$120 oil is here
Crude oil from the “light end of the barrel” hit $120 this morning. Forget what Bernanke and the MSM are telling you. They keep showing the WTI price. Even supposedly smart guys like Mark Zandi have said recently that $100 oil is not a problem for the US. Wrong. The US needs light crude for the gulf refineries. And consumers will be paying $4 a gallon before Zandi or his pal Bernanke can catch their breath.
More Pirate Stuff
The Somali pirates hit another civilian sailing boat of the coast of Oman. This is even worse than a few weeks ago when the bad guys captured two elderly couples that were delivering bibles. This time they have four adults and three kids. They also got two other merchant ships in past five days.
The family and crew are Danish. What they were doing in these waters and not part of a convoy is a mystery to me. They were asking for trouble. The pirates have already issued a warning that if there is an assault by special forces they will kill everyone. This can easily get stepped up a notch or two. It’s unlikely that there will be a repeat of the disaster of a fortnight ago.
A recap of that action is that there were 4 large US Navy vessels surrounding the boat with the four Americans. They had an FBI hostage negotiator on board. They got two of the pirates onboard the Navy ship and the Feebs promptly told them they were not going to let them get to shore. They could free the hostages, take they boat and go free or there would be a bad end.
Not surprisingly the pirates were not pleased with this and fired off a rifle grenade. The Navy does not take kindly to that sort of thing so all hell broke lose and the hostages were killed before a Ranger team could get onboard. A complete balls up in my opinion.
US amphibious forces have left the area to patrol off Libya. So don’t look for US troops to get involved. This time it will be NATO Special Forces that get to play hero. Hopefully they will do a better job at negotiating a deal than the FBI. That or they do a better job than our Rangers did (I think we should have had the SEALS do that job).
Junk for Sale
The FDIC is having a big sale up in Michigan. They are auctioning off homes and property they got from failed banks.
Part of me feels that this is fine. We have to clean out the problems. So as unpleasant as it is to have the FDIC driving down real estate prices up in Michigan it something that has to be done.
There is another part of me that looks at this as a measure of how desperate things have become. Is it really necessary for an institution as significant in our economy as the FDIC to be selling dreck like this? There has to be a better way.
Irrelevant Dollar
About two weeks ago Tyler Durden first made the observation that the dollar was becoming irrelevant. At the time I disagreed. There is too much history to say that this is not so. Now a few weeks later I have to agree with TD. The dollar has become irrelevant.
That there has been no significant adjustments in FX rates while the Middle East has boiled and burned is sort of unfathomable. There should have been some flight to quality move. But there wasn’t. For me this is a warning sign. I have to wonder what the dollar will do when/if there isn’t a crisis someplace that keeps it stable.
Sometime ago I recommended a long dollar Yen position. Two months later and it is back to where it started and I/you have nothing to show for it. I still think that the Yen is the worst reserve currency out there, but as far as recommendations go, I have to take this one off the table. It has done nothing for anyone, beside waste time and focus. Sorry for the blank.
Posts
I think I scooped TD on that one :-) http://www.annuityiq.com/blog/main/the-dollar-is-dead/
ReplyDeleteMy grammar sucks and I ramble a lot, but I got an excuse, cancer and drugs related to it so forgive me.
Do you think part of the USD non-reaction might be that much of the Middle East is Dollar-pegged and the oil markets there are largely Dollar-based? A rush into Dollars ironically boosts the Saudi and Kuwaiti currencies, among others.
ReplyDeleteI've been watching the same phenomenon in T-Bonds over the last 5 months. As the tenor with the least Fed-love, I thought it would be a decent indicator of real fear. The last three weeks have seen a good run-up from an oversold condition, but nothing like the summer prior.
I find it nearly impossible to believe that Army Rangers were being used in such a mission... from a Navy ship no less.
ReplyDeleteThey had to have been navy seals.
Cheap crude can be refined at a refinery I helped build in Corpus Christi. The project started with sweet crude in the low thirties and when completed in 1983 it was around 14$. Since the elaborate 400MM$ plant was worthless at those prices, it was sold to the Venezuelan government.
ReplyDeleteSo what happens when oil shoots past $150 towards 200 and our oil dependent economy takes a big hit. Seems like we have shot our wade saving the banks and if another hit happends what might Ben and President O do? The Republican cost cutters?
ReplyDeleteSorry Bruce, I'd rather have them try to rescue me and perhaps fail then endure a year in captivity in some rotten God foresaken hell hole amongst those human scum.
ReplyDeleteShort positioning in Yen is at extremely high levels, I would be very cautious about continuing to recommend betting against it. In fact you're probably better off selling Yen puts, I don't think it's going anywhere in the short-medium term. One day it'll be the best short out there, but not til it's forced an awful lot of stop-outs.
ReplyDeleteHi Bruce
ReplyDeleteI just wanted to say thank you for your post on the "rule of thumb" that has just been established by Fed Chairman Ben Bernanke. A comment on my blog raised the issue and I can see that some readers have looked at your blog which is as it should be.
I have given my own analysis today of Ben's in many respects extraordinary claims and a few implications he didn't mention! But I also wanted to remember my manners and say thanks for spotting this.
Shaun Richards
If the risk premium on crude comes off during the next little while we are going to have a very nice rally in the stock markets, and a correspondingly large drop in the precious metals, so keep that on the radar and don't go nuts on the short side until that rally comes. I also believe that any relief rally will be short lived because political turmoil should rule the middle east (and perhaps many other locales) for months to come. The world is in a paradgm shift of some significance.
ReplyDelete