UPDATED: Australia's Flooded North Braces for Massive Cyclone as Locust Plague Heads South

Updates:  

Australia: Sharks Swimming in Flooded Streets

 

After Dodging Australian Cyclone Bullet, Apache Corp. Counting on Egyptian Gas Fields...Oh, Wait... (APA)

From Reuters:

Australia's flood-stricken state of Queensland closed major coal ports, evacuated tourists from vulnerable resorts and warned of heavy rain on Monday ahead of a massive cyclone due to slam into its coast this week.

Forecasters said Cyclone Yasi could be generating gales of more than 250 kph when it hits the coast on Wednesday or Thursday, which would put it on a par with Hurricane Katrina, which devastated New Orleans in 2005.

"This is a very serious threat," Queensland Premier Anna Bligh told reporters. "It may be one of the largest and most significant cyclones we've ever had to deal with."

Queensland, which accounts for about a fifth of Australia's economy and 90 percent of its exports of steelmaking coal, has borne the brunt of a cruel summer, with floods having swept across the eastern seaboard in the past month, killing at least 35 people.

Queensland is also home to Australia's sugar industry, which was also hurt by the floods and now risks being battered by the cyclone....MORE

Australian locust spotter on alert:

From the Department of Agriculture Fisheries and Forestry:

Locust situation in January 2011

Australian Plague Locust (Chortoicetes terminifera)

Swarm activity increased in late November and continued throughout December in the Riverina and Far Southwest of New South Wales, the Murray Valley and Northeast South Australia and in Northwest and North Central Victoria. Sporadic egg laying began in these areas in late November and intense swarm egg laying was reported in areas near the Murray River during mid–December. The general southward movement during early December resulted in swarms accumulating in the southern and eastern Riverina and in Victoria as far south as Horsham–Stawell and Hamilton. In South Australia adults moved into the western Mt Lofty Ranges in mid–December and swarm egg laying was reported from Peterborough to the Barossa Valley. Hatchings from eggs laid in the first half of December commenced at the start of January in northern Victoria and the Riverina. There were several periods of migratory redistribution during December.

The outlook is for a second generation of high density nymphs in the Riverina of New South Wales, Northwest and North Central Victoria and in the Murray Valley of South Australia during January. The development of hopper bands from eggs laid in mid–December will occur during the first half of January. Sporadic egg laying is likely to continue during the first half of January in these areas, which could result in extended hatchings throughout January. A significant summer generation could also develop in parts of Southwest Queensland, the Far North of South Australia or other regions where populations were previously low, as a result of migrations.

In New South Wales high density adults and swarms were recorded in Western, Lachlan, Riverina and Hume Livestock Health and Pest Authority (LHPA) areas during December, while adult numbers declined in Darling, Central West and Northwest LHPA. Swarm density egg laying was recorded in the Riverina and Hume LHPA areas in mid–December, with many egg beds recorded in the Deniliquin–Corowa area....

Okay, he wasn't a 'locust spotter', just a guy with a big problem.
For some reason I was thinking of the iconic (was it Brit propaganda?) photo of the London air raid warden:

Space Weather:

From SpaceWeather.com:

Solar wind: Brisk
speed: 325.4 km/sec
density: 1.9 protons/cm³
explanation | more data
Updated: Today at 2215 UT

...CORONAL HOLE: A dark croissant-shaped hole has opened up in the sun's atmosphere, and it is spewing a stream of solar wind into space. NASA's Solar Dynamics Observatory took this picture of the vast opening during the early hours of Jan. 31st:

Researchers call this a "coronal hole." Solar rotation is turning the coronal hole toward Earth. The stream of solar wind pouring from it will swing around and hit our planet in early February, possibly sparking polar magnetic storms. High-latitude sky watchers should be alert for auroras between Feb. 2nd and 4th....MORE

The 5 Black Swans That Keep Société Générale's Dylan Grice Up At Night... (And How To Hedge Against Them All)

There's a fund for that.*
For folks new to Climateer Investing, we are fans of Grice's more chipper almost almost Panglossian [not -ed] partner-in-crime, Albert Edwards.**
From ZeroHedge:

With all the hoopla over Egypt some have forgotten that this is merely a geopolitical event (one of those that absolutely nobody, with a few exceptions, was talking about less a month ago, so in many ways this is a mainstream media black swan which once again exposes the entire punditry for the pseudo-sophist hacks they are), and that the actual mines embedded within the financial system continue to float just below the surface. Below we present the five key fat tail concerns that keep SocGen strategist Dylan Grice up at night, which happen to be: i) long-term deflation, ii) a bond market blow-up, iii) a Chinese hard-landing, iv) an inflation pick-up, and v) an Emerging Markets bubble. Far more importantly, Grice provides the most comprehensive basket of trades to put on as a hedge against all five of these, while also pocketing a premium associated with simple market beta in a world in which the Central Banks continue to successfully defy gravity and economic cycles. For all those who continue to trade as brainless lemmings, seeking comfort in numbers, no matter how wrong the "numbers" of the groupthink herd are, we urge you to establish at least some of the recommended trades in advance of what will inevitably be a greater crash than anything the markets experienced during the depths of the 2008 near-cataclysm.
But before we get into the meat of the piece, we were delighted to find that Zero Hedge is not the only entity that believes that providing traditional annual forward looking forecasts is nothing more than an exercise in vanity (and more oftan than usual, error).

At this time of the year we’re supposed to give our predictions for what’s in store for the year ahead. The problem is I don’t have any. Not because making forecasts is difficult. It isn’t. It’s just pointless. Instead, I suggest getting in touch with our inner Kevin Keegan, the hapless former England football manager who, facing the sack after a bad run of results famously lamented “I know what’s around the corner, I just don’t know where the corner is.” The more people construct portfolios on the assumption that they can see the future, the greater the opportunity for those building portfolios which are robust to the reality that we can’t.

That said, no matter how ridiculous the act of Oracular vanity ends up being, those who charge an arm and a leg for their "financial services" continue to do it, only to be among the first carted out head first when reality is imposed upon them and their blind belief that this time is different and the crowd is actually right. Few are willing to accept and recognize the humility that they really know little if anything about how a non-linear, chaotic system evolves. Which is once again why we believe that Grice is among the best strategists out there: in his attempt to hedge the stupidity of the crowd, he has coined a term that may well be the term that defines 21st century finance and economics: instead of foresight, Grice believes the far more correct term to explain the process of prognostication should be one based on foreblindness.

In financial markets, craziness creates opportunity. It affects only prices, not values. And one of the craziest afflictions I know of is our faith in our ability to see the future. Indeed, there isn?t even an appropriate opposite to the word ?foresight? in the English language. So I'?m going to make one up. And rather than build a portfolio based on the pretence we have foresight, let?s explore some ideas for building one that is robust to our foreblindness.

This is the kind of insight that one will never find from a TBTF "strategist"... And one wonders where all those softdollars go.

So now that we know that unlike the traditional cadre of sell side idiots who are always wrong in the long-run, Grice actually admits that he has no clue what will happen, which is precisely the reason to listen far more carefully to what he has to say.
Let's dig in...MUCH MORE

*Ex-Deutsche Bank Trader Weinstein Launches 'Black Swan' Hedge Fund

**Société Générale's Albert Edwards: "I Have Been Wrong – I’ve Been Too Bullish" (Jan. 17, 2011)

"Pick off the Offer" Buying in First Solar (FSLR)

What's not to love about this stock?
Down $5.78 last Tuesday, up $6.62 today (to $154.11)
There is a fly in the ointment though: Volume.
The sellers are hanging small offers over the market, making the buyers jump for the pick-off.
For some reason I am reminded of the story of the Fox and the Grapes.

Volume today is only average, 1.15MM with 33 minutes to go vs. the 1.34MM daily average.
That said I would not want to be short as we approach the Q4 and year-end earnings report, we may just see a new version of the run-up into earnings/fade (mystery/history), perhaps a run-up followed by a further move up.
Goldman's $165 target may prove to be conservative.

Citigroup's Largest Shareholder "will sell only if it gets a very attractive offer" (C; UBS)

From Reuters:

Singapore's GIC , the biggest shareholder in Citigroup and UBS , intends to hold its stakes in the two banks for the long term and will sell only if it gets a very attractive offer, executive director Tony Tan said over the weekend.

GIC, or Government of Singapore Investment Corp, also saw investment opportunities in the United States and Europe as asset prices have come down significantly, Tan said in interviews with the Straits Times and Bloomberg in the Swiss town of Davos.

GIC, which manages over $200 billion according to most analyst estimates, bought stakes in Citi and UBS during the financial crisis. It has since sold about half its stake in the U.S. lender....

OIL: Umm... Don't Look Now but WTI Just Closed at a Two Year High

A quick hit from Bloomberg:

Crude Oil Rises to Two-Year High in N.Y. on Egypt Unrest, Brent

Oil rose to the highest price in more than two years and Brent crude topped $100 a barrel as a seventh day of unrest in Egypt raised concern that supplies may be disrupted.

Oil gained as much as 3.8 percent as opposition groups demanding President Hosni Mubarak’s ouster urged more people onto the streets. Egypt’s Suez Canal, which links the Mediterranean and Red seas, is one of seven “world oil transit chokepoints,” according to the U.S. Energy Department.

“This is all Egypt,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Upwards of 3 to 4 million barrels a day of flow could be disrupted” by a shutdown of the Suez Canal. That would add 6,000 miles (9,700 kilometers), two weeks and assorted costs to tankers’ journeys from the Persian Gulf to Europe and the U.S., he said....MORE

"...Google’s Trading Desk" (GOOG)

From MarketBeat:

Who knew? Apparently Dow Jones Newswires’ Chana R. Schoenberger:

When [Google Treasurer Brent] Callinicos joined Google in 2007 from Microsoft Corp., he pitched Google’s executives on starting a cash flow currency hedging program in addition to the company’s existing efforts to hedge foreign exchange exposures on its balance sheet.

Google uses currency forwards to hedge its balance-sheet exposures, which it now identifies using its own software as well as a foreign-exchange risk tracker from FireApps. The new software allowed Google to expand from hedging against “single digit currency pairs to dozens of dozens of currency pairs,” Callinicos said. Those hedges aren’t designed to make money; they are supposed to guard against the firm’s assets losing money as exchange rates change.

Google’s cash flow hedging, which began at the end of 2007, uses a rolling, layered portfolio of options on currencies, meaning they expire at varying times....MORE

Say, About That Plan to Supply 15% of Europe's Electricity from North Africa.... (Look for Desertec to go with Natural Gas instead)

Some commentators thought it was lunacy to put Europe's power supply in the hands of Tunisia, Algeria, Libya and Morocco.
The French in their haughty way believe they can control the governments of the Maghreb. Events of the last two weeks should give them and the German companies backing the plan reason for concern.

If you've forgotten, Desertec was a planned $555 BILLION plan to use concentrating solar thermal to produce electricity in the North African desert and ship it to Southern Europe. The World Bank was on board, Siemens, E.on, Deutsche Bank, Munich Re and a host of other Germans were ready to make money and then, darn, revolution.
Here's a bit of insight from Solar Novus:

Revolution in Tunisia May Threaten Dii Goals

Tunisia is in the midst of difficult times and how it will affect Desertec and the Dii goals is yet to be seen. President Ben Ali stepped down last Friday and immediately fled out of the country, the country is currently in a state of emergency, and the military is patrolling the streets of Tunis after heavy rioting took place with arson and looting.

People took to the streets to protest the bleak economic outlook that resulted from widespread corruption. While the overall unemployment rate is reported with 14%, some 30% of the young people are unemployed despite the fact that many are well educated. Even employment is tied to bribery and connections. According to a latest estimate of the Global Financial Integrity (GFI), over one billion US dollars per year was lost by “corruption, bribery, kickbacks, trade mispricing, and criminal activity” in the past years.

The revolution in Tunisia hits the Dii project at its weakest point: The political instability of future partner countries in the Maghreb. The political framework is the one variable upon which the Dii makers have little influence. Dii CEO Paul van Son has stated in a social community blog on Saturday that the events in Tunisia may perhaps delay Dii’s work temporarily, but he feels confident that the long-term goals of the initiative are not in danger. Geographically, Tunisia is the smallest of the countries that are in the focus of the Desertec activities in the MENA region, but at the same time also lies in the centre of the Maghreb states. With its vicinity to Sicily and therewith Europe, the country also plays a strategic role in the long-term Desertec plans....

You can bet your bottom dollar that with the taste for solar subsidies fading fast and the wake up call that maybe, hey, this isn't the most stable region in the world, that the plan will be scaled back to shipping Libyan NatGas to power plants in France or, maybe, in oh I don't know, Mauritania?

"The battle of Cairo is over, or is it?" and Oil Markets 'Choppy'

The oil markets seem to think so, Brent is down 42 cents, WTI up 42 cents.
From The Economist:

I KNEW it was truly over when I came home to find a neighbour in a panic. He had smelled a fire nearby. We traced its source soon enough, after climbing to the roof of my building. Smoke drifted from the garden of the villa next door, where workers had recently been digging a peculiarly deep hole, as if for a swimming pool. In a far corner of the garden stood rows of cardboard boxes spilling over with freshly shredded paper, and next to them a smouldering fire.

More intriguingly, a group of ordinary looking young men sat on the lawn, next to the hole. More boxes surrounded them, and from these the men extracted, one by one, what looked like cassette tapes and compact discs. After carefully smashing each of these with hammers, they tossed them into the pit. Down at its bottom another man shovelled wet cement onto the broken bits of plastic. More boxes kept appearing, and their labours continued all afternoon....MORE

From the Wall Street Journal:
Oil Futures Choppy as Market Eyes Egypt 

Crude-oil futures swung between positive and negative territory, as the market eyed the unrest in Egypt and its potential effect on the operation of the Suez Canal, a key transport link for oil headed to the Mediterranean.
Earlier Monday, the potential for escalating anti-government protests in Egypt to interrupt shipping traffic or spread to major oil-producing nations in the Middle East helped push Brent to within a whisper of $100 a barrel. However, with no clear indication of how events would unfold, both contracts have since eased off these highs....MORE

"Price developments today are wide open depending on the further developments in Egypt," wrote analysts with SEB.

The front-month March Brent contract on London's ICE futures exchange was 62 cents, or 0.6%, lower at $98.80 a barrel. The front-month March contract on the New York Mercantile Exchange was trading seven cents higher at $89.41 a barrel.

Both contracts shot higher on Friday, with Nymex futures rising by more than 4%.

"Media Matters": Trouble in Egypt? It's the Jooooos

I feel creeped out just linking to this guy. Here's M.J. Rosenberg:

-HuffPo puffery.

M.J. Rosenberg is Senior Foreign Policy Fellow at Media Matters Action Network. Previously, he worked on Capitol Hill for various Democratic members of the House and Senate for 15 years. He was also a Clinton political appointee at USAID. In the early 1980s, he was editor of AIPACs weekly newsletter Near East Report. From 1998-2009, he was director of policy at Israel Policy Forum.

Here he is at Media Matters:

If one needs additional proof that the "pro-Israel" lobby and the policies it dictates to US policymakers are bad for both the U.S. and Israel, look no further than what is happening in Egypt....MORE

Yuck.
In other news, we learn that it wasn't Napolean's troops who disfigured the Sphinx:


The Great Sphinx of Giza is a half-human, half-lion Sphinx statue in Egypt. But the nose of this Great Sphinx at Giza is made conspicuous by its absence. What happened to it?

Although popular legend blames Napoleon and his troops during the French campaign in Egypt (1798-1801) for having shot the nose off the Great Sphinx, in fact this story just isn’t true.

An article by Ulrich Haarmann, “Regional Sentiment in Medieval Islamic Egypt,” states that according to Makrizi, Rashidi and other medieval Arab scholars, the face of the Sphinx was vandalized in 1378 A.D. by Mohammed Sa’im al-Dahr, a“fanatical sufi of the oldest and most highly respected sufi convent of Cairo.”...

Probably one of them Sufi Joooos.

(there's no such thing, if you're Sufi you're not Jewish and vice versa,
Madonna and her version of kabbalah, who knows)

Being the master of disguise that I am, I have in my posession three pairs of Groucho glasses.
Here are some other aficionados:

It's not all fun and games though:

The Effect of Groucho Marx Glasses on Depression

Cycles: Schumpeter vs. Wall vs. The Cobden Centre (S&P 400?)

These darn cycle charts look so elegant that you almost wish they could divine the future.
Then your higher brain kicks in and you think "If the charts could predict, why would they need me?"
That was also a bit of lizard brain/survival impulse.

When I first saw the title I had to ask "Is P.Q. Wall still alive?"
He has a decidedly spotty record and disappears from time to time but the charts are pretty.
From The Market Oracle:

Joseph Schumpeter was a Harvard economist and president of the Econometric Society (1940-41). He was author of the two-volume tome Business Cycles (McGraw-Hill 1939). Schumpeter’s cycle research is of particular interest because he was one of the first to attempt to integrate sociological understanding into economic trends. He also presented an integrated approach to cycles that presented the Kondratieff long wave as a larger scale of the smaller cycles. In Business Cycles, he introduced a theoretical model for how all the various cycles fit together.

Schumpeter’s model of how all the cycles worked together to produce long waves included Kitchin cycles (the regular business cycle of 3-5 years) and Juglar cycles (7-11 years), with three Kitchins in each Juglar. Schumpeter also wrote of the Kuznets cycles (15-25 years), but didn’t put them in the charts below. The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles. Note that Schumpeter’s model presented 18 business cycles in a regular long wave. 

Note that Schumpeter’s model presented 18 business cycles in a regular long wave....CHARTS

With all the manipulations by central banks and politicians anyone who tries to bet on an idealized repitition is bound to be disappointed. You might be better off making prop bets On the Periodicity of Crop Circles.

And from ZeroHedge:

"The 18 Year Cycle" - S&P Adjusted For Business Revenues Means The 666 Lows Are Just The First Stop

Sean Corrigan's weekly "Material Evidence" is always a must read. In his latest edition, the uber-eloquent Brit puts simplistically worded Fed bashing to shame with an anti-Fed manifesto masterpiece that is off the charts on the Flesch-Kincaid reading level.  While we will post the full piece shortly, we wanted to bring attention to one particular chart which has not received any prominence in the past, namely the S&P adjusted for business revenues, which appears to have an 18 year periodicity, and whose mean reversion implies that we are only half way through the correction phase. In other words when all is said and done, when the Fed's POMO gun is finally out of bullets, Albert Edwards' and Nic Lenoir's S&P targets of ~400 will be spot on....CHART

Oil and Food Prices: Sometimes Correlation Does Imply Causation

The volume of petrochemical inputs into our current methods of agriculture are stunning.
Then, when the stuff is grown, it has to be shipped.
Oil = Food.
(and no, the headline is not "cum hoc ergo propter hoc")
From Paul Chefurka.ca:

...The thing that stunned me was the closeness of the correlation.  For you math geeks, the correlation coefficient of the two data sets is 0.93!...

HT: Famland LP's post:
Oil and Food Prices

Several years ago National Geographic magazine published an article on oil that included a stunning photo of mature steer and the barrels of oil needed to grow an animal to that size.  I recently went looking for that picture, found it, and post it here because it hasn’t lost its impact or relevance one bit....

Geopolitical unrest and world oil markets

Worth your time. From EconBrowser:

Change is on the way in the Arab world, with Egypt the latest focal point. Here I review recent events and their implications for world oil markets.

Source: Google maps.

I begin with a timeline, if not to connect the dots, at least to collect the dots in a single list.

• Sudan, Jan 9-15: Country holds a referendum whose apparent outcome will be a split of South Sudan into its own a separate country.
• Lebanon, Jan 12: Key cabinet ministers resign in protest against impending indictments from a U.N.-backed investigation into the 2005 assassination of former prime minister Rafiq al-Hariri, toppling the governing coalition. U.S. Secretary of State Hillary Clinton offered this assessment:

We view what happened today as a transparent effort by those forces inside Lebanon, as well as interests outside Lebanon, to subvert justice and undermine Lebanon's stability and progress.

• Tunisia, Jan 14: President Ben Ali flees the country in response to widespread protests.
• Iraq, Jan 17-27: Over 200 people killed in a spate of recent bombings, a sharp and tragic increase from the recent norm.
• Egypt, Jan 29: Cairo appears to be near anarchy as a result of an uprising against President Mubarak.
• Yemen, Jan 29: Demonstrations and rallies have resulted in clashes with police, with unclear implications at this point for the stability of the regime.

An optimist might see the common thread in many of these developments to be the realization across parts of the Arab world of the power of popular will to overthrow dictators, the first step toward democracy and a better life for the people. A pessimist might see in at least some of these situations deliberately orchestrated chaos for purposes of seizing power by a new group of would-be ruthless leaders....MORE

Foreign Exchange Conspiracy Theory: "The Last Recourse Against Runaway Inflation? A Commensurately Greater Jump In The Dollar"-Citigroup

From ZeroHedge

Citi's head of FX, Steven Englander, has some contrarian observations on the fate of the US dollar, which a more nuanced read may even indicate a slightly conspiratorial bent, namely that in order to cut the surging global inflation dead in its tracks (alas, too late for the regimes of Tunisia and Egypt), the dollar will have to surge even more.

To wit: "If the world’s inflation problem is primarily derived from rising commodity and food prices, it is very likely that a stronger USD will help mitigate this inflation quickly and efficiently. There is a well established relationship between USD strength and weaker commodity prices." Of course, with the Printing Dutchman at the helm, what hope is there for a sustainable strong USD thesis: "The problem is that there does not appear to be a market driver for USD strength."

Yet this could very well be the contrarian trade going forward as the G-20 looks aghast at events in Africa and realizes that the "last case" scenario just seems that much more credible. If this happens and there a concerted effort to reincarnate the dollar, look for the EURUSD to plunge, and all USDXXX pairs to surge in the following days, especially as the carry funding shorts realize that they will once again, just like in late 2008, be the sacrificial lambs at the altar of "Kicking the can down the road one last time"-dom.

Quote Englander: "During a similar high commodity price episode in mid-2008, we saw some evidence of high reserves growth, which is unusual when the private sector is buying dollars. Moreover, then as now, market macro investor positions appeared to be long commodities. While it would be unusual for reserve managers to buy USD for inflation stabilization reasons, as a quick solution to a major problem it may be more effective than most."....MORE, including the whole Citi note which ZH calls "Must Read."

Commodities: "Egypt and Tunisia usher in the new era of global food revolutions"

Ambrose weighs in. From the Telegraph:

Political risk has returned with a vengeance. The first food revolutions of our Malthusian era have exposed the weak grip of authoritarian regimes in poor countries that import grain, whether in North Africa today or parts of Asia tomorrow.

If you insist on joining the emerging market party at this stage of the agflation blow-off, avoid countries with an accelerating gap between rich and poor. Cairo’s EGX stock index has dropped 20pc in nine trading sessions.

Events have moved briskly since a Tunisian fruit vendor with a handcart set fire to himself six weeks ago, and in doing so lit the fuse that has detonated Egypt and threatens to topple the political order of the Maghreb, Yemen, and beyond.

As we sit glued to Al-Jazeera watching authority crumble in the cultural and political capital of the Arab world, exhilaration can turn quickly to foreboding.

This is nothing like the fall of the Berlin Wall. The triumph of secular democracy was hardly in doubt in central Europe. Whatever the mix of aspirations of those on the streets of Cairo, such uprisings are easy prey for tight-knit organizations – known in the revolutionary lexicon as Leninist vanguard parties.

In Egypt this means the Muslim Brotherhood, whether or not Nobel laureate Mohammed El Baradei ever served as figleaf. The Brotherhood is of course a different kettle of fish from Iran’s Ayatollahs; and Turkey shows that an ‘Islamic leaning’ government can be part of the liberal world – though Turkish premier Recep Tayyip Erdogan once let slip that democracy was a tram “you ride until you arrive at your destination, then you step off." ...MUCH MORE

Chartology: The week In Review

From Alhambra Investments:

Stocks were so overbought that Friday's nasty selloff didn't even break the uptrend line. From a short term perspective, Friday meant nothing.

From a longer term perspective there is room for more correction within the context of a bull move. Good support should be found at the Fibonacci retracement level around 1220. Further support comes in at 1125-1150 but at this point there is no reason to expect this to carry that far.

...Many MORE

Egypt and the Markets: Buy More Oil

From the Asia Times' Inner Workings blog:

I will have a good deal more to say about the topic in my “Spengler” column in Asia Times Online Monday morning, but the prospect of a failed state in Egypt should worry the markets. I’ve been urging investors to buy oil stocks. Egypt simply doesn’t function as a country, and the spike in wheat prices may have been the wheat-stalk that broke the camel’s back-as a number of observers, including Nourel Roubini, have been saying. If you live on $2 a day, as half of Egypt’s population does, a rise in the bread price hurts. Unofficial estimates put unemployment at 25%, not the 9% reported by the government, and the country’s 700,000 university graduates compete for perhaps 200,000 job openings. Half the country is illiterate. Nine out of ten Egyptian women suffer genital mutilation.

Egypt imports almost half its wheat, despite years of government promises to bring about food self-sufficiency. It’s the world’s biggest wheat importer. Food and fuel subsidies alone account for 7% of GDP. Just to keep the population’s nose above water, that is, the Egyptian government each year must spend a sum comparable to the Obama fiscal stimulus–year after year after year. How an illiterate society that butchers its women is supposed to make an instant leap to liberal democracy is not a question that lends itself to an answer....MORE

Iran Urges Egyptian Restraint Against Protesters

From Iran's FARS News Agency:

Spokesman: Iran Closely Monitoring Developments in Egypt

Iranian Foreign Ministry Spokesman Ramin Mehman-Parast asked the government in Cairo to exercise restraint in confronting Egyptian demonstrators, and stressed that Iran is closely monitoring developments in Egypt....

...MORE

It's the End of the World as We Know it

Ladies and gentlemen:
R.E.M.

Net-less Egypt may face economic doom Monday

Imagine that Y2K had happened.
From Technolog:

Egypt's government must return Internet access to the country by Monday or perhaps suffer massive economic damage, as banks and other economic institutions return to work without the ability to conduct commerce.

It's currently the weekend in Egypt, which means the government's decision to block all Internet traffic in response to protests may seem to many of the nation's 84 million inhabitants as more of an inconvenience than cataclysm.

"If you go beyond the weekend, real damage is done to capital flow and banking," Neil Hicks, international policy analyst for Human Rights First told msnbc.com, citing a report from the Economist Intelligence Unit. Egypt is part of the world's financial infrastructure, he said. "That's probably why most governments don't do this — it hurts the state and hurts the economy."

Not only would it impact government holdings, but it's sure to hit those investors, businesses and middle-class citizens who may support the status quo of the Mubarak administration.

It's counterproductive, Hicks explained, citing Secretary of State Hillary Clinton's January 21 speech on Internet freedom. "States that uphold Internet freedom are going to do better economically," Hicks said. Cutting off the Internet is "damaging your own prospects for prosperity and growth."

"We've never had a lab in which to see what percentage of a country's economy relies on the Internet," Jim Cowie, chief technology officer of the global Internet monitoring firm Renesys, told msnbc.com. "This is the experiment."...MORE

Public version of Isreali security analysis of the Egypt situation

From the Jerusalem Post: 

‘We’re living on a volcano,’ experts warn

As with Iran in ’79, Islamists could hijack pro-democracy movements; ex-IDF research chief: “We're on thick ice, but even that melts eventually."

Israeli security experts are casting an uneasy eye at the civil unrest spreading through the region.

On Thursday, Yemen joined the list of Arab states experiencing unprecedented demonstrations calling for authoritarian leaders to step down, and Egypt braced for more civil unrest.

While no analysts here predict any immediate ramifications for Israel’s national security, some said mass protest movements that begin as pro-democracy uprisings could easily be hijacked by Islamists.

“We need to understand that we are living on a volcano,” said Maj.- Gen. (res.) Ya’acov Amidror, former head of the IDF’s Research and Assessment Directorate.

“Conditions can change from today until tomorrow. We must ask ourselves, what is the worst case scenario,” he said. “We are on thick ice, but even that melts eventually." 

“Advice we have heard from certain countries in Western Europe [suggesting that the uprisings could lead to a wave of democratic revolutions] should not be followed,” he said. “There’s no immediate fear of any security escalation. The main question is: In the long term, will we be ready for all scenarios?” Maj.-Gen. (res.) Giora Eiland, a former national security adviser, and a senior research fellow at Tel Aviv University’s Institute for National Security Studies (INSS), said, “There’s a reasonable chance that if a revolution takes place in Egypt, the Muslim Brotherhood would rise to power. That would be bad not just for Israel but for all democracies.”...MORE

HT: to Next Big Future from whom I swiped the headline as well as the link.

From Debka (I know, but they do have good sources):

The possibility of the military taking control of the regime on the back of the popular uprising to end Hosni Mubarak's 30-year rule was actively discussed Friday night, Jan. 28, after security forces failed to control anti-government riots for four days. Protesters in Cairo, Alexandria and Suez ignored the nationwide curfew imposed until 0700 Saturday and the soldiers who were called in to enforce it held their fire. Protesters overturning and burning security forces vehicles welcomed the military APCs.

The transfer of rule to the military even for an interim period would shake the entire Middle East to its foundations.  The US stands to lose its senior Arab ally, whereas a new government in Cairo might modify or abandon Egypt's epic 1979 peace treaty with Israel and turn away from the close relations between the two governments.
debkafile reported earlier:

Egyptian protesters tried to storm the foreign ministry in Cairo Friday night, Jan. 28 in defiance of nationwide curfew imposed on the capital, Alexandria and Suez, until 0700 hours Saturday. President Hosni Mubarak called in the army to back the security forces facing swelling numbers of protesters and enforce the curfew. Gunshots were heard near the parliament and thousands of protesters remained out in the streets. At least 10 people were killed and more than a thousand wounded in Cairo during the day. In Suez, 13 are reported dead, 75 injured.

The protesters later set fire to parliament, the national museum and the ruling National Democratic Party whose offices were later looted.

Some soldiers and policemen instead of confronting the rioters reportedly shed their uniforms and joined them....MORE

Also at Debka:
Muslim Brotherhood joins Egyptian protesters. Three cities locked down

Oil: Why Cairo Counts in the Crude Market

Last I saw the futures were up $3.70 at $89.34.
From MarketWatch:
Cairo contagion 

Commentary: Riots expose regional fragility that worries oil traders

While the world is glued to live coverage of running street battles in Cairo, oil prices are nervously edging ever higher. There are good reasons for that.


Egypt is not a major oil producer. It pumps less than a 700,000 barrels a day, and while that number is expected to grow as exploration pushes further offshore, the political turmoil in Cairo poses little threat to global supplies. That supports the notion that the 4% jump Friday in the price of crude oil is driven more by speculation than fundamental market concerns.

But there are other concerns tied closely to the transportation of oil.

The Suez-Mediterranean pipeline system runs along Egypt’s Suez Canal, linking the Gulf of Suez to Sidi Kerir on the Mediterranean. The line can carry up to 2.5 million barrels of oil a day, most if it bound from the Persian Gulf to Europe’s refineries.

Like the narrow Hormuz Strait that the world’s supertankers sail through when leaving the Persian Gulf, the Sumed pipeline is one of those transit choke points oil traders like to fret over. The heightened threat of sabotage to such a key line really makes them fret.

The Sumed line is fed by tankers arriving from the main oil export terminals of Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates. These four, along with Egypt, also own the line through a partnership called the Arab Petroleum Pipelines Co....MORE

What's Moving: Umm, About Those Emerging/Frontier Markets...

Here's Tickerspy's list of their indexes with the largest percentage declines:

1-Day Losers

View All

Broad Emerging Market ETFs		-7.7%	track
Broad International Market ETF...		-6.3%	track
Single Country Emerging Market...		-5.8%	track
Trucks and Auto Stocks		-4.6%	track
Single Country ETFs		-4.3%	track
Stem Cell Stocks		-4.2%	track
Chinese Advertising Stocks		-4.2%	track
Bill Collector Stocks		-4.1%	track
Airline Stocks		-4.1%	track
Auto Part Stocks		-4.1%	track
View All 1-Day Losers

Re-post: Top 50 Nanotech & Biomaterial Blogs

First posted January 13, 2010.
Nano is one of the reasons we believe this secular bear market, which we date from the NASDAQ's March 2000 5048 closing high (currently 2302), will be shorter than the previous secular bear about which we commented on April 13, 2009*:

...We may have already emerged from the CYCLICAL bear market. One definition is a 20% up move that follows a 20% down move. I've never cared much for hairsplitting on the shorter moves. Secular moves are different. Regarding the secular bear market from 1966 to 1982 ('64-'82 depending on your pick of mid-sixties market tops) Warren Buffett comments:

December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00
“Now I’m known as a long-term investor and a patient guy, but that is not my idea of a big move.”
-Warren Buffett

From HealthTechTopia (MastersInHealthInformatics):

Technology is providing interesting opportunities to advance our knowledge of science and improve our lives. Indeed, technology is shrinking down to the nanoscale, putting objects and devices at up to one billionth of a meter in size. That is amazing, and it means that scientists are working on projects at a scale so small that they are working with molecules and even atoms in some cases. Nanotechnology is providing the potential for a number of new discoveries and breakthroughs, including in materials. New materials are being discovered regularly, including biomaterials that have some amazing potential. Here are some of the top nanotech and biomaterial blogs around.

Nanotechnology

Learn about what is happening in the world of the smallest machines. Interesting breakthroughs and fascinating science.

1. Soft Machines: This blog focuses on thoughts related to the future of nanotechnology, looking at where we are and where we might be going.
2. Responsible Nanotechnology: A look at developing nanotech in a way that is more socially responsible.
3. blog nano: Looks at what is happening in the world of nanotechnology.
4. Next Big Future: A look at what our future could look like, with the help of nanotech.
5. The Foresight Institute: This blog looks at explaining the transformative technology that is nanotech.
6. Nanotechnology Today: The latest information and news related to nanotechnology and more.
7. Nanotechnology Development Blog: Learn about how nanotech is developing and read about the latest breakthroughs.
8. Nanotechnology Now: News and information related to nanotechnology and related developments.
9. Nanotechnology News and Information: Just what it sounds like, this blog features the latest in news on nanotech, as well as jobs in the field.
10. Nanotech Buzz: Get the latest news and happenings in the world of nanotechnology.
11. Nanotechnology Law Blog: An interesting look at legal issues surrounding nanotechnology.

And 39 MORE

HT: Al Fin
*If you think that was good timing how about a March 5, 2009 (four days before the market bottomed) post, "I Wanna Be Sedated: Top Strategists Still Expecting a 46% Gain From Here":

There is historical precedent. After the 89% decline to the 1932 bottom the DJIA better than doubled in a year (via Gold-Eagle)...
...And there have been a fair number of 50% rallies over the years....

Or this series:

March 1, 2009
Marc Faber: Stocks Poised to Rally

March 10, 2009
Marc Faber: More Boom, Less Gloom and Doom

March 10, 2009
S&P 500 5% Days

...I'll go with Faber on the timeline, at least three, maybe six weeks before we see a change in direction, i.e. more than a one day move....

March 13, 2009
Markets: Where Do We Go From Here?

On Tuesday I said "I'll go with Faber on the timeline, at least three, maybe six weeks before we see a change in direction, i.e. more than a one day move.", referring to Marc Faber's comment:

“Equities could rally between here and the end of April,” Faber said. “The government’s efforts will fail to boost economic activity. They can boost stocks. Stocks have adjusted meaningfully.”

Faber thinks the rally will likely be short-lived, saying that after the March to May rally, the S&P 500 could drop 27 percent to below 500. But on a long-term perspective, he sounded very bullish, saying investors will make money over the next 10 years....MORE

Using the low I.Q. approach* to investment analysis, refined by yours truly, while we will have some down days in the next two weeks, the trend will be up.
Then come the first quarter earnings reports and the crystal ball gets a bit cloudier....

I wasn't bullish enough but the fact is, if you recognize the turning point and are on the right side of the move it's easier to extend the time-frame and raise the target than it is to get on the right side in the first place.
The timing accuracy was, of course, just informed luck, but the great thing is: the market pays luck the same as it pays skill.

Soros: Authorities Terrified

From Economic Policy Journal:

In an interview out of Davos, Switzerland, George Soros told FT that authorities are terrified over the financial situation in countries like Ireland. The oligarch spoke up for "the people" in his remarks and said that it is "blatantly unfair for the people [of Ireland] to absorb all the losses" in Ireland, while bond holders go free. He said this is causing fear among authorities and it is why an EU emergency fund must be said.

Not mentioned by Soros is the fact that an emergency fund would result in further EU control over "independent" EU nations.He also failed to mention the fact that an emergency fund would simply spread the cost over entire EU population, rather than only the populations in the countries with the debt problems. As for objections from the German people about bailouts, the master manipulator said the German people "were coming along"....MORE 

Also at EPJ:
$900 Billion Child Support Suit Against Rapper Diddy

"Argus Upgrades General Electric to Buy" (GE)

In late pre-market trade the stock is up .60% at $20.40.
A quick hit from StreetInsider:

Shares of General Electric (NYSE: GE) are trading only modestly higher this morning despite an upgrade from an analyst at Argus Research. With more than an hour left in pre-market action, GE shares last traded at $20.34, up 0.3% from yesterday's close....

"Analyst: This Time, Uranium Demand Is for Real" and The Reformed Broker's Uranium Bet (CCJ; PDN.tsx,asx; URA)

...Words like "uranium", "rare earths", etc. seem to be magic to

 those unsuspecting who are often fleeced...

Gerald M. Loeb

The Battle for Investment Survival

Simon & Schuster, 1935

URA is the GlobalX Uranium ETF, rolled out last November.
CME's GLOBEX has some  U308 swap futures, you probably don't want to take delivery.
Here's a twofer. First up The Energy Report:

Mining Analyst David Talbot of Toronto, Ontario-based Dundee Securities, sees demand for uranium rising far into the future. He points to the extraordinary buildout of infrastructure in India, Russia and especially China, where the number of reactors currently under construction could triple the number already in use, and where growth could increase 14- to 15-fold a decade from now. Dave shares his extensive knowledge and field experience with The Energy Report and leaves readers with a few interesting ideas that present tremendous potential for growth.

The Energy Report: Your list of buy ratings wouldn't be this broad if you weren't still bullish on the spot price of uranium. Are you bullish? If so, what factors are causing you to be?

David Talbot: Yes, I am bullish on the spot price of uranium. I think it's all about demand this time. I believe that in the past, investors were essentially focused on supply disruptions as the driver for uranium prices. This time around, I think the demand fundamentals are strong and people are paying attention to that. If you take a look at the trendlines of the number of reactors that are in operation and that are being planned, built and proposed, this continues to rise month after month without exception. If you look at China, India and Russia alone, these three countries account for about 50% of the reactor build. China currently has 13 reactors in operation, which is about 2% of their electrical production capacity. But it has 27 reactors that are under construction, 50 in the planning stages, and it has plans to grow that number to about 188 reactors by 2020, which would represent about 7% of its electrical production capacity. This could essentially increase the country's uranium use from its current annual 8 million pounds (Mlb.) to about 45–50 Mlb., which is roughly equal to what the U.S. uses today.

But the story doesn't really stop there. Russia's goal appears to be nuclear power domination, and the country is essentially signing high-level trade agreements with foreign governments. Russia also went after Uranium One Inc. (TSX:UUU). Also, countries like Japan and Korea are building out their nuclear power efforts. So, we believe this access to supply is going to become a real concern for many and that uranium prices are likely to continue to rise. I'm assuming $65/lb. U308 price for 2011, $70/lb. next year, $75/lb. for 2013, $67/lb. in 2014 and $65/lb. thereafter.

TER: Uranium bounced along a $40/lb. baseline for a long time, and during this last six months we've seen an amazing increase in price. Have you seen such a spike before?

DT: I would have to say that the increase in 2006–2007 was probably a larger spike. At that time, the uranium price essentially jumped from $40 to $136 within a year's time. Then, everybody was looking at the spot price. Well, in 2007 spot trading was only about 20 Mlb., or only 8% of the total volume of uranium trades. This time around I think it's a little different. The spot market is much, much bigger—about 50 million pounds, which represents about one-third of the entire market....MUCH MORE

And from The reformed Broker:

My 2011 Uranium Trade

Before reading another word, please ask yourself if you're capable of being an adult and not just blindly trading based on what's written here.  Nothing on this site should ever be considered a blanket inducement to make investments.
OK, now that the children are gone, we can continue.


Last night on Fast Money, I mentioned Cameco (CCJ) for the Final Trade segment.  It's a fairly big name but many of my friends on The Street pinged me to say they'd never heard of it.
I'm going to give you some insight into why I've gotten extremely bullish on the Uranium Trade for 2011.  Please keep in mind that any opinions expressed here are subject to change without notice and that I'm not your advisor or broker - I am simply giving you some background on a theme I'm very excited about.
Before I talk stocks, I want to give you some background on the supply/demand picture for uranium itself, because the setup here is delicious.  We'll let Barron's Roundtable legend Felix Zulauf do the talking first, this excerpt comes from his 2011 outlook in which uranium played a starring role:

My next recommendation is in energy, because the rise of emerging economies also leads to rising energy demand. Electricity demand probably will double in emerging markets in the next 20 years. I would buy uranium. It is used to power nuclear plants, and it is used for medical diagnoses and research. There are 441 nuclear reactors operating in the world. They require 185 million ounces of uranium per year. There are 331 proposals to build new reactors. Fifty-eight new reactors are under construction, up from 52 a year ago, and 148 reactors are planned, including 110 that will come onstream in the next 10 years. Twenty reactors will be shut down. The demand side looks solid for many years.
Uranium production is growing, but slowly. Annual production is 47,000 tons. It meets only 60% of demand; the rest is met from utility stockpiles or decommissioned nuclear weapons. Production will increase over time, but it could take 10 years or more until it is sufficient to meet demand.

Uranium prices have soared to the $68 per pound level on the recognition of a few things....MORE

Recently:

General Electric Asset Management Buying Uranium Producer's Shares Open Market (GE; PDN.asx)
  
Uranium Prices Surge on China's $511 Billion Investment in Nukes (BHP; CCJ)

Caterpillar Worries About Central Bankers, Global Divergence (CAT)

They do get an ground level-view of things.
From Real Time Economics:

Caterpillar is out with its fourth-quarter earnings today and, as is its custom, the company  offered its extensive forecast for the world economy.

Cat’s two big worries: Trigger-happy central bankers and tensions over currencies and trade provoked by the divergence in the pace of growth between emerging markets and developed countries.

On the first: “We are concerned that central banks in the developed economies may begin tightening economic policies too quickly. Modest interest rate increases in both Australia and Canada, two of the stronger developed economies, quickly caused some weakness in construction indicators. The larger, more fragile economies would likely react even more unfavorably to significant economic tightening… The European Central Bank has voiced concern about inflation, but the European debt crisis may limit its ability to tighten policy.”

On the second: “World economic recoveries have diverged, disrupting the consensus on economic policies that developed early in the financial crisis. Policy differences are creating trade and currency tensions and increase the potential for trade frictions.”
Some other highlights:

Industrial production: Output “is recovering throughout the world but has not returned to pre-recession levels in most countries. We believe that incomplete recoveries in industrial production, coupled with high levels of unemployment in many countries, indicate that the world economy has capacity for above average growth. We anticipate that economic growth in the developing economies will moderate from 7% in 2010 to about 6.5% in 2011.”...MORE

The Grass is Always Greener....

"Presenting The Companies Most Exposed To A Slowdown In Government Spending"

If I were upper management at some of the companies receiving 100% of revenues from government, I'd be a bit concerned.
From ZeroHedge:

Following the release of the yesterday's revised CBO projections, we, together with anyone with half a brain, were stunned by the ridiculous assumption that somehow the US government can grow its revenue by 50% (!) in the span of 3 years. Since absent a wholesale increase in taxes, which won't happen ahead of the Obama presidential elections, this has a snowball's chance in happening, the only recourse to the government is to cut spending. But where? Most major governmental expenditures are non-discretionary, yet spending has to be cut... Which brings us to the topic of this post: most likely the biggest sacrificial lamb will be companies on the dole of not only the US government, but certainly foreign governments (where unlike in the US, austerity is rampaging without mercy). Courtesy of data prepared by Lehman's Mark Rothman we present the companies whose revenues are comprised at least 50% of sales to governments, both foreign and domestic.
Rothman explains:

In this note, we highlight the companies that are most at risk in a broad scope to slowdown in government spending. Specifically, we list 127 companies [TD: we present just the top 78] within the Russell 3000 that have the largest part of their revenues derived from U.S. government sources.

This data is culled from the recent annual revenues released by the companies. In these annual filings, companies are required to list all customers that account for over 10% of their annual revenues and the amount of revenues that they derive from each of these customers. We have searched for all government sources, separating out revenues from foreign governments, the U.S. federal government, state governments and local municipalities.

As shown in Figure 1, the companies are concentrated within Industrials (50 companies), Health Care (46 companies) and Technology (24 companies) sectors. As further broken down in Figure 2 to the Industry Group level, we find a preponderance of companies within Capital Goods (44 companies) and Health Care Equipment and Services (41 companies) and a tailing off into Software (12 companies) and Technology Hardware (11 companies).

Obviously, the degree of risk for each individual company is a complex matter that must be studied carefully on a case-by-case basis and our work here is best used as a starting point for that analysis. Nonetheless, we do believe the companies shown in Figure 3 do represent names where revenues may be at risk should a material cut in government spending materialize....THE LIST

Lockup Period for Tianli Agritech, Inc. IPO Ends (OINK; GS)

Tianli, a major Chinese hog processor did a mini-maxi IPO at $6.00 in July. The company was able to sell the maximum 2mm shares and has been using the proceeds to buy hog farms, here's the news release on their 10th.
The lockup period ended at the close yesterday but as the stock. at $5.60, is below the IPO price the market doesn't seem too concerned.

Speaking of high-on-the-hog, fat-and-sassy types we have this from the link-vault:
From the PigSite:

Chinese Pig Farms Bring Home Bacon for Banks

Zou Changkui, a 59-year-old pig farmer from the southern Chinese city of Longyan, is waiting for a call from Goldman Sachs that will change his life.

"I heard they have bought a lot of pig farms in Nanping, but they have not approached me yet," he said. But he has not lost hope. "If they want to buy my farm, I would say yes - providing we have a win-win agreement."

The US investment bank has sent ripples through the Chinese pork industry after reportedly spending between £150m and £200m this month on a series of hoggeries in Fujian, Jiangxi and Hunan, the heart of China's green belt.

It may be an unorthodox investment, but Goldman Sachs is not the only major bank on the hunt for hogs. Last year, Deutsche Bank launched the DWS Global Shennong Fund specifically to invest in agriculture.

Jiang Hua, the chief executive of Hongbo, an enormous Shanghai-based pig farm, said the German bank wanted to buy a 30 per cent stake for £30m. Deutsche Bank is reportedly spending a similar amount for a slice of Baodi, a Tianjin hoggery....MORE

Scrap Metal Cowboys (SCHN)

Schnitzer stock is trading at $61.73, about 11% below its 52-week high. During the 2008 commodity madness the stock traded over $110 before collapsing to $22.
Action baby, action.
From InfectiousGreed:

The following is a co-post, researched and written by Paul Kedrosky and Gregor Macdonald.

Schnitzer Steel of Portland, Oregon reported record revenues earlier this month. No surprise. The recycled-metal giant, which has roots going back over 100 years to the Alaska Junk Company, is uniquely positioned for the ongoing commodity supercycle. With iron ore, copper, and a selection of other metals now exceeding their 2008 price highs, the demand for salvaged metal is soaring. 2011, so far, pressages more of the same as the worst copper deficit since 2004 is set to unfold over the next two years. With production from mining under pressure, industry will have to turn increasingly to scrap.

The world of salvage and scrap is filled with memorable images. In Sebastaio Salgado’s classic series of photographs, human shipbreakers attack hulks on the warm beaches of Chittagong, Bangladesh. A load of chopped-up American junk from tools to kitchen blenders, resembling a dirt pile, heads out to sea from the port of Los Angeles. Upon arriving in Guangdong Province it will be transformed into appliances for export, starting the cycle all over again. There is even the legendary portrait of a central banker (Alan Greenspan), sitting in his bathtub and scanning the latest price reports for No. 1 Heavy Melt Steel Scrap.

Scrap is an essential part of industrial civilization. We buy stuff; we scrap stuff. As Robin Nagle, the New York City Department of Sanitation’s anthropologist-in-residence, recently said, “Every single thing you see is future trash. Everything.” The question, in other words, isn’t what is scrap – everything is – but what we do with it all, and what that says about us. Do we toss it into landfills? Do we recycle it? Do we send it others, or do we do it ourselves?

We can get part of the answer from the illegal drug market. Of all the parts of the economy touched by scrap, among the most surprisingly instructive is this one. Why? Because as any narcotics officer or addiction counselor will tell you, a primary source of capital for the drug addict is found by rummaging (or stealing) discarded metal. The word junkie actually goes back to the early years of the 20th century, when heroin addicts turned to scrap to finance their habits.
In John Seabrook’s absorbing 2008 New Yorker essay, American Scrap, he references the connection between metal-theft and drug dealing operations, noting that:

….hot spots of crystal meth abuse—Hawaii, the Southwest, San Diego, Oregon, and increasingly the rural Midwest and South—map to hot spots of metal theft.” One of the conditions of a meth high is extreme focus, which is just what you need to unravel lengths of copper wire from a tightly corded braid of other metals. Not only does meth give you the patience to do the job but the reward—money for more meth—is right there in the metal.

Others have learned from the junkies’ focus. In 2008 during the last bull market in global metal and steel prices, the FBI produced a report titled: Copper Theft Threatens U.S. Critical Infrastructure. Don’t laugh....MORE

Rich Economists: "Paul Samuelson's Secret"

We've looked at Keynes in "Keynes The Money Manager" and "John Maynard Keynes: Money Manager (Couldn't Trade Lard to Save His Life)".

We saw David Ricardo's Golden Rules of investing in "Investing Tips from the World's Richest Economist" and "HOW THE RICHEST ECONOMIST IN HISTORY GOT THAT WAY"

Today we'll look at Nobel Laureate Paul Samuelson. From economicprinciples.com:

The last two volumes of Paul Samuelson’s collected papers appeared this month, edited by Janice Murray, his assistant for twenty years. As far as I can tell, the only mention of Commodities Corp. to be found anywhere in the seven volumes appears in the final one, in the last serious piece he ever wrote, which appeared originally in Volume 1 of Annual Review of Financial Economics, two years ago, at a time when PAS knew full well he was slipping out the door.  (He died in December 2009.)

“I skip here my long years as activist charter investor and Board of Directors member for Commodities Corporation of Princeton,” he writes in “An Enjoyable Life Puzzling over Modern Finance Theory.”  “Space does not allow me to go into that intricate story.”

Somewhere, in the letters, perhaps, or in interviews with various colleagues that were taped and tucked away, further details of a great case study may be waiting for a scholar. Then again, maybe not.  Samuelson left his share of loose ends. Reflections on his  role in Commodities Corp. may be among them.

A good thing, therefore, that in the meantime we have “Paul Samuelson’s Secret,” chapter three in More Money Than God: Hedge Funds and the Making of a New Elite, Sebastian Mallaby’s very interesting book about the origins and recent history of the hedge fund industry.

It turns out that the great MIT economist was influential in the creation of one of the earliest and most influential hedge funds. Launched in 1970, Commodities Corp. blazed a trail of extremely high returns throughout the 1970s and early ’80s, before disappearing in various pieces into Bermuda mailboxes and Goldman Sachs.  Many of its star traders – Bruce Kovner of Caxton and Paul Tudor Jones, chief among them—formed successful hedge funds of their own. Samuelson thus had a ringside seat at the birth of an influential industry that is still only poorly understood.

About the same time, he invested a substantial amount in shares of Warren Buffet’s Berkshire Hathaway Inc. It was in 1970, too, that he won the Nobel prize in economics, the second to be awarded. Long famous for the fortune that his pioneering textbook earned him after 1948, it turns out that Samuelson may have made more money as an investor than as an author. He was both smarter and richer than is generally understood: as an investor, a bigger winner, perhaps, than the more volatile John Maynard Keynes.
.                                         xxx
In 1965, Samuelson published a version of the efficient-markets hypothesis — a world in which all reliably predictable events are priced right, and only surprises would remain; there would be no easy pickings on Wall Street. About the same time, Eugene Fama published his own formulation, and the idea that stock prices were properly described as  a “random walk” – that  it was all but impossible to outperform the market — was on its way to becoming firmly established.

Not that Samuelson himself took the finding literally. He later explained, “Experience makes me think that a few folk do have an intuitive flair for making money by sensing patterns of momentum.” Others, he said, are good at “figuring out which fundamentals are fundamental and which new data are worth paying high costs to get.”
But the services of such wizards, when they could be found, would not come cheap, he warned. And even the hottest hand would sometime turns cold.  Someone proposed an experiment to Samuelson – Mallaby doesn’t say who – and the idea of Commodities Corp. was born. As one of two original venture investors, Samuelson put up $125,000 – real money back then.

The key figure was F. Helmut Weymar, whose prize-winning thesis on predicting cocoa prices Samuelson had supervised a couple of years before, along with MIT finance professor Paul Cootner. “I thought random walk was bullshit,” Weymar told Mallaby for More Money Than God.  “The whole idea that an individual can’t make serious money with a competitive edge over the rest of the market is wacko.”

Weymar had gone to work for Nabisco, buying its cocoa beans. After some signal successes, he and Frank Vannerson, a Princeton PhD who specialized in predicting wheat prices for Nabisco, decided to go into business on their own. After talking to Samuelson, they raised $2.5 million, including the economist’s five percent, and, opened for business in a bucolic Princeton farmhouse with seven professionals (including Cootner) and six support staff....MORE

For those so inclined, MIT has put Mr. Weymar's dissertatation "The dynamics of the world cocoa market" online. It is a big 'ol PDF and, I must say, much drier than Warren Buffett's story of the cocoa bean/common stock arbitrage:

...For several weeks I busily bought shares, sold beans, and
made periodic stops at Schroeder Trust to exchange stock
certificates for warehouse receipts. The profits were good
and my only expense was subway tokens....

From our post "Living La Vida Cocoa: Warren Buffett, Berkshire Hathaway and the Chocolate Wars (BRK.A; BRK.B; CBY; KFT; HSY)".

"Inflationary Thursday – Dow 15,000 + $5 Will Get You a Happy Meal" (except in San Francisco)

I like the headline as much as anything.
[the S.F. reference is his, he's so proud -ed]
From Phil's Stock World:

Are they rioting in Africa?
 
Check – they are rioting in Africa!  Toppling governments in Tunesia?  Check, government toppled.  Riots and demonstrations also in Albania, Belarus, Jordan, Libya, Lebanon, Ireland, Egypt, Yemen, Zambia…  Even the British Royal Family attacked in their limo after being booed and jeered by a mob chanting "off with their heads."

If nothing else disturbs you while you buy your NFLX today – that last one should.  Rich folks in an industrialized nation trying to go to the theater in their limo and being attacked by an angry mob.  How long before we (in the top 1%) need to armor our cars and hire bodyguards?  Is this part of the Fed’s plans to create jobs – make the top 1% so much richer than the bottom 99% that we’ll need to hire guards just to go shopping at Whole Foods as we drive past the bread lines?

“We’re in an era where the world and nations ignore the food issue at their peril,” World Food Bank’s Josette Sheeran said in an interview yesterday at the agency’s Rome headquarters. Risks of global instability are rising as governments cut subsidies that help the poor cope with surging food and fuel costs to ease budget crunches....MORE including a link to this CBS OpEd:

2011: The Year of Living Dangerously
Michael T. Klare: Rising Commodity Prices and Extreme Weather Events Threaten Global Stability