Obama and McCain appeared on CNBC and neither one said anything particularly scary to spook the markets so it would be nice to make a little progress this morning ahead of the Beige Book (2 pm) and the oil inventory reports (10:30). Last week we had a 4.8M barrel draw in crude and a 2.9Mb build in gasoline and a 2.3Mb rise in distillates as refiners came on-line but demand for gasoline fell 1.4% from last year's holiday weekend. Traders took the opportunity to play the draw in crude into a $12 increase in the price of oil on Thursday and Friday, half of which they have given back so far.
This week "analysts" expect a 900,000 barrel draw in crude and a 1.1Mb build in gasoline and a 1.7Mb build in distillates with refiners operating at 90% capacity. Now if I'm a refiner, and the price of gasoline goes up 1/4 of 1% but the price of crude I'm buying goes up 12% in 2 days – I don't think I'm going to be rushing to crack open barrels on Friday. We'll see how the numbers play out…
As I wrote last night, it's all about the Benjamins, so we'll be watching the dollar very closely for the balance of the month. As it's pre-market, they are already jamming oil up $2 ahead of real trading. Spanish truckers are in day two of their strike and one person died yesterday trying to stop a truck from crossing the picket line and another one was burned setting fire to some trucks and it's a huge mess over there – these are violent strikes, not the kind you think of in the US!
Portuguese drivers have joined the strike and protests are kicking up in France. The South Korean cabinet offered to resign in the face of street protests yesterday and truck drivers there voted to strike as well. In Hong Kong about 500 minibuses, lorries, garbage trucks and coaches staged a go-slow protest, crippling traffic in a demonstration calling for fuel taxes to be scrapped. Bus drivers in England are threatening a strike and tanker drivers have gone on strike in Nigeria. People are actually as mad as hell, and they are not going to take it anymore!
If this widespread global backlash against fuel prices comes as a shock to you, it's because you are a prisoner of the mainstream media as Criminal Narrators Boosting Crude continue to pretend they can shove $130 a barrel crude down your throat and you'll be a good little consumer and take your medicine. If they tell you other people are refusing to pay, you might get ideas of your own and having ideas is just plain unAmerican in this administration!
The markets were very positive until Bush opened his mouth this morning, back to rattling sabers on Iran, which gave oil another boost and sent the markets back down. I'm not worried because this lame duck is not going to get another war no matter how badly he wants to make it happen. Meanwhile the Republican party is gearing up for major losses in the House and the Senate in November, something that can set the stage for sweeping reforms and we won't have to wait for Bush to be officially kicked out the door if the current polling numbers hold up. In the Senate, only one Democratic Senate seat is "up for grabs" while 12 Republican seats are closely contested with a less than 30% approval rating for incumbents.
"A lot of Republicans thought that 2006 was the low point, and that simply isn't the case," said Nathan Gonzales, political editor of the nonpartisan Rothenberg Political Report, which predicts Democratic gains of eight to 12 seats in the House and three to five seats in the Senate. "It's like 2006 never ended for Republicans," said Jennifer Duffy, of the nonpartisan Cook Political Report, which predicts Democratic gains of 10 to 20 seats in the House and four to seven in the Senate.
So let's look for more sector rotation as traders prepare for Democracy in America. This is right in line with our currency plays as Democratic administrations have been much better for the dollar historically and they may have brainwashed US investors to think otherwise but foreign currency investors know which way the wind blows and change is certainly coming.
There was no change in China this morning as both the Hang Seng (0.21%)and the Shanghai (1.84%) continued to drift lower but the Nikkei bounced back 1.16% and the BSE jumped 2% as the export business began to look good again as the dollar gathered strength. Europe is trading flat ahead of our open, breaking a 5-session losing streak so far. RBS had a good report.
We're going to stay nimble as the market could go either way but it's all about oil and the dollar today and anything negative today will probably spend a bad ending to the week so let's hope for the best.
