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POTPOURRI

With this being the last Market WrapUp I write before we enter the month of March – I felt it appropriate to take a look ahead, because the month of March has the potential to be one of the most memorable [for a host of reasons] on record. In the words of Michel de Chabert-Ostland, chief trader at Royal Palm Trading – there’s a convergence of some very important events occurring this month:

March 6: IAEA meeting on nuclear issue with Iran. Could precipitate a move to the UN Security Council for sanctions. Iran has warned, for some time, that sanctions could have adverse effect on the world community ( read withdrawal of oil for exports ).

March 8: OPEC meeting. Venezuela and others are pushing for a cut in production by OPEC.

March 9: US Trade Deficit

March 15: TIC report ( net purchases of US assets by foreigners ) for January. The previous one fell way short of financing our trade deficit. Another poor report on this front could well put the US dollar under considerable pressure.

March 20: Iran to open a new oil bourse ( exchange ) on which countries all over the world can buy and sell oil and gas in Euros. It also establishes a new oil " marker " based on Iranian crude and denominated in Euros, in open rivalry to the existing West Texas, Norway Brent and UAE Dubai markers, all of which are calculated in US dollars. It should be obvious that if the bourse opens as planned that it would reduce considerably, over time, the need for dollars by all the Eurozone countries. Russia has already moved in this direction.

March 24: M3 no longer being reported by the Fed - we all know why.

March 27/28: Fed meeting on interest rates. Markets presently give it almost a 100% probability of an increase of 25 basis point on Fed Funds to 4.75% - we'll see what happens between now and then. I predict that if we go to 4.75%, that will be the last rate hike for this cycle.

Unknown date: From the reports I have received, it seems that there is a good chance that the SEC will decide on the silver ETF in March. I believe it will be a huge success whenever it is launched.

In addition to the above, anecdotal evidence suggests that the Chinese yuan is set to rise at a faster pace against the dollar. This past Friday it reached a recent high of 8.043 yuan/dollar. This would be very gold and silver friendly.

Then, we have Iraq in total chaos with the American forces as bystanders ( taking casualties every day ), completely unable to control the direction of events unfolding there. When you can no longer shape the political denouement, I would say that you have lost control ( not that we ever had it ).

The attempted recent attack on oil installations in Abqaiq, Saudi Arabia is certainly a precursor of more to come.

Other Wild Cards

In addition to the above, there’s a number of other potentialities “hanging” in the background. The month of February saw the penning of two very important critiques of our current global monetary system/situation:

            1] - The Cheuvreux Report

            2] – Hon. Ron Paul’s The End of Dollar Hegemony

I consider both of these works as not only essential reads - but landmark pieces which have still not gained significant traction in the main stream press. With the events that potentially could unfold in March – could the two items above gain the traction they deserve?

Minding Our P’s and Q’s

Also simmering on the back burner – on the domestic front – still fresh in everyone’s mind is Plame-gate, quail-gate and the other mega bird story – Avian [bird] Flu.

Another Bourse of Course?

As if the controversy surrounding Iran and their proposed oil bourse is not enough, it seems the Norwegians seem intent on entering the fray,

Norwegian Bourse Director wants oil bourse - priced in euros
by Laila Bakken and Petter Halvorsen

Bourse Director Sven Arild Andersen is fed up with Norwegian oil having to be traded in London and wants to have a commodities and energy bourse in Norway.

The Bourse Director believes that Norway already has the prerequisites for building up a Norwegian or Scandinavian energy bourse.

"This would in such case compete with the bourse in London. Why not have the ambition to outcompete the British petroleum bourse," says Sven Arild Andersen.

"Here, you could trade crude oil, natural gas contracts and establish derivatives for these products."…..

Seems to me, someone might want to explain to the Norwegians that such talk could land them in a whole heap of trouble.

Sneak Peak At Peak Oil – A Year Later

This past week, Tom Whipple penned a piece about Peak Oil – titled, The Hirsch Report - One Year Later. The piece serves as an executive summary of the peak oil situation and provides great links to the Hirsch Report and associated commentary.

Looking On the Bright Side

Because the proverbial glass is not always half empty, at least we can all smile and take solace that the government continues to report that the jobs picture is robust, inflation is low and empirically the stock market continues to exhibit a positive trajectory – namely UP. It’s not till we stop and consider why the stock market is rising – in large part due to another one of the Fed’s massive “liquidity daggers” – that we temper our enthusiasm:

           
Chart Compliments of: Stephen L. Hulme

Today’s Market

Overseas equity markets began the week on a positive note with Japan’s Nikkei Index gaining 91 points to close at 16,192. Meanwhile, North American Markets also began the week on a positive note with the DOW up 35.70 to 11,097.55, the NASDAQ up 20.20 to 2,307.20 and the S & P closing at 1,294.10 – up 4.65 on the day. NYMEX crude oil futures dropped close to $2 – ending the day at 61.00 per barrel.

Foreign exchange markets were relatively quiet with the U.S. Dollar Index gaining .02 – closing at 90.60.

In the interest rate complex the yield curve remains steeply inverted with the benchmark 2-year note yielding 4.73%, 5-year at 4.65% and the 10-year yielding 4.59% at day’s end.

Precious metals sold off with COMEX gold futures losing 3.80 to 555.50 per ounce while COMEX silver fell .07 to 9.66 per ounce. The XAU dropped 4.84 to 135.67 and the HUI gave up 11.40 – closing at 309.27.

On tap for tomorrow, at 8:30 a.m. the Bureau of Economic Analysis [BEA] is due to release preliminary Q4 [05] GDP – expected 1.6% vs. prior 1.1% along with the Chain Deflator – expected 3.0% vs. prior 3.0%. At 10:00 a.m. February Chicago Purchasing Manager Index data is due to be released – expected 59.0 vs. prior 58.5.  Also at 10:00 a.m., the Conference Board is due to release February Consumer Confidence data – expected 104.0 vs. prior 106.3. Finally, at 10:00 a.m. the National Association of Realtors is due to release January Existing Home Sales – expected 6.60M vs. prior 6.60M.

Wishing you all a pleasant evening and a prosperous tomorrow, and I look forward to reporting to you next week from the PDAC convention in Toronto.

Rob Kirby

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