1/31/11…dance like an Egyptian

…no sooner did TB comment on Egypt and uprising over food in Africa which had already toppled the Tunisian government…along with three days of warning on Bloomberg of rioting and collapse of Egyptian bond prices…but the S&P made a third straight ‘slight’ new rally high, before they came to their senses and took it down 1.8%, wiping out the entire rally from January 11th! Meanwhile the resilient Dow had a 2nd straight lower high, tumbled 1.4% and wiped out all gains since January 20th. The hard hit Russell 2000 which had been attempting to rally fell 2.5%, The two Nasdaq indices -2.5% and the Dow Transports plunged 2.7%, led by FDX, EXPD, and UPS…is THAT telling you anything? Freight carriers all! In fact the only winner was OSG in the entire group!

Once again a familiar pattern emerged: selloffs on BIG volume, rallies on below average volume. Friday’s NYSE was 1.32B shares, highest since 12/17’s 2.02B shares…all we needed was a catalyst: EGYPT!!!

CAT was off despite blowout earnings…remember however there are two divisions: construction and agriculture and we know where the orders were coming from don’t we? Misled by record wheat, corn, and cotton prices while rice is attempting a rebound after spiking similarly two years…and for the same reasons: speculation.

You witnessed the plunge in Crude TB also discussed since 12/31///but what have you seen at the pump? Higher prices! West Texas Intermediate is trading at a $12 discount to the crack spread and that is artificial and due to refiners buying less…it can’t hold….but now crude is surging along with Gold on Egypt…what a world we live in…one in which the consumer cannot win…only the speculators on the Board of Trade and Merc! Pity when governments around the globe begin to topple…for what?

. . . - - - . . .    . . . - - - . . . (S.O.S.)

Imagine this: To attend the World Economic Forum in Davos, Switzerland (pronounced D’vos as TB’s Swiss friend informs him, but none of the networks seem to know that as they pronounce it with a distinct drawl (Dahvos), will set you back $150,000…definitiely a wealthy man’s club.

While most partied hardy though only one man, Barrie Wilkinson, a financial consultant predicted a 2015 financial crisis according to Bloomberg. Only one man, who says ‘the fundamentals haven’t been addressed at all.” This is or should be obvious to any sane person as daily we hear of sovereign bailouts and bank problems…but all we are told is that the consumer…broke though he is…is back in force…which is in itself a gross exaggeration! But why shouldn’t the richest men in the world be unconcerned about a pending financial crisis? Because they have not been impacted one iota while the bottom 95% or more have felt severe pain. Pain at the expense of derivatives traders…be they default swaps, collateralized mortgages, or commodities index swaps…but it is all coming home to roost…while food prices were not the cause of the Egyptian riots…after all they have argued for more democratic freedoms for years…but what they were was the catalyst…i.e. why it happened now! Yet on the Sunday talk shows only one reporter used the word ‘poverty’ – TB would call it ‘abject’ poverty…but when people can’t feed their families what else do you expect? The U.S. government is trying to straddle the fence…as well they should if they learned anything in Viet Nam, Iran, Iraq, Cuba and other places…through our ignorance! But is there any doubt the Mubarak is a relic now?

Note that in our ill-advised and for the wrong reasons invasion of Iraq, we failed to protect the central bank (unbelievable for a capitalist country) allowing it to be looted while our troops stood idly by along with the Museum of Antiquities, the most important museum in the world…now in Egypt rioters have sacked the History Museum arguably the second most important to civilization…as Matthew Arnold wrote ‘culture and anarchy’ they do not go together.

TB listened to the book reviews on CSPAN Sunday and one was on ‘Prophets of War’ by William Hartung which is about the industrial- military complex Eisenhower so feared. Also with him was Ike’s grandson, David, who said his grandfather today would call it the ‘industrial/military/congressional complex which is totally corrupt and led by Lockheed Martin…who employs 130 lobbyists! This far-reaching organization is into everything…and nearly every legislators pockets…did you know that more than half of the CIA is now outside contractors? Does that worry you? It should…and who is the biggest? Lockheed Martin. How much secrecy is there…there are outside contractors controlling CIA agents…much like Abu Graib. Not comforting.

There is also a new book out ‘Osama Bin Laden.’ The author took a different tack finding out what motivates him rather than ranting that he is insane. He pointed out that every attack, U.S. embassies, the Cole, etc. had one purpose: to draw the U.S. into Afghanistan…finally 9/11 succeeded and worse Dubya ‘dumbly’ called it a ‘crusade’ which was like pouring gasoline on a fire…it is as losing a proposition as Viet Nam…and costing billions…what will the GOP, who overpowered the Democrats on that and the first gulf war as well as the Iraq invasion, do? With 84% of the budget in entitlements, education, and military, something has to be done…IF they want cuts.

Friday, TB got several responses…which are always appreciated. One from a Canadian-born friend, who was critical of their healthcare system. TB was not defending it, merely pointing out how they balanced their budget in three years…still no matter how it is, can it be worse than 50% of American’s with NO health insurance? Who is paying for that?

He also got a letter from a friend who thought TB is too harsh on the ‘teabaggers’ of which he said he is one. He also said he is probably in the top 2% of taxpayers. He would be willing to pay more in taxes IF the size and scope of the government was reduced.

But to TB restoring a tax cut…or even half of it (2%) on MARGINAL incomes above $250k is not a tax increase…that cut was supposed to be temporary but was immediately planned to be made permanent and likely would have been had not the Dems taken control in the 2006 election. Obama has done a poor job of stressing the marginal rate. For instance a person making $260,000 would only pay an additional $200 in taxes…about the same as a dinner for four in a nice restaurant. Meanwhile we are allowing hedge fund operators to pay 15% taxes. Teabaggers, wake up to realty…who you are really protecting! Not yourself!

Also, TB has stated that in principle he agrees that the budget should be cut…but who really ran it up? The GOP after Gingrich made since great inroads…he will tell you that! Not the tax and spend Dems alhough they jumped on board once they had control…the are both insane and greedy! But if the teabaggers themselves can’t agree on what should be cut…or what could be cut…should we let them risk another recession…if, that is were are truly out of the last one other then economically speaking…TB thinks it is more like a depression but the top 2% don’t know it

Well, today was long and could have been longer. Tomorrow TB is flying back to California so he should be forgiven for the length and it might not be until Wednesday before there is an update.

Have a wonderful week!


Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries...as he sees it...and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Copyright TBD Capital LLC, January 31, 2011.


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