Euro at inflection point in two channels (EUR/USD) 1/6/2012

EUR/USD broke support and then sold off to test (and actually form) a new channel support level (yellow line). You can see on the daily chart that it just bounced off that level. It is positioning for the U.S. employment report. EUR/USD is testing resistance in the steep white descending channel ("death channel") and support in the yellow descending channel just formed. The weekly chart shows a clearer view of what's been happening. If the euro can catch a bid here, a key resistance level to watch is 1.2873, or the January 2011 low. If EUR/USD can successfully destroy that downtrend line, it could rally up to that red ceiling and possibly to the yellow channel resistance level at some point. If it continues to slide, 1.2587 and 1.1875 are the next floors to watch. I say death channel because if the euro wants to test channel support, it is around 1.14 in January and 1.08-1.10 in February (see the third chart).

Judgment Day Near For European Sovereign Debt, Euro

Euros (source: aranjuez on flickr)
There's a huge chunk of European sovereign debt principal and interest due in the next few months (and year). Bloomberg.com has a table of the debt payment schedule for Greece, Italy, Spain and Portugal. There could be a hard Greek default in Q1.

*WSJ: Greek PM Says Country Faces Risk Of Disorderly Default In March (WSJ)
*ECB's Knot: Euro May Collapse If Greece Pushed Out (Dow Jones Newswires)
*EU Crisis Road Map: Key Milestones Ahead (WSJ)
*Spain, Italy Debt Insurance Costs Rise On Euro-Zone Worries (Dow Jones Newswires)
*French Debt Costs Rise at Bond Sale as AAA Decision Looms (BusinessWeek)
*France Likely to Lose AAA Rating: UBS European Economist (CNBC Video)
*Zero Hedge: The Can Kicking Is Ending, Key Upcoming Dates For Europe's Patient Zero (Zero Hedge)
*Collapse of euro will hit EU, global financial system: Soros (BusinessLine)
*Greece: If we can’t finalise second bailout, we’ll have to leave the euro (thejournal.ie)
*Banking sector trembles as UniCredit shares plunge (Reuters)
*High ECB reserves are not evidence of bank "hoarding" (Alea)
*Japan buys 300 mln euros of EFSF bonds -MOF official (Reuters) - where's China?
*Germany is Biggest Obstacle to Emergency Fund: Knot (Bloomberg)
*Slowing Inflation May Give ECB Room to Maneuver on Interest Rates: Economy (Bloomberg)

New Low For The Euro, EUR/USD Hit 1.2837 (Chart)

According to ZH, Unicredit was halted down -7.9%, Deutsche Bank was down 5%, and the 10-year Italian bond yield was above 7% again. And then I saw EUR/USD drop to 1.2837, a new low. Check out the chart.


source: freestockcharts.com

Investment in African Renewable Energy Reaches $3.6 Billion in 2011 - Guest Post

Kuraymat Solar Station (Egypt) - GreenProphet1 Flickr
Guest post by John C.K. Daly of Oilprice.com

Investment in African Renewable Energy Reaches $3.6 Billion in 2011

First, the bad news.

Although Africa has vast fossil and renewable energy sources, only twenty percent of its population has direct access to electricity and in some rural areas, four out of five people are completely without power. According to the UN, over 600 million Africans currently do not have access to electric power. A depressing 70 percent of Sub-Saharan Africa's population is living without access to clean and safe energy for their basic needs such as cooking, lighting and heating, making energy poverty among the most urgent issues facing Africa. Worldwide, more than 1.4 billion people worldwide have no access to electricity, and 1 billion more only have intermittent access.

Over 2.5 billion people, almost half of humanity, rely on traditional biomass - wood, coal, charcoal, or animal waste to cook their meals and heat their homes, exposing themselves and their families to smoke and fumes that damage their health and kill nearly two million people a year. More than 95 percent of these people are either in sub-Saharan Africa or developing Asia.

The good news?

Case for Sustained $100 Oil - Guest Post

Guest post by Frank Holmes of U.S. Global Investors

Case for Sustained $100 Oil

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

In 2011, oil was one of the top performing commodities among those we track, with Brent rising more than 13 percent. Geopolitical risk and unexpected non-OPEC supply losses caused oil to rise significantly in early 2011. By October, we saw the black gold sink to a low of $96 per barrel before rising to its current level of nearly $108 a barrel.

Last year’s unrest demonstrated how major oil-producing regions can significantly affect oil prices. As I’ve previously stated, according to PIRA, the Middle East accounts for over 70 percent of OPEC oil production and, along with North Africa, more than 95 percent of the cartel’s capacity growth.

A disruption of the supply chain can also influence oil prices. One of the largest chokepoints along the global oil supply chain is the Strait of Hormuz, which roughly 90 percent of all Persian Gulf oil tankers—some 18 million barrels per day—pass through, according to Barclays. With Iran controlling the entire northern border of the strait, there is a significant chance for disruptions should the country fall into conflict or war.

2012 Outlooks: Morgan Stanley, Bridgewater, Ron Conway, World Ending...

2012 outlooks

Morgan Stanley's 2012 Forecast: S&P Will Close Year At 1,167, Sees Consensus As Too Optimistic (ZeroHedge)

Bridgewater Takes Grim View of 2012 (WSJ)

Where angels will tread: "Ron Conway, special adviser to SV Angel, points to areas where start-ups will create the next billion-dollar companies." (The Economist)

Guest Post: War Imminent in Straits of Hormuz? $200 a Barrel Oil?

Strait of Hormuz (U.S. Navy Imagery/Flickr)
Guest post by John C.K. Daly of Oilprice.com

War Imminent in Straits of Hormuz? $200 a Barrel Oil?

The pieces and policies for potential conflict in the Persian Gulf are seemingly drawing inexorably together.

Since 24 December the Iranian Navy has been holding its ten-day Velayat 90 naval exercises, covering an area in the Arabian Sea stretching from east of the Strait of Hormuz entrance to the Persian Gulf to the Gulf of Aden. The day the maneuvers opened Iranian Navy Commander Rear Admiral Habibollah Sayyari told a press conference that the exercises were intended to show "Iran's military prowess and defense capabilities in international waters, convey a message of peace and friendship to regional countries, and test the newest military equipment." The exercise is Iran's first naval training drill since May 2010, when the country held its Velayat 89 naval maneuvers in the same area. Velayat 90 is the largest naval exercise the country has ever held.

Sears Holdings is Back at $31, Where's the Value? Price/Book at 0.44 (SHLD)

Former Kmart HQ (Troy, MI) sold to BlackRock in 2005
To close off 2011 with a bang, Sears Holdings Corp. (SHLD), which owns Kmart and Sears, and majority owned by hedge fund manager and Sears Holdings chairman Edward Lampert (ESL Investments/RBS Partners), announced on 12/27/2011 that holiday sales were weak so they plan to close 100-120 marginally performing stores and record a non-cash charge of $1.6-$2.4 billion. They released a list of 79 stores closing and I found an interactive map as well.

I was watching SHLD's price action on 12/21/2011 and it looked terrible on the chart (made a new low, can ESL buy Sears CDS?). When the big news hit on 12/27, SHLD closed at $31.78 on Friday, down 27%. It is retesting the 2008/2009 lows and back at 2003/2004 levels, when Kmart (KMRT) emerged from bankruptcy in 2003. Kmart acquired Sears (S) in November 2004 for $11 billion (or eventually $12.3 billion in 2005) to form Sears Holdings Corp (SHLD). Out of bankruptcy, Kmart was a nice real estate play for Lampert since Kmart owned real estate recorded at low historic book values, and real estate was about to go parabolic.

BusinessWeek: The Next Warren Buffett? 11/22/2004:

"And he pushed for Kmart to sell 68 stores to Home Depot Inc. (HD ) and Sears to raise a total of $846.9 million. That's nearly as much as the $879 million value placed on all of Kmart's real estate -- 1,513 stores, 16 distribution centers, and the fixtures -- in bankruptcy proceedings."

While I'm at it, check out the chart of SHLD's price/book ratio going back to 2003 courtesy of ycharts. It is at 0.44 as of 12/30/2011. Since October 2004, SHLD's price/book ratio has been in a range between 0.38 (11/2008) and 2.31 (10/2006). What is 0.44 trying to say here? Is there still hidden real estate value or major equity erosion ahead.


Sears Holdings Corporation Price / Book Value Chart



After Sears was acquired, the combined company went from being a cash, tax credit, retail synergy, real estate backstop play to which magical retail company will Lampert acquire in May 2007. SHLD peaked out in April 2007, and the company decided to buy back shares.