more to Iran and North Korea as well. I pose the idea that foreign submarines could act in surprising fashion against the American fleet, and God forbid that. The art of war could drive the art of stock market collapse, and oil price shock. This remains the most serious near-term risk to your portfolio, in our view. Oh, and consumer confidence hit a 16-year low today. Wah Wahhh!!!
We should note one more thing, as you hold your head in your hands. The increase in prices over the last twelve months broke the old record, and just at a time when Bernanke (wah) says inflation is still anchored. This anchor is critical to his ability to fight recession. I look around from my old fishing boat and do not see anything recognizable; Bernanke better check that anchor, cause it sure seems like we're drifting to me.
Treasury International Capital
Foreign demand for long-term U.S. securities declined sharply in December on a relative basis. At $56.5 billion, the measure was 38% short of reported November investment demand. The good news is, that was two months ago. The bad news is, things got worse. (wah)
OPEC Gets Spoiled
Seems OPEC is not comfortable with $90 oil, and is now contemplating a production cut. An unexpected consequence of recently rich petroleum pricing, the Arabs got spoiled. These guys now expect insanely costly pricing. Between OPEC and the IEA, The Greek sees enough political perversion to rule both parties mute as reliable information providers. The good news here is in the fact that at least they offset each other. We know reality lies somewhere in between, and actually probably perfectly centered.
This is again another great illustration of where art meets science in the investment world. Slowing global economic demand, despite recently positive news out of Japan, should have oil prices moving toward $80 by now. Enter the art of the trade...
But, is there more to it...
Strange happenings overseas, like the rumored/reported loss of four undersea Internet cables, some of which are important to Iran, may offer hint of near-term shock to the oil market. Perhaps Mahmoud Ahmadinejad thinks so at least, and that would be enough for him to make a phone call to his buddy, Hugo Chavez. Hugo decides to up the oil ante, and cuts off Exxon Mobil (NYSE: XOM). OPEC reduces its demand forecast, which makes sense, but then also slows shipments informally, and despite expensive oil. One has to question whether political strategy is at play. We have to ask if Middle Eastern interests and allies sense something, and seek to allay that "something" by maintaining pressure on oil prices.
The Greek's Thesis
Democratic candidates are looking like highly probable victors in the upcoming general election in the U.S. This must not sit well with Israel. Iran, a developing nuclear power with unstable leadership that has announced its intent to completely destroy Israel would possibly not face military intervention under a Democratic Party regime in the U.S. There appears more likelihood for help at least from Clinton than Obama, but once again, Obama is the candidate with momentum.
President Bush began filling the strategic oil reserve last year, and by my estimation and the information offered at the time by the government, it should be nearing the lip of the tank by now (March). The United States has filled the strategic reserve before attacking Iraq on both occasions (1+1=2). If President Bush has effectively backed off of his promise to dismantle the "Axis of Evil," then, in my estimation, Israel will act.
At a recent conference, I listened to former Secretary of the Navy John Lehman discuss Iran (as an answer to a question I posed). I asked, "with the presidency effectively up for grabs, if we do not bomb Iran, will Israel do so?" John, who by the way impressed me greatly and also eased some of my concern regarding John McCain's perhaps extreme military mindset, responded in surprising fashion. He said that because a precision airstrike is in his view unrealistic, we will likely have to live with a nuclear Iran. While I had plenty going on in my mind, I did not respond, as there was a large audience with a list of questions for John.
He indicated that Iran has learned from Iraq's mistakes, an idea we've offered here often. He said that Iran has built many facilities underneath hospitals and schools. He stated that America would likely not induce that collateral damage. He said that we are more likely to blockade Iran.
The Greek expects this blockade to develop very soon. We also expect that if it is not effective and in short time, that Israel, the nation most threatened by Iran, will grow impatient. Israel, you recall, purchased a good number of bunker busting bombs from us recently and has bombed a nuclear development project in Iraq before. In order to protect the entirety of its population, we are confident Israel would destroy Iranian hospitals when necessary to remove nuclear capability. In the end, there may in fact be no way to stop Iran, since it has likely passed the point of no return. But, that does not mean Israel will not try. Meanwhile, a well-prepared American fleet or two sits in the Persian Gulf ready to put down any Iranian counter attack.
What most strategists are likely not considering is how far Russia or China might go to stop U.S. domination of the oil rich Middle East. We have witnessed both nations arming Iran with offsetting technology such as anti-aircraft missile systems. We've seen them sell submarines and more to Iran and North Korea as well. I pose the idea that foreign submarines could act in surprising fashion against the American fleet, and God forbid that. The art of war could drive the art of stock market collapse, and oil price shock. This remains the most serious near-term risk to your portfolio, in our view. Oh, and consumer confidence hit a 16-year low today. Wah Wahhh!!!
Market-Moving News
- European Markets Slip Back - FT
- Asian Markets Mixed - MarketWatch
- Bernanke & Paulson Depress Investors - CNBC
- Monolines Given 5 Days to Find Funds - FT
- Bond Insurers Dismiss Need for Bailout - CNBC
- Bond Insurer May Be Split to Save Munis - Bloomberg
- Oil Today - Bloomberg
- Empire State Manufacturing Survey Feb. Turns Negative to -11.7, Vs. Consensus 5.75
- BLS - Import Prices Jan. Rise 1.7% M/M, Ahead of Consensus +0.5%)
- Treasury: Treasury International Capital Dec.
- Chinese Storms Should Impact Agriculture, Soybean Prices - Bloomberg
- University of Michigan Consumer Sentiment Feb. Sets 16-Year Low - Bloomberg
- Recession Likely Now, According to Greenspan - CNN Money
- ECONOMIC REPORT 9:15 - Industrial Production Jan. - (Consensus: Production +0.1%, Capacity Utilization 81.4%)
- Europe Shows Trade Deficit - Bloomberg
- IMF Leans on China to Ease Yuan Controls - AP/Yahoo!
- China Trade Surplus Expands in January - AP/Yahoo!
- Bank of Japan Holds Rates - AP/Yahoo!
- Yahoo! Earnings Calendar
- French Bank Warns - FT
- Buffet (NYSE: BRK.A) Takes Stake in Kraft Foods (NYSE: KFT) and GlaxoSmithKline (NYSE: GSK) - CNN Money
- Activision (Nasdaq: ATVI) Scores - TheStreet
- Citigroup (NYSE: C) Stops Withdrawals from Hedge Fund - CNBC
- Abercrombie & Fitch (NYSE: ANF) Profit Rises - AP/Yahoo!
- NetSuite (NYSE: N) Beats Numbers - TheStreet
- Choosing the Best Ag ETF for You - SeekingAlpha
- Gazprom (Nasdaq: OGZPY.PK)Reports, Post KGB Review of Course - CNBC
- Putin's Successor Has a Plan, an Economic Plan - FT
- Greek's Week Ahead: The Market Loves Me, She Loves Me Not
- Economist: Geopolitical Week Ahead
- Iran Daily: Tales from the Dark Side
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posted by The Greek | 10:30 AM
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