Saturday, March 26, 2011

Nevada Saves $8 Million a Year Using Private Medicare Insurance Exchange, Thoughts on Exchanges For Credit, Derivatives

Source: Pew Center on the States 2010
It is well known that U.S. States face a $1 trillion shortfall in funding long-term pensions and health care liabilities. The unfunded liability percentage is worse for retiree health care and other non-pension benefits. From Pew Center's "Trillion Dollar Gapreport:

"But pensions are just one side of the problem. Retiree health care and other non-pension benefits represent the other half of the challenge facing states: a $587 billion long-term liability, with just over five percent of that amount, or almost $32 billion, funded as of fiscal year 2008. Pew found that only two states have more than 50 percent of the assets needed to meet their liabilities for retiree medical or other non-pension benefits: Alaska and Arizona. Twenty-eight states have less than one percent of their liabilities funded, and twenty states have not set aside any funds." (source: pewcenteronthestates.org)

Aside from cutting services and benefits, or raising taxes and premiums, there is another way for states and municipalities to cut retiree health care costs (administrative and premiums) and retain benefits. Instead of overspending on group plans, States and munis can utilize a private medicare health insurance exchange, similar to Expedia for airline tickets and Lending Tree for loans, to let retirees purchase private medicare supplement insurance plans at competitive rates (Read: Extend Health prescribes new model - San Francisco Business Times).

Thursday, March 24, 2011

Victorville, California Has Net Asset Deficiencies, Liquidity Concerns - June 30, 2010 CAFR

General Fund Balance 2010 vs. 2009 (CAFR)
MUNI UPDATE: Victorville, CA released its Fiscal Year June 30, 2010 CAFR; here is a quote from the city's independent auditor, Mayer Hoffman McCann:
"The accompanying financial statements have been prepared assuming that the City will continue as a going concern. As discussed in Note 21 to the financial statements, the City has suffered recurring losses in its General Fund, the Southern California Logistics Airport Authority Enterprise Fund and the Municipal Utilities Enterprise Fund, and those funds have a lack of liquidity and net asset deficiencies that raise substantial doubt about the City's ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 21. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the City be unable to continue as a going concern."

General Fund information:
"General Fund of the City of Victorville, (Continued)

The City’s general fund has incurred an excess of expenses over revenues and estimated fund deficit (unaudited) of approximately 4.5 million through January 31, 2011. Management has estimated an excess of expenses over revenues for the fiscal year ended June 30, 2011 for the City’s General Fund of approximately 5.3 million. Management is estimating general fund balance at June 30, 2011 of approximately $2.2 million.

Tuesday, March 22, 2011

Charles Nenner is Cautious on Economy, Sees Dow 5,000 in 2013, Likes Exxon (XOM)

Charles Nenner, founder of the Charles Nenner Research Center, was featured on Fox Business, CNBC and Yahoo Finance Tech Ticker earlier this month. Here are a few quotes. He shared his cyclical views on the economy, oil, ExxonMobil, copper, gold and Treasury yields. Find the videos after the jump.

"What our indicators show is that this bounce in the economy is going to be over in a couple of months. Which worries me because everybody now thinks that times are good, and we are not taking the measures we have to. And we'll get scared again in a couple of months when the economy is going to be weaker than expected." (Charles Nenner on Tech Ticker, 3/10/2011)

He still sees the Dow falling to 5,000 in 2013! The catalyst? War (and the sun spot cycle).

"I don't want to depress you, but I also do war and peace cycles and it shows that we're going to have a major war starting at the end of 2012 and 2013, and I think that is what's going to do it" (Charles Nenner on Fox Business, 3/9/2011)

Monday, March 21, 2011

Meredith Whitney Gives Update on Muni Defaults, Home Prices (3/21/2011, Link)

Maria Bartiromo interviewed Meredith Whitney at USA Today Online today (3/21/2011). She shared her views on the housing market and municipal defaults.

Carl Icahn Returning Funds to Limited Partners, Will Icahn Take IEP Private?

Icahn Enterprises L.P. (IEP)
On 3/8/2011, Carl Icahn decided to return all fee paying capital back to limited partners ($1.76 billion). In August 2007, two months before the market peaked, American Real Estate Partners, a public real estate and home fashion company majority owned by Icahn, acquired Carl Icahn's "interests in the management company and general partner of the Icahn Funds" for $810 million AREP depository units, and changed its name to Icahn Enterprises (IEP). At that time there was "$5.0 billion of third-party fee paying assets under management"! Currently Carl Icahn owns 92.6% of $IEP as of 12/31/2010 (via Yahoo Finance major holders). Icahn should take IEP private in the $20s, start a new $7 billion fee-based hedge fund, and go public again in a few years. Does IEP's investment in the Icahn Fund stay put?

His funds put up decent numbers in 2009 and 2010, 33.3% and 15.2% respectively (see below), but lost 37% in 2008. Here's a look at Icahn's bombs at Wall St. Cheat Sheet. Remember, he was "actively" trying to create value by restructuring boards and firing management. The macro environment trumped any kind of equity analysis and skilled activist investing, in my opinion. Since inception though (2004), Icahn Funds were up 106.9% (see below). Before I get to his investor letter, here are IEP's Q4 2010 results and valuation ratios.

"New York, NY – Icahn Enterprises L.P. (NYSE: IEP) reported revenues of $2,488 million for the three months ended December 31, 2010 as compared to $1,863 million for the three months ended December 31, 2009. Net income attributable to Icahn Enterprises was $82 million for the three months ended December 31, 2010, or $0.94 per LP unit, compared to a net loss of $1 million or $(0.09) per LP unit in the prior year period.


Sunday, March 20, 2011

Links: French-U.S.-UK Fire Missiles at Libya, Yemen-Syria Protests, Saudi-Bahrain-Iran Conflicts, Gaza-Israel

Geopolitical Headlines: Middle East/North Africa Edition - ending 3/19/2011 (curated by Dvolmeme). Warning: Intense link-fest.

Libya (now in war)

Gaddafi Threatens Attacks In Mediterranean - SkyNews
Fighter Jet Shot Down in Benghazi - Russia Today Video
Libya state television says 48 killed, 150 wounded in allied air strikes - @Reuters
French fighter jets fire the first shots at Gaddafi's forces (pics) - smh.com.au
British and French jets over Libya. US, UK ships fire 112 Tomahawks - DEBKAfile
Libya Hit by Coalition Missiles, Air Raids as Qaddafi Decries ‘Crusaders’ - Bloomberg
Libya: British forces launch missile attacks on Gaddafi - The Telegraph

Saudi Arabia / Yemen / Bahrain

Saturday, March 19, 2011

Cracks Open and Close, Gush Water In Tokyo Park From Earthquake, Japan Coast Guard Heads Into Tsunami Wave (Videos)

Two more must see videos I found. The first one is courtesy of AGU (American Geophysical Union) Blogosphere, which shows cracks opening and closing, and gushing water, in Tokyo's Central Park from the Sendai earthquake (h/t @pkedrosky). The second video is of the Japanese Coast Guard heading into the initial tsunami wave via Russia Today. If you haven't noticed, DistressedVolatility.com covers market, science, geopolitical and social volatility.

Friday, March 18, 2011

President Obama's Statement On Libya (Video/Transcript) - 3/18/2011

President Obama addressed the nation today on the situation in Libya. I embedded the full transcript and video after the jump (via WhiteHouse.gov). Today 30 protesters were killed and 200 wounded in Yemen, there were protests in Syria and Saudi Arabia sent forces into Bahrain. If there are wars in the region, oil prices would rise and markets would see increased volatility. I'll throw up a bunch of articles to read in my next post. Here's a quote from the transcript:
"Now, once more, Moammar Qaddafi has a choice. The resolution that passed lays out very clear conditions that must be met. The United States, the United Kingdom, France, and Arab states agree that a cease-fire must be implemented immediately. That means all attacks against civilians must stop. Qaddafi must stop his troops from advancing on Benghazi, pull them back from Ajdabiya, Misrata, and Zawiya, and establish water, electricity and gas supplies to all areas. Humanitarian assistance must be allowed to reach the people of Libya. Let me be clear, these terms are not negotiable. These terms are not subject to negotiation. If Qaddafi does not comply with the resolution, the international community will impose consequences, and the resolution will be enforced through military action."

G7 Intervention Statement, BoJ Injects ¥3 Trillion, USD/JPY Spikes Back Above 1995 Low

USD/JPY 1995-2011 (FxStreet.com)
USD/JPY (US Dollar/Japanese Yen) fell through a level not seen since 1995 yesterday as banks-traders-portfolios made risk adjustments, unwound carry trades or demanded liquidity (what else), due to the earthquake/tsunami aftermath and nuclear fears. On Monday, USDJPY initially pierced through a symmetrical triangle to the downside, but quickly recovered once the Bank of Japan pumped 15 trillion yen into money markets. Japanese equities also got killed. Post tsunami, the Nikkei 225 Stock Average fell 6% and then crashed 10.55% (14% at the low), and Nikkei 225 futures on the Osaka exchange lost 16.2% at the low. Maybe some fund managers got spooked, via Reuters:
"The monthly global fund managers' survey from Bank of America-Merrill Lynch, conducted before Friday's earthquake, showed allocations to Japanese equities rose to a net 8 percent overweight in the month compared with 4 percent in February."

Thursday, March 17, 2011

Federal Reserve FOMC Statement (3/15/2011), Still Easing

"Release Date: March 15, 2011

For immediate release

Information received since the Federal Open Market Committee met in January suggests that the economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks. Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued.

Raw Footage of Tsunami Hitting Kesennuma City, Aerial Video of Damaged Fukushima Daiichi Nuclear Plant

This is probably the closest a Japanese cameraman got to the tsunami. It was shot in Kesennuma City in Miyagi Prefecture (see street view on Google Maps h/t Telegraph). I added aerial video of the damaged Fukushima Daiichi nuclear plant that was just released.

Updates:
Japan nuclear situation reasonably stable: IAEA - Reuters
"The situation remains very serious but there has been no significant worsening since yesterday."
Fukushima Crisis Worsens as U.S. Warns of a Large Radiation Release - NY Times
Fukushima Daiichi nuclear plant workers' fight to stop meltdown - NYDailyNews
Japan Noodle Shop Owner Who Lost Home In Tsunami Offers Free Food - CNN.com
Food, gas scarce in Tokyo - CNN.com (rice, bread, instant noodles, canned foods)
Japan nuclear crisis could last for weeks, U.S. nuclear official says - LA Times
Blizzards Follow Earthquake, Tsunami - CNN.com (they lack kerosene, petrol)

Japan Market Watch: USD/JPY, Nikkei 225 Future Charts, JGB Links

Tokyo Stock Exchange
Tokyo Stock Exchange (Wikimedia/Stéfan)
With volatility running wild in the Japanese markets after the earthquake/tsunami hit, keep an eye on the Nikkei 225 Index Future (via Singapore Exchange), USD/JPY and JGB rates (Japanese Government Bonds). Most of the time money breaks news faster than the media (watch NHK World in English with #fukushima tweet stream). If you're worried about the fate of Japan and the radiation threat from Fukushima, monitor these charts as another source.

Being a contrarian on Japan's lost, deflationary decades, has to work out at some point. On Yahoo's Breakout yesterday, Marc Faber called Japan "a lifetime buying opportunity" once the correction ends (10-15% downside and 100-200% upside). It will be hard to time, but a good guide will be to watch the long term structure of the Nikkei chart. Did the recent black swan event bring the lifetime buying opportunity closer to (or further from) reality? For example, "Analysis: Japan heading back into recession" (Susumu Kato, Credit Agricole via Reuters h/t StockJockey). Or will another external event, China for example, affect Japanese equities and credits. See Hugh Hendry's CDS betsKyle Bass, hedge fund manager at Hayman Capital, also has interesting views on JGBs, the Yen and Japanese stocks. The charts below are courtesy of ForexPros and FuturesPros.com. Links to JGB rates point to Bloomberg.com.

Tuesday, March 15, 2011

Osaka Nikkei 225 Future Falls 16% at Low, Nuclear Fears Dominate Trading

Nikkei 225 Future (source)
Yesterday, the Nikkei 225 Stock Average hit a low of 8,227 (-14.5%) before closing at 8,605 (-10.55%). In the first few hours of trading, the Nikkei 225 June Future on the Osaka Futures Exchange fell 16.2% to 7,300 (from 9,310) before recovering. Nikkei 225 on the Singapore exchange fell even further I think. Circuit breakers were triggered on that trade, according to Reuters. Watch for capitulation when volatility peaks out. Where's the NKY VIX?

Nikkei 225 Index (Bloomberg)
This morning looks like a classic flight to quality with Treasury bonds and the U.S. Dollar green and the E-mini S&P future down 2.4%. Traders are trying to price in multiple black swan events (earthquakes, tsunamis, radiation fears, an economic slowdown in Japan, Middle East and North Africa unrest, municipal and sovereign debt crises etc.). Update: King of Bahrain declares state of emergency (Telegraph).

The charts looked sick before the earthquake and tsunami hit Japan (3/14/2011, 3/11/2011 tsunami hit and 3/10/2011 pre tsunami) and Tom DeMark was right. Catalysts are sometimes evil. Hopefully Japan enters its recovering phase very soon. For real-time updates on Japan, watch NHK World in English live on this blog post with #fukushima tweets streaming in a widget.

Articles to read:

Officials told residents living within 20km of Fukushima No. 1 nuclear power plant to leave due to increased radiation levels. Those living 20km-30km from the plant were told to stay indoors. This was a graphic I snapped from NHK World.


BOJ: Earthquake Will Likely Decline Production, Sentiment Might Deteriorate

The Bank of Japan released its Monthly Report of Recent Economic and Financial Developments for March (hat tip Seeking Alpha). I'll write about the Nikkei 225 crash next with some must see charts. The report seemed quite calm after what just happened to the country.
"Japan's economy is emerging from the current deceleration phase. Exports and production are showing signs of resuming their uptrend. Business fixed investment is picking up. The employment and income situation has remained severe, but the degree of severity has eased somewhat. Private consumption is showing signs of picking up. Housing investment has started to pick up. On the other hand, public investment is declining.

Japan's economy is expected to return to a moderate recovery path. However, the damage of the earthquake has been geographically widespread, and thus, for the time being, production is likely to decline and there is also concern that the sentiment of firms and households might deteriorate." (continue reading at Bank of Japan)

Speaking of monetary policy.
"The Bank of Japan added 8 trillion yen ($98 billion) to the banking system today in Tokyo. Governor Masaaki Shirakawa pledged yesterday at a news conference in Tokyo to keep pumping cash as needed after adding a record 15 trillion yen to the economy. The central bank yesterday also doubled its asset- purchase program to 10 trillion yen." (continue reading at Bloomberg)

Monday, March 14, 2011

E-Mini S&P Future -0.73% at 1,291.75 Pre-Open 3/14/2011 (Chart)

After the earthquake and tsunami destroyed Japan, the E-mini S&P June Future is down 0.73% at 1,291.75 pre-open on Monday. Read my posts linked below for more information on the charts. The market could test lower levels if it can't hold this shelf. It already took out the uptrend line. Also check out the MACD, Moving Average Convergence-Divergence (chart school). It measures momentum using moving averages. It could bust through the centerline. I also chart out futures at barchart.com and cmegroup.com.

Interesting news: Stifel cuts Toll Brothers to sell from hold (TOL) (MarketWatch).


E-mini S&P June Future - ESM11 9-months
(courtesy OptionsXpress)

E-mini S&P, Nikkei, Oil Down After Tsunami Hits Japan, ZB Tipped Off ES Earlier (Treasuries/S&P) - 3/11/2011

E-Mini Nasdaq 100 Future Broke Its 50 Day Moving Average (Charts) - 3/10/2011

Post Tsunami, Nikkei Falls 6% to 9,620, USD/JPY Moves on BoJ Injection (In Symmetrical Triangle)

USD/JPY (freestockcharts)
After an earthquake and tsunami destroyed parts of Japan on Friday and killed thousands of people, I think the markets still need to digest the situation and acknowledge new risks. Experts say there's a 70% chance a major aftershock could strike by Wednesday (WiredNews). Is there any possible way to hedge land masses against seismic wave volatility? The answer is in the Adams–Williamson equation somewhere.

The Fukushima nuclear power plant was damaged by the earthquake and reactors keep exploding (hydrogen), so there are fears the plant could meltdown or spread radiation. Lastly, there is the aftermath. You have infrastructure and houses destroyed, production halts (oil refining, power, steel production, Honda and Toyota) and a million people without water. Read this Reuters article.

Nikkei 225 (marketwatch)
So now Japan has to either tax or borrow from their citizens, or tap the "external" markets to foot the bill. However, Japan is already fiscally constrained or JGB investors could ask for higher rates. See videos featuring hedge fund managers Kyle Bass and Vitaliy Katsenelson for their views. This is why I want to see how everything reacts, including the Nikkei 225 Index (stocks), Japanese Yen and JGB rates (Japanese Government Bonds).

To stabilize the financial system, the Bank of Japan (BoJ) "pumped 15 trillion yen or $183 billion into money markets" and doubled asset purchases (read more at Bloomberg). Last night the Nikkei 225 Index closed at 9620, -6.18%, USD/JPY was volatile around BoJ statements (81.83) and JGBs saw safe haven buying. Click the charts for a larger view.

More News:
Japan quake feared to fuel S. Korean inflation (Yonhap News)
Moody's: Japan fiscal crisis not imminent (MarketWatch)
Quake impact on Japan non-life insurers seen limited: analysts (Reuters)
Analysis: Japan quake risks severe near-term economic damage (Reuters)
Japanese Quake Causing a Temporary `Panic' in Iron Ore Market, Trader Says (Bloomberg)
Sendai's homeless are fearful (SifyNews)
*Watch NHK World Live in English (#Fukushima Information #Japan) - (DistressedVolatility)

Sunday, March 13, 2011

Uzumaki Whirlpool From Japan Tsunami, Shinmoedake Volcano Erupts (Videos)

One more video, then back to regular scheduled financial programming. "Uzumaki whirlpool Japan tsunami" via TheHifromjapan on Youtube. Previous videos: Ground video of tsunami and helicopter footage from NHK World. There has to be a way to protect land masses from tsunamis and earthquakes. Here is a good survivor story: Japanese man found floating out to sea on his house - CTV News). Donate at Red Cross. UPDATE: The Shinmoedake volcano erupted in southwestern Japan. I found video. WTF is going on?

Watch This Tsunami Video (Iwaki City, Japan - 3/11/2011)

Watch ground video of the tsunami that hit Japan. The Earth is going insane. I'm using Twitter (#Japan hashtag search) to monitor live news feeds and conversations on Japan. Also see before and after photos at ABC News (Japan Earthquake: before and after). Devastating.

Saturday, March 12, 2011

Watch NHK World Live in English (#Fukushima Information #Japan)

Watch NHK World live via Ustream after the jump. I also added the live #fukushima tweet stream. There's an emergency at the nuclear power plant that was damaged by the earthquake.

Breaking news at Reuters: "CNN Breaking News: "We are assuming that a meltdown has occurred" at a nuclear power reactor, Japan's chief Cabinet secretary says." (Reuters Live Blog).

Friday, March 11, 2011

E-mini S&P, Nikkei, Oil Down After Tsunami Hits Japan, ZB Tipped Off ES Earlier (Treasuries/S&P)

E-mini March S&P (barchart.com)
Early Morning Update: Tsunamis striking Japan, a 'Day of Rage' planned in Saudi Arabia (non-event?) and sick looking charts (technicals) are putting pressure on markets worldwide. Japan's NIKKEI 225 Index closed at 10,254 today, -1.725%, and the March E-mini S&P future (ESH11) is currently at 1286.25, -0.62%. For information on the tsunamis read this post from a few hours ago. The March E-mini S&P future looks like it could test 1,200-1,225 when looking at the chart. The levels coincide with the April and November 2010 peaks. Click the chart to your left for a larger view.

Oil is getting killed this morning and I think the market likes that. April crude is down 2.91% at $99.72 and ES is now only down 0.19%. The second chart shows how T-Bonds predicted the S&P's correction (imo). Look how they rose in tandem in the beginning of February, but suddenly diverged when the S&P put in its blow off top, DeMark style (S&P went down/T-Bond went up).

Video: Tsunamis Hit Japan After 8.9 Earthquake, Fukushima Nuclear Plant Affected (Updates)

Tsunami wave that hit Japan
Multiple tsunamis hit Japan, northeast of Tokyo, after an 8.9 magnitude earthquake struck a few hours ago. I saw it live on NHK World in Japan (see videos below). It was surreal. There are tsunami warnings or advisories now in effect for Hawaii, California, Alaska etc. Go to *Weather.gov Tsunami Warnings or NOAA.gov for information. You can watch NHK World live in English below after the jump via Ustream. DV hopes people are alright in Japan.

Fukushima via EPA/Tokyo Electric Power
More information and links: National Weather Service Tsunami Warnings, Earthquake.USGS.GovJapan Meteorological Agency, West Coast and Alaska Tsunami Warning Center, Pacific Tsunami Warning Center, Hawaii State Civil Defense, 2011 Japanese Earthquake and Tsunami (Google Response). I also embedded Youtube videos of the tsunami. Below is a live twitter search widget for #Japan. The Fukushima nuclear power plant (Tokyo Electric Power - TEPCO: press releases) was damaged by the earthquake and there's risk of a meltdown. Read the articles below. Also check out live #fukushima and #tsunami, #earthquake twitter searches.

Updates (ending 3/12/2011)
Nuclear Experts Explain Worst-Case Scenario at Fukushima Power Plant (ScientificAmerican)
US Nuclear Experts Worry About Possible Japan Reactor Meltdown (VOA News)
Japan Faces ‘Another Leg Down’ in Fiscal Health as Earthquake Toll Mounts (Bloomberg)
US deploys nuclear experts to Japan to avoid meltdowns at 2 nuclear stations (DiscoveryNews)
Japan's Fukushima nuclear plant faces new reactor problem, Fukushima Daiichi No. 3 (Reuters)
Health risk from Japan reactor seems quite low: World Health Organization (WHO, Reuters UK)
The ¥4.3 Trillion Japanese Government Earthquake Liability Cap: Mechanics Of Japanese Earthquake Re-Insurance (Zero Hedge)
"4.4million homes without electricity, 1.4million with no water, 820k phonelines down" (Al Jazeera Blog)
The Destructive Power of Tsunami Waves (New York Times)
Japan nuclear mishap 'among worst ever' (SkyNews)
Explosion Rocks Japan Nuclear Plant After Quake (NYT) -CNN video below
9,500 in one town are unaccounted for -Kyodo (CNN)
Japan warns of meltdown at quake-hit nuclear reactor (MarketWatch)
More than 1,000 dead or unaccounted for in megaquake (Kyodo News)
20-meter displacement in 500-km fault seen as cause of Japan quake (Kyodo News)
Japan quake causes emergencies at 5 nuke reactors (AP)
Nuclear Expert: "Fukushima Has 24 Hours To Avoid A Core Meltdown Scenario" (Zero Hedge)
Snap analysis: Japan may have hours to prevent nuclear meltdown (Reuters)
Japan nuclear plant conditions worsening, local media reports (LA Times)




Thursday, March 10, 2011

Saudi Police Fire at Protest (Disperse Rally), 'Day of Rage' is Tomorrow (Tweet Reactions, Articles)

Saudi Arabia updates (ending 3/18/2011). Watch out for volatility in the Middle East. Watch the live twitter search widget I embedded below with the #Saudi hashtag for updates.

*Update 3/18/2011: Saudi role in Bahrain brings regional stakes (Iran) (AP)
*Update 3/18/2011: Saudi troops break up (Bahrain intervention) protests with force (PressTV)
*Update 3/18/2011: Saudi king offers cash and reforms in rare speech (AP)
*Update 3/14/2011: Saudi Arabian forces prepare to enter #Bahrain after day of clashes (Guardian)

*Update 3/12/2011: "RIYADH, Saudi Arabia — Several hundred people protested in at least four locations in Shi’ite-dominated eastern Saudi Arabia yesterday, but hundreds of police in the country’s capital prevented rallies calling for democratic reforms." (Boston.com/AP)

Witnesses: Saudi forces fire on protesters, injure 3 (CNN)
Saudi Arabia prepares for 'day of rage' protests (BBC News Video)
Saudi Police Open Fire To Scatter Protesters, 3 people injured in Qatif (SkyNewsVideo)
Saudi protest dispersed by police, shots heard (Reuters)
Saudi police open fire at protest (Washington Post)
Saudi Arabia unrest: a blogger's view by Ahmad Al Omran (Guardian)
Quatif: Saudi Arabia police 'fire at rally' (Al Jazeera English)
Police fire on protesters in Saudi Arabia (thejournal.ie)
Saudi Arabia Police Break Up Rally in al-Qatif, Activist Says (Bloomberg)
Revolution Not Headed for Saudi Arabia (Carnegie Endowment)
Ahead of Protests, Experts Say Saudi Turmoil Unlikely (National Journal) h/t Business Insider
Protests called Friday in Saudi Arabia - March 11, 2011 (CNN)
Saudi police open fire at protest (AP)
Reports of Saudi clash, swooning stocks lift VIX (MarketWatch)
What Has To Happen For $200 Oil - Nomura (Middle East) - Leaked Research h/t theback9


Live reactions on Twitter (searching top tweets with #Saudi hashtag)



*BBC covered the non-event, when officers and soldiers flooded the streets (video below).

E-Mini Nasdaq 100 Future Broke Its 50 Day Moving Average (Charts)

The March Nasdaq Future (NQH11) broke through its 50DMA and pierced symmetrical triangle support. It could lead the S&P lower if there's follow through. I'll chart out $SPY, $QQQQ, $DIA and $IWM tomorrow. You can chart out futures on the web for free at barchart.com. Keep an eye on oil, Saudi Arabia and Libya (monitor live tweets).

E-Mini Nasdaq 100 - NQH11 (direct source: barchart.com)


E-Mini S&P 500 - ESH11 (direct source: barchart.com)

Protesters Occupy Wisconsin's Capitol (Live Video, Youtubes)

Kicking the Hornet's Nest
source: markonf1re Flickr 
Protesters took over Wisconsin's State Capitol after Senate Republicans passed an anti-union bill. Here's what happened.
"Republican senators in Wisconsin Wednesday night maneuvered around Democrats to pass legislation (18-1) stripping public employees' unions of collective-bargaining rights, setting the stage for other states to pursue similar steps in one of the broadest challenges to organized "labor in decades" read more at WSJ 
Governor Walker is taking drastic measures to close Wisconsin's budget deficit.
"His state is braced with a $137 million budget shortfall for the fiscal year ending June 30 and a projected $3.6 billion gap over the next two years." read more at CSMonitor

The UpTake has a live video stream from inside the Capitol which I embedded below (hat tip zerohedge). Watch out for a nationwide general workers strike. That could do some damage.

Interesting history: "The textile workers' strike of 1934 was the largest strike in the labor history of the United States at the time, involving 400,000 textile workers from New England, the Mid-Atlantic states and the U.S. Southern states, lasting twenty-two days" (read more at Wikipedia, h/t pdenlinger).

Tuesday, March 8, 2011

Saudi Oil Minister: Crude Not Supported By Supply-Demand But Financial Speculation

Saudi Oil Fields (source: EIA)
The press release below, released by the Saudi Embassy in Washington DC, was tweeted out by @SaudiEmbassyUSA today. It's pretty clear that speculators are dominating the oil market on concerns that political unrest could spread to Saudi Arabia.

For example: "Oil Options ‘Bullish’ as Volatility Rises, Futures Above $105" (Bloomberg) and "Saudi Arabia's `Day of Rage' Lures Record Bets on $200 Oil: Chart of Day" (Bloomberg). And there's violence in Yemen today: "#Yemen security forces fire on protesters, injuring at least 65 people -- Al-Jazeera" (h/t pdacosta).

However, OPEC could intervene to lower prices: "Kuwait's oil minister said OPEC was considering a production boost as war-torn Libya's output remained disrupted and the region's unrest fueled concerns about more supplies being cut off." (Reuters). I read that the U.S. might tap the Strategic Petroleum Reserve, but Total's CEO said that could "drive energy prices higher" (CNNMoney).

David Tepper (Appaloosa Management) and Larry Fink (BlackRock) have already acknowledged oil risk. And now Nouriel Roubini: "Roubini Sees Double-Dip Recession for Advanced Economies If Oil Hits $140" (Bloomberg). April crude oil is down 0.64% at $104.76.

"March 8, 2011

[Washington, DC] – His Excellency Minister Ali Al-Naimi, the Minister of Petroleum and Mineral Resources for the Kingdom of Saudi Arabia discussed recent concerns surrounding crude oil prices and reserves in an interview with the Saudi Press Agency. During the interview, he outlined the ways the Kingdom is working to ensure stability in the oil market and discussed the recent surge in prices.

David Tepper's Concerned About Middle East Risks (#Oil #SaudiArabia)

Institutional Investor had an interesting story on David Tepper yesterday, the founder of hedge fund Appaloosa Management (hat tip Pragmatic Capitalist). He's still bullish on the U.S. economy, but is concerned that political unrest could spread to the Middle East, mainly Saudi Arabia, and disrupt oil supplies. That makes sense. There's a "day of rage" protest planned for March 11 (Tehran Times). Or it's postponed until Monday (UPI). From Institutional Investor:

"Even so, Tepper has reduced his risk somewhat in response to recent global political developments. He has taken down his P/E estimate from 15 to 14 1/2 times and at the beginning of March removed all leverage."

"However, he is seemingly most concerned about developments in the Middle East. Tepper is said to be especially concerned about Saudi Arabia. Sources say if the oil fields in Saudi Arabia are burning, Tepper would react to that by selling and going heavily into cash."

Recent interviews from CNBC on blog:

Tepper: Dean Foods Undervalued, Cautious and Optimistic on Stocks (DF, SPY) CNBC Video 1/26/2011

David Tepper's Bullish Bet on the Fed's Economic Put (QE2-3-4) CNBC Video that sparked "Tepper Rally", 9/24/2010

Recent post on Saudi Arabia:

Libya Unrest, Saudis Protest Arrest of Sheikh Tawfiq Al-Amer (Videos, *Live #Libya and #SaudiArabia Twitter Search Widgets) 3/4/2011

Monday, March 7, 2011

Bill Gates' TED 2011 Speech: State Accounting Tricks, Healthcare and Education Spending

Bill Gates gave an interesting speech at the 2011 TED conference on state budgets, healthcare and education spending trends. He mentioned that states use government accounting tricks to balance their budgets (pension accounting) that would make Enron blush. Wow. Watch the video after the jump. I added two slides on healthcare trends from his presentation.

Bob Prechter is Bearish on Stocks, Silver and Oil, Likes Dollar (2/25/2011)

Robert Prechter, president of Elliott Wave International, was featured on Tech Ticker on 2/25/2011. The last time I featured Prechter was on 8/12/2010, when he was bearish on stocks and bullish on the US Dollar. Since then, the market rallied hard during QE2 and the $USD declined, but he still hasn't changed his views. In fact, Prechter noted that investor optimism in stocks is at an extreme not seen since 2007, when the stock market peaked. Prechter is confident that the S&P 500 is in a cyclical bull market within a structural bear market. Watch the video after the jump with links to 2 and 3.

  • "AAII (American Associate of Individual Investors) 10 week average of the % of bulls - % of bears is above where it was at the peak in 2007 for the stock market" 
  • "Advisors (Investors Intelligence) on a 10-week moving average are also higher than they were in 2007, meaning they are more optimistic or have been over the past 10-weeks"
  • "Futures traders hit 93% (98% bearish 2 years ago at the bottom)"
  • "I think we are nowhere near the end to the bear market." (he said the stock market could make a new low)
  • "Oil has hit not only 97% bulls (daily sentiment index) but the last time it hit that number was the first week of July 2008 just before it crashed 78%. It has also retraced 62% of its crash decline since 2008, and it's on news...."

Sunday, March 6, 2011

Eric Sprott: Between ETFs, You and Us, There's No Silver Left (PSLV, SLV)

Eric Sprott, CEO of Sprott Asset Management, gave a presentation on gold and silver at the Fall 2010 Casey Research Gold & Resource Summit. The video shows slides as well. Sprott's firm started an exchange traded physical silver trust (ticker symbol: PSLV) and a physical gold trust (PHYS). It appears that market participants have cornered the silver market.

Sprott Phsyical Silver Trust ETF
($PSLV Stockcharts.com)
"One of the statistics that I fully agree with is the availability of gold versus silver. I use the number $6 trillion as the amount of gold that's available in the world. And the amount of silver that's available in the world is about $22 billion. A billion ounces of silver at $22, of which the ETFs already own half, and between you guys and us, we probably own the other half. Which means there's nothing left".

After the jump watch the full video courtesy of Casey Research and see a chart of 24 Hour Silver Spot and London PM Fix 1985-Present via Kitco.

Friday, March 4, 2011

Larry Fink is a Big Buyer of the U.S. Dollar, Market At Reflection Point

Larry Fink, CEO of BlackRock, the largest money manager in the world with $3.56 trillion under management, said he was a "very big buyer of the U.S. Dollar here" on Bloomberg TV. He mentioned that banks in Europe are still undercapitalized and the PIIGS (Greece, Ireland etc) still have sovereign debt issues.

The most interesting part of the interview, first noted by Washington's Blog, was Fink's comment that markets prefer totalitarian governments "where you have an understanding of what's out there", rather than democracies (democratizations of countries) which can be "dirty and messy". He thinks what we're seeing in North Africa is a "negative uncertainty" that could bring volatility to the market, and the jump in oil was pricing this in. Watch the BloombergTV video with Erik Schatz after the jump.

Libya Unrest, Saudis Protest Arrest of Sheikh Tawfiq Al-Amer (Videos, Tweet Reaction)

I'm reading that Sheikh Tawfiq Al-Amer was calling for a constitutional monarchy in Saudi Arabia and got arrested. That's why people are protesting. According to PressTV, it was organized on Facebook. There is also a protest planned for March 11. Today there was violence in Libya, as rebels clashed with Gaddafi's forces in Zawiyah (outside of Tripoli).

Keep an eye on the Middle East, Libya, Egypt and oil prices. If serious geopolitical volatility spikes, gold and possibly the U.S. Dollar could see a safe haven rush (imo). Right now oil is up 2.54% at $104.50, gold is up 0.92% at $1,429 and the S&P 500 is down 1.34% at $1,313. GLD and GDX calls are active relative to puts at the ISE. See videos of the peaceful protests in Saudi Arabia after the jump via Zero Hedge. Below the videos I embedded live reactions from twitter on #libya and #saudiarabia in streaming search widgets. I recommend you follow @SultanAlQassemi, @AlArabiya_Eng, @AJEnglish and @AbdulHamidAhmad (GulfNews) on twitter for news.

Sheikh Tawfiq Al-Amer Jailed again (Rasid News Network)

Anti-govt. protests held in Saudi Arabia (PressTV.ir)

Related post from yesterday (Saudi Arabia's Tadawul Stock Index Down 20% In 2 Weeks Charts)

The royal house is rattled too (Economist)

*UPDATE: "Saudi Arabia is drafting in up to 10,000 security forces to the north eastern Muslim Shia provinces ahead of mass protests planned next week." (Telegraph.co.uk)

Libya News

"@REUTERSFLASH:‎ At least 30 civilians killed by pro-Gaddafi forces after attack on Zawiyah - Residents"

Fighting rages in Libya's east, 30 civilians killed (Al-Jazeera)

Challenges for State and Local Governments (Ben Bernanke, 3/2/2011)

"Chairman Ben S. Bernanke
At the 2011 Annual Awards Dinner of the Citizens Budget Commission, New York, New York
March 2, 2011

Challenges for State and Local Governments

I am pleased to have the opportunity to speak to a group that has such a long and distinguished record in identifying and addressing crucial issues affecting the governments of the city and state of New York. I will focus this evening on a top challenge not only for New York, but also for states and localities across the nation--namely, the imperative of achieving fiscal sustainability in both the short and the long term. I will first discuss the fiscal pressures currently confronting states and localities, then turn to longer-term challenges and opportunities faced by these jurisdictions.

Recent State and Local Fiscal Developments
As you know well, the deep recession of 2008 through 2009 and the subsequent slow recovery have battered state and local budgets. As the recession took hold, revenues dropped precipitously, especially at the state level. Driven partly by balanced-budget requirements under their constitutions, many governments have responded by cutting numerous programs and reducing workforces. As necessary as these cuts may have been, they have left some jurisdictions struggling to maintain essential services. The fiscal problems of state and local governments have also had national implications, as their spending cuts and tax increases have been a headwind on the economic recovery. Moreover, concerns about both the current fiscal condition of these governments and their longer-term commitments to provide pensions and health benefits have recently led to strains in municipal bond markets.

Thursday, March 3, 2011

Lynn Tilton To Save U.S. Manufacturing Base (Diva of Distressed Reality Show)

Lynn Tilton, who runs the $7 billion private equity firm Patriarch Partners, has a reality show out called "The Diva of Distressed". The 9-minute video below (via New York Magazine) is filmed at Old Town Fuel & Fiber, one of her portfolio companies. The mill is trying to produce bio-butanol from wood pulp.
"Lynn will star and go around the country looking for businesses on the brink to work with endangered entrepreneurs in an attempt to get them back on track. The most deserving business owners could score an equity investment from Patriarch or a much needed loan." (FishBowlNY)

Saudi Arabia's Tadawul Stock Index Down 20% In 2 Weeks (CDS, SASEIDX Charts)

Saudi Arabia's Tadawul All Share Index lost 20% since February 12, 2011. The thought of contagion risk from the uprisings in Tunisia, Egypt and Libya, as well as protests in Bahrain, Yemen and Oman, probably spooked investors holding Saudi Arabian stocks (FT: Political unrest sparks ‘panic selling’). There are also protest fears. "Activists have set up Facebook pages calling for protests in Saudi Arabia on March 11 and 20." (Reuters). Recently King Abdullah promised his country a $36 benefit package to "address inflation and housing, expand social security benefits, and ease unemployment and education costs" (CSMonitor). I embedded a Twitter search widget with the #SaudiArabia hashtag below just in case anything happens. A disruption to Saudi oil supplies would spike oil prices.

Saudi Arabia's 5Y Credit Default Swap spread closed up 1.65% at 140 basis points, according to CMA Datavision.  Credit default swap spreads measure the cost to insure underlying debt from default (a credit rating that trades). On January 30, Saudi Arabia CDS was at 109.83 basis points, so it's up 27% in a month. Check out the charts below of the Tadawul All Share Index. It closed at 5323.27.

Wednesday, March 2, 2011

Reads: Ned Davis On Stocks, Hugh Hendry's Credit Bet, David Rosenberg on Oil, Yields, Deflation

Belated linkfest for February 2011
    • On CNN, billionaire George Soros took shots at Obama's economic agenda and said municipalities could default. Also, when the Fed stops pushing money into the economy (QE2), interest rates will go up which will choke off the economic recovery;
    • Market Crash 2011: It will hit by Christmas by Paul Farrell at MarketWatch.com featuring Ned Davis and Jeremy Grantham;
    • Congressional Oversight Panel Hearing on Commercial Real Estate's Impact on Bank Stability (2/4/2011)Panel #1: Sandra Thompson (FDIC), Patrick Parkinson (Board of Governors of the Fed), David Wilson (Office of the Comptroller of the Currency). Panel #2: Matthew Anderson (Foresight Analytics/Trepp), Richard Parkus (Morgan Stanely Research) and Jamie Woodwell (Mortgage Bankers Association in CRE Research). Link: cop.senate.gov;
    • Hugh Hendry's recent report (Eclectica Management): Profiting From Contrarian Opinion: Just How Investment Grade Are Japan's Credits - Read at Business Insider;
    • David Rosenberg: Forget Oil And Inflation, The Real Story Is In The Bond Market (read the article at Business Insider). Read the "Breakfast With Dave" report at FMX Connect;
    • Jim Grant sees interest rate risk for municipal bonds (likes mortgage REITs, Annaly Capital) - BloombergTV (from early February).

    High Yield CDX Spreads Widened (CDX.NA.HY.8, CDX.NA.HY.9)

    High yield credit default swap spreads widened yesterday. CDX.NA.HY.Series 8 and Series 9 were the most active on CMA's website. I'm not a CDS trader, but the curve is steep and could be flattening or default risk is being repriced on high yield credits (more info from @credittrader 1, 2).

    From CMA Datavision's "Largest Widening Spreads" list on 3/1/2011

    5-Year Mid CDX.NA.HY.Series 8: 117.02 basis points, +21.24 bps, +22.17%
    5-Year Mid CDX.NA.HY.Series 9: 147.22 basis points, +12.00bps, +8.88%


    On Markit.com they provide information everyday on the most recent series or "roll", which is currently CDX.NA.HY.Series 15.

    3Y CDX.NA.HY: 276bps
    5Y CDX.NA.HY: 407bps
    7Y CDX.NA.HY: 440bps
    10Y CDX.NA.HY: 427bps


    To your left is a chart of 5Y CDX.NA.HY.Series 15. The red line is the index spread which rises when credit conditions deteriorate, or when curve and basis trades are being played.

    CDS indices would be interesting to analyze if I could watch them trade on an exchange and chart out free data. On 9/19/2008, three days after Lehman went bankrupt, I charted out the investment grade credit default swap index future (CX: CBOT CDR Liquid 50 NAIG Index, post ). Unfortunately it never took off because it would've made the CDS market more transparent. It looks like banks are rolling out electronic platforms to trade CDS (Barclays, UBS, Credit Suisse), so we'll see what happens. The CBOE is coming out with Credit Event Binary Options (CEBOs) or credit options, which is a pure play on bankruptcy. See their website: http://www.cboe.com/micro/credit/introduction.aspx. The future looks bright for real-time credit ratings.

    Tuesday, March 1, 2011

    Bullish Moves In VIX Options Today (3/1/2011)

    Courtesy StockCharts.com
    The VIX (Volatility Index) closed up 14.5% today at 21.01. The volatility index measures the implied volatility percentage of S&P 500 options (option price changes). VIX spot is still relatively low compared to the SPX lows in May 2010, but watch oil against the S&P going forward or economic catalysts. According to Bloomberg yesterday, Barclays raised its S&P target to 1,450 and EPS estimate to $93 (Bloomberg). Here's a quote from Barclays' Barry Knapp from the article:

    “The market is currently struggling to quantify a new exogenous risk, the political instability in the Middle East and a related oil shock,” Knapp wrote. “However, given the experience of the last decade, our current thinking is that the shock will not be large enough to derail the recovery.”

    Could a new "exogenous" risk for the economic recovery be more sellers than buyers? Below is Chris McKhann of OptionMonster going over today's action in the VIX futures options.

    The Extraordinary Events in the Middle East and the Coming Global Tsunami - Guest Post

    Guest post by John C.K. Daly for Global Intelligence Report

    The Extraordinary Events in the Middle East and the Coming Global Tsunami

    The extraordinary events in Tunisia, Egypt and Libya are the initial high tides of an eventual tsunami that will impact the world that globalists have so fervently promoted for decades, in ways not necessarily to their liking. The first wave has struck and is now retreating from the shore, but will shortly return with redoubled force, and what and who will be swept away and what will be left standing is anyone's guess.

    Per usual, America's intelligence agencies on which $60 billion a year is lavished, or $200 for every man, woman and child in the U.S., have given zero benefit to the American citizenry in anticipating events in the North African Magreb, as the CIA along with America's 15 other federal intelligence agencies were completely blindsided by events, if public information is to be believed. If any comfort can be had in this, it is the fact that America's favorite bête noire, al Qaida, much less other Islamic fundamentalists such as the Islamic Brotherhood in Egypt, were apparently caught flatfooted as well.

    As "Beltwayistan" frantically tries to conceptualize events in North Africa now threatening the larger Muslim world, Washington's pundit class has tried a number of insta-definitions to explain events.

    SEC Charges Former Goldman Sachs Board Member Rajat Gupta With Insider Trading

    Source: Wikimedia
    Wow, this Rajat Gupta guy is (or was) no joke. Read more about him on Wikipedia. From the SEC press release (SEC Order PDF after the jump):

    "Board Member of Goldman Sachs and Procter & Gamble Charged in Insider Trading Scheme

    FOR IMMEDIATE RELEASE
    2011-53

    Washington, D.C., March 1, 2011 – The Securities and Exchange Commission today announced insider trading charges against a Westport, Conn.-based business consultant who has served on the boards of directors at Goldman Sachs and Procter & Gamble for illegally tipping Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information about the quarterly earnings at both firms as well as an impending $5 billion investment by Berkshire Hathaway in Goldman.

    The SEC’s Division of Enforcement alleges that Rajat K. Gupta, a friend and business associate of Rajaratnam, provided him with confidential information learned during board calls and in other aspects of his duties on the Goldman and P&G boards. Rajaratnam used the inside information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm who then traded on it ahead of public announcements by the firms. The insider trading by Rajaratnam and others generated more than $18 million in illicit profits and loss avoidance. Gupta was at the time a direct or indirect investor in at least some of these Galleon hedge funds, and had other potentially lucrative business interests with Rajaratnam.

    Monday, February 28, 2011

    Bernie Madoff: The Government is a Ponzi Scheme

    Steve Fishman of New York magazine interviewed Bernie Madoff from jail. Read the full article here (The Madoff Tapes). Here's a forward looking statement on the U.S. Government from the mastermind himself.
    “The SEC,” he says, “looks terrible in this thing.” And he doesn’t see himself as the only guilty party on Wall Street. “It’s unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.” (read at New York Magazine)

    Financial Crisis Inquiry Report (FCIC PDF)

    (embedded after the jump)

    FCIC Interview With Warren Buffett On Derivatives, Financial Crisis

    The Financial Crisis Inquiry Position interviewed billionaire investors, hedge fund managers and executives at financial institutions on the cause of the financial crisis. This post is on the interview with Warren Buffett. Find all of the interviews here and the full FCIC report. I'll do an in depth post on John Paulson's interview later, whose firm made $12 billion shorting the subprime mortgage market.

    Buffett said leverage at Lehman Brothers (and other banks), fueled by derivatives, was the major systemic risk (1:07). He mentioned that netting arrangements between Lehman Brothers and Bank of America (and JP Morgan, the counterparty for BAC) had major swings before Lehman went broke (1:07:30). And lets not forget the CDS chart on AIG, which was writing CDS without capital. Then Buffett got into the good stuff on derivatives and transparency. These quotes are not from an official transcript. Listen to the full interview MP3 at FCIC.gov.
    "It started out with the simple ones, interest rate swaps and foreign currency.. and then the profit got driven away from those.."

    "Then the plain vanilla contracts, there weren't any money in it because they were on the screens (price transparency?). But what they called sometimes the toxic waste, there was a lot of money in...." (*an example he gave was Procter & Gamble vs. Bankers Trust, see below*).

    "There's just more money in contracts that people don't understand, and so then you get the proliferation of these things. And who knows what's in the mind of the end user of these things (example: Jefferson County, Alabama swap blowup, Bond Buyer, Bloomberg). It's an instrument that is prone to lots of mischief.."