"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." – Abraham Lincoln; Nov. 21st, 1864 (killed 5 months later)
Tomorrow is Fed day so don't expect much today.
The financials are off to yet another rocky start as both C and GS announce 10% staffing cuts and oil remains high after the OPEC conference even though King Abdullah pledged to push their overall output capactity to 15Mbd in the next 10 years, a 5% increase in global production. This was actually a huge surprise and is freaking out the "peak oil" proponents who base their logic on this not even being possible.
Don't expect the fact that the entire long-term investing premise of oil being shot to hell to stop speculators though, already the spin doctors are on CNBC telling you not to believe the Saudis. Also, July contracts closed on the NYMEX on Friday with all but 21M of the 400M barrels that were, at one point scheduled for delivery canceled by the oil hostage takers (which we will now call the traders). Since "normal" delivery on the NYMEX is 40Mb delivered to Cushing, OK in a month – the crooks at the NYMEX have purposely shorted our country 20M barrels for the month of July, creating a 5M barrel weekly shortfall in inventory beginning in two weeks, which Criminal Narrators Boosting Crude will tell you is the result of July 4th weekend demand.
In short, traders at the NYMEX churned over 1.5Bn barrels worth of contacts last week along and, in the end, accepted just 21M barrels for actual delivery, the other 98.6% of the contracts were canceled and that oil will never make it to America, even though a contract guaranteeing delivery was in the hands of an "American" trader at some point during the week. 1.5Bn barrels is 75 days of total US oil consumption and 6 months of our imports and over 1 year's worth of imports from OPEC (most of our imports are from Canada and Mexico).
So NYMEX traders dumped 1 year's worth of our energy security last week while Energy Secretary, Sam Bodman disrupted the Jeddah conference by being one of only two dissenters (UK's Gordon Brown was the other) who declared there was "no evidence the speculators were driving future prices of petroleum." Do you want evidence? There are only 2,000 authorized traders at the NYMEX so let's hire 2,000 auditors to sit next to each one and say "Who are you buying these barrels for? How many barrels do they need next month? Why are you now cancelling those orders? What happened to the 'need' of your 'client'?"
Unfortunately, the way the NYMEX traders churn the market, you would have to ask those questions an average of 100 times a day per trader of the same barrels for the same "client" but it's a start! John McCain has, of course, backed the Administration's defense of speculators (great video). A Senate sub-committee has just completed a study that shows McCain and his contributors at the Denver Petroleum Club are full of it as "70% of all trading in West Texas Intermediate crude on the New York Mercantile Exchange is driven by speculators." McCain is a Senator, doesn't he get these memos?
Asia was down just a bit today with the Hang Seng holding steady at 22,714 and the Nikkei down half a point at 13,857 while the Shanghai fell it's usual 2.5%, finishing at 294. This was not a bad performance considering what they saw in our markets on Friday and the fact that oil was trading at $137 in the overnights as traders pumped barrels for all they were worth before the morning's dump on the NYMEX as that OPEC conference could in no possible way be considered bullish for oil by people who actually understand oil trading. Don't worry though, there are plenty of suckers left to play but, even according to Barrons, the long-term trend does not look good for energy bulls.
Europe is up about half a point in early trading despite German business confidence hitting it's lowest level since December 2005. December 2005 would have been an excellent time to buy the DAX, it doubled since then, so you can understand why investors aren't putting too much stock in German confidence numbers… The EU is expected to officially announce sancitons against Iran's biggest bank, adding International pressure for Iran to bend in their nuclear negotiations.
Our futures are looking good this morning, much improved since gold and oil fell but, without follow-through from the Fed tomorrow, any gains the from the dollar will be temporary. Regarding our pledge to work our Stocks virtual portfolio this week, we're going to sell $22 naked puts in the XLF for $1, our first step to owning them for the long haul. We will also sell naked C $17.50 puts for .75 but that's going to be it for the financials until after the Fed. Don't forget you have to treat this like you are buying the stock!
We will also sell the naked GE $27 puts for $1 if we can but no less than that.
Let's be careful out there, nothing to get excited about until we digest tomorrow's data and don't forget that the quarter is not quite over yet. Have fun out there!
