Capital Chronicle

Summer in the Midi

2008-07-18T18:07:00.005+02:00

From 21 July, a two week writing gap/cellar refill down by le Canal du Midi.

Emperor Coccyx's Old Clothes

2008-07-18T10:12:00.013+02:00

Amazing scenes as Mr Cox announces "new" rules aimed at naughty short sellers. These bear remarkable similarity to "old" rules announced in June last year.

Naked shorting should not be allowed - that is clear. If the SEC are so sure of their audit showing larger floats than issued stock then there are grounds, it would seem, to take action. There are also bear squeeze opportunities going a begging - albeit difficult ones to take advantage of.

On the other hand, if market participants just think, for some odd reason, that financials do not look a great place to be, the regulator is on a political justify-our-existence romp just as the proverbial is being blown off the fan. And a decent portion of shorting (legitimate or otherwise) will probably shift into the options and CFD markets simply on the back of the bureaucratic and administrative confusion Mr Cox's intervention is generating.

There is the greater question of Fannie and Freddie - and by implication systemic dangers - which Mr Cox referred to directly in his testimony. But highlighting his agency's inability to enforce its regime or targeting "rumour mongers" (brilliant) is not any solution to the spawn of excessive leverage.

The diary of Jérôme Kerviel

2008-07-15T13:01:00.010+02:00

Livres Hebdo (sub required) have announced the release for 8 September of:

Sample extracts:

"Tomorrow I’ll take it easy. I’ll place 200 million on a Death Index tracker backed by either a future, a warrant or maybe an interest rate swap. It all depends on how my concierge greets me in the morning. If he says “Not at all hot for summer”, I’ll buy the upside on the DAX for 20 billion. Otherwise I’ll bet on a drop."

7h21 : The moron. He said “I put my heating back on” What do I do? Compromise and I could lose 10 billion. The guy just doesn’t realise that with these guesstimates France could lose a quarter point of GDP growth. It's always the same with the man in the street – a lot of talk, a lot of complaining but when it comes to decision making, then there's nobody home.

If it's got you in stiches pre-order it from FNAC here (in French only).

Hat tip: www.apprendrelabourse.org

July Zew quotes

2008-07-15T12:16:00.006+02:00

"On the one hand, repeatedly decreasing incoming orders indicate that Germany''s momentum will loose steam in the next six months. On the other hand, continuing price increases for energy and food are reducing the purchasing power of consumers. Furthermore, loan conditions for companies should worsen as a result of the financial market crisis and the expected interest rate increase by the ECB." (ZEW press release)

"The expectations of the financial market analysts are strongly influenced by the current forecast of a weaker economic momentum in 2009." (ZEW President Wolfgang Franz)

"The upswing will lose significant drive in the coming 12 months." (Germany's Chamber of Industry and Commerce)

"Leading indicators point to much worse news ahead on the manufacturing side of the euro-zone economy, including more recently in Germany. As a consequence, the risk of a recession is increasing and, unlike the previous downturn, monetary policy isn't going to come to the rescue." (BNP Paribas economist Luigi Speranza)

"Germany is on the verge of falling back into its old weak growth pattern. For 2009, we see a notable trough in economic growth looming." (BDI Federation of German Industry's managing director Werner Schnappauf)

"The data is really quite shocking. The mood among the analysts has dropped close to freezing point." (DekaBank economist Andreas Scheuerle)

"The strong increase in the price of oil is the deciding reason for the worsening outlook." (Commerzbank analyst Matthias Rubisch)

With crude at $138, some EU27 energy dependency ratios...

2008-07-10T16:00:00.005+02:00

With crude pushing $138 as I write, this fresh in from Eurostat this morning (2006 data being the latest available):

See? The UK does have at least something economic going for it. Sort of.

Nota bene, from Eurostat: "The energy dependence rate is defined as net imports divided by gross consumption, expressed as a percentage. Gross consumption is equal to gross inland consumption plus the fuel (oil) supplied to international marine bunkers. A negative dependency rate indicates a net exporter of energy. A value greater than 100% occurs when net imports exceed gross consumption. In this case, energy products are placed in stocks and not used in the year of import."

Official: FNAIM declare French property an asset class immune to the credit crisis

2008-07-10T11:41:00.010+02:00

Previous entries here covering French property prices as scored by the Fédération Nationale de l'Immobilier (FNAIM) have had an incredulous tone at the accompanying sanguine commentary of the organisation. Their latest quarterly missive treats readers to this claim:

"The idea that there are direct risks of contagion to the French property market from the year-old US subprime crisis well deserves rejection. Indeed, the mechanical selling obliging US households to take losses on their homes against a backdrop of collapsing prices, oversupply and reduced demand has not spread…However, the financial and stock market crises which have since broken appear to have definitely affected the health of the property market." (page 1)

This finesses, somewhat, prior more bellicose rejections. And, leaving aside the curious question as to where, according to the FNAIM, the current financial crisis originated, the declaration (unlike previous ones) seems to be actually supported by the numbers: the Q1 drop of –1.0% has been all but annulled by a Q2 rise of 0.9%.

This, say the FNAIM, translates to an annual 2008 forecast of +1.7% (page 1). Or 1.6% (page 6). Or 1.5% (page 7). Whichever, in fact, of the convenient methods, frequently mislabelled, that the reader prefers.

One explanation for this unexpected rush of good vibe is that the FNAIM retrospectively adjusts its monthly data once the quarterly data is known. Which is, of course, an invitation to compare the monthly releases to the quarterly ones.

Exhibit 1: FNAIM monthly versus quarterly data

Funny, isn't it, that the FNAIM’s adjustments say the exact opposite in aggregate of the raw(er) monthly numbers. Even the year-to-date number, at minus 0.1%, can hardly be judged as confirmation of the monthly data’s equivalent.

It is not a shock, therefore, that some have already questioned the integrity of the June adjustment; and it does seem FNAIM have plenty of latitude in both the samples they take and the opaqueness of their statistical methods. It is, for example, notable that the monthly end May comparables are remarkably different in composition and magnitude (but not direction) to those of June.

Exhibit 2: FNAIM monthly data for May

Why these gaps and jumps are unexplained is testament to FNAIM’s close-chested calculations, biased commentary requirements and locked down databases. On the other hand, it may be that FNAIM have actually discovered an asset class that is immune from the credit crisis despite its reliance on credit.

However, deciding which data are more representative of reality requires only a survey of general conditions. Down between 3% and 5% in a year looks accurate. 'Adjusted' flat year-to-date and year-over-year is laughable; and it is surprising the President of the FNAIM, René Pallincourt, risks so much credibility so stating.

That FNAIM deny the straight line relationship between subprime, French banking write downs, credit scarcity and falling prices is their choice. But torturing the data to lend statistical weight to that remarkable logic is – euphemistically – disingenuous.

Related articles:
Immobilier : les clignotants passent au rouge, Paris résiste
Nouvelle prévisions de baisse des prix de l'immobilier
Réactions des économistes à la production industrielle
HSBC chiffre à 0,5 point la perte de croissance liée au retournement immobilier
La baisse revue à la hausse

Sources: FNAIM monthly data; and quarterly data

Subprime graphic: Big banks

2008-07-08T15:03:00.004+02:00

Neat overview from leMonde.fr entitled "Subprimes : 4 stratégies pour sortir de la crise". Looks more like 3 and a half; and that "Dépréciation d'actifs" graph will require an update sooner rather than later (c/f links below).

Bradford & Bingley shorters: feeling the feeling

2008-07-08T13:44:00.004+02:00

Brought to you by the Financial Services Authority:

Fox Point Capital 0.40% short (2 July 2008)
Marshall Wace, LLP 0.40% (27 June 2008)
Bridger Management, LLC 0.35% (22 October 2007)
Tiger Global Management, LLC 3.4% (on or before 20 June 2008)
Steadfast International, Ltd 0.842% (16 May 2008)
FIL Limited 0.25% (on or before 20 June 2008)
American Steadfast, LP 0.392% (May 27 2007)
Steadfast Capital Management 1.233% (February 29 2007)
Oceanwood Global Opportunities 0.455% (on or before 20 June 2008)
Odey Asset Management 0.28% (on or before 20 June 2008)
JGD Management Corporation 0.49% (6 June 2008)

Not quite 8.5% of the issued share capital. Shame be upon these manipulative abusers of rights issues so easily able to punch amazingly above their weight.

An aubade for Aubade

2008-07-08T12:29:00.011+02:00

Sunset, physically fit, long nights, leçons de séduction
and Aubade.

Salute the ladies of Saint Savin, Vienne.
Savoir faire, artists, therapists (even). But now sad.

Many others too. What now of Tigresse, Lotus, Verone
and the model to match?

Laid off, not even your regional president
Madame Ségolène Royale, doubtless quite mad

Could stop the the sun rising at the new factory in Tunisa.
Globalisation is not a fad.

Nor did voluptuousness make the break of day.
The new collections plus skinny are simply not up to scratch.

Lingerie française. Now made in the Maghreb.

FSA's near fanatical devotion to comedy does not do the trick for Bradford & Bingley

2008-07-04T09:54:00.029+02:00

Texas Pacific Group Capital (TPG) are abandoning the Blowhard & Bongley rescue. In the spirit of black comedy that now dominates the UK's financial sector TPG had this right of action written into the original deal should the Maestros in the Ratings Game lower B&B's credit worthiness.

Well, never an outfit to knowingly shun publicity, Moody's have done the trick. See? they can be hard, too. This is surely the death rattle for B&B in its current form.

But, meanwhile, the spotlight has turned (again) onto the Financial Services Authority (FSA). Many inquiring minds, most of them in the British Bankers Association, want to know WHAT THE ASS the FSA is going to do now about the short sellers who have infiltrated Moody's out of Crispin Odey's shop.

Unsubstantiated reports have BBA suprema Angela Knight alternately frothing at the mouth and plaintively asking anyone who will listen "Now who will protect the market from getting a false impression of the demand for our members' securities?" A spokesman for BBA member HBOS plc, commenting on condition of anonymity, said of the FSA Plan B "We weren't serious when we signed up for it. It was just a bit of a laugh, really. Expect Plan C presently."

For its part, having inadvertently carved a niche for itself with its recent disclosure regime as a friendly PR agent for short sellers (did the wicked, wicked Mr Odey get to regulators too?) the hour is upon the FSA to retool and let the word go forth that within their arsenal of regulatory devices are indeed the weapons of fear, surprise, and ruthless efficiency (the current one of three really isn't cutting it). The near fanatical devotion to the Pope and nice red uniforms cited in the new promo video below are mere nice-to-haves.

On the other hand, they need every assistance going.

The proverbial shot to the groin

2008-07-02T14:39:00.009+02:00

Time lags are strange things, really. The moments between a blow to the crotch…and the pain; the time between an earthquake…and the tsunami; and the wait between a major dislocation in credit markets…and the ensuing job losses in the wider economy leading to lower consumption.

The US is not there yet (which is one reason there are still optimists) but chances are the shots taken to the tenders will not be denied their inxeorable pain however much praying is done in the foetal position.

The latest ADP National Employment Report, whilst showing a definite confirmation of the Bureau of Labor Statistic’s now negative trend data, reveal most damage is still to be found, unsurprisingly, within the construction and mortgage financing sectors. But this bit is a likely harbinger for the wider economy:

"Employment in the service-providing sector of the economy declined 3,000, the first decline since November 2002."

Exhibit 1:

Europe and US futures data are down very modestly in the wake of the report; if that's not a time lag in action (and on cue) go ahead and take the (benign) over for Thursday's non-farm payroll data.

See Dick run

2008-07-02T11:18:00.017+02:00

Richard Grasso, or 'Dick' as friends (and enemies) call him, is back in the news. The case against him has been thrown out by the New York State Court of Appeals. An entertaining background is in this Fortune article.

The case was about whether or not Mr Grasso's job at the New York Stock Exchange (NYSE) was worth $188m. In other words, the public wanted a case brought because they thought his package was unjust.

Although the answer is morally obvious to most it is expecting much that a legal action would rule thus in a context where the money was already voted by the board of the NYSE, had been paid (except for $48m in pension benefits) and did not involve any public funds. Nor would the NYSE have done anything particularly admirable with the difference had a smaller salary been settled on instead.

As it happened, the judges did not have to rule on the "fairness" question. From the NY Times link above:

"The decision means the case was not decided on whether Mr. Grasso’s pay had been unreasonable but rather was thrown out because the exchange merged with Archipelago Holdings in 2006, becoming a public company. The appeals court concluded that the attorney general has no standing to sue Mr. Grasso since the exchange has been converted from a nonprofit entity to a for-profit corporation, negating the attorney general’s ability to sue on behalf of the public rather than for private shareholders."

The irony of Archipelago's role in the technical victory will not be lost on Mr Grasso. Pre-NYSE, Archipelago (an electronic trading-platform company) was 15% owned by Goldman Sachs. Goldman pushed hard for the merger with the NYSE but encountered resistance from Mr Grasso. His departure paved the way for the transaction.

At the time Goldman was run by Hank Paulson who was on the NYSE board that voted Mr Grasso's compensation. However, Mr Paulson also led the charge to get rid of Mr Grasso (having missed the board meeting where the final package was approved) - a constellation of events that led to the Grasso side nursing a conspiracy theory against Goldman/Paulson.

Still, hard for the victim to complain of a conspiracy that inadvertently ends up paying him $188m.

Equity market strategy: like chess - but without the dice

2008-07-01T17:18:00.011+02:00

"Like chess without the dice" is a nod towards both the world of football from where this comparison came (Podolski, Germany); and the world of stock market strategy, so often a parallel universe when forecasting is involved.

In that spirit the following chart, a current pet, does not mean anything. There is no particular reason to consider the two periods correlated (although there are obviously some ties). But it is astounding to watch it unfold as is. Especially today as the SPX hits 1261.

Exhibit 1: 2000-2002 equity & bond market versus now

Refinancing in a crisis. First, make sure you took on too much risk to start with.

2008-07-01T11:30:00.008+02:00

One of the ironies of this financial crisis is that if you have run a business prudently and are debt free but desperately short of working capital then you are all alone when seeking financing. Usually in the parallel lending shark-pool world of private equity.

In contrast companies that went wild at the top with expansion debt have effectively handcuffed themselves to conventional lenders.

Bankers, of course, are known as chaps who keep offering umbrellas when the sun shines; and snatch them back when the storm breaks. Sharing the shelter is not, generally, part of the deal. But between taking a soaking and tolerating a companion most of them are prepared to modify terms.

UK house builder Barratt plc is a decent enough example of this. The firm bought a rival, Wilson Bowden, for over £2bn last year by taking on a short-term credit facility of £600m. Barratt was worth close to £4bn at the time.

The firm now finds itself with circa £1.9bn of debt to service as its central markets collapse. Moreover, Barratt’s shares have declined over 95% to give the company a market value of under £300m. It is tough to raise more money than the worth of one’s assets.

But the good news is that with so much debt Barratt, as far as its lenders are concerned, has become the well-worn euphemism “a long term investment”. This is reflected in the nature of the deal – a refinancing – which aims to give the company an extra 2 years to find £400m.

Barratt made its acquisition in a bid to catch the UK’s largest builder, Persimmon plc. Everyone involved in the deal, as one might expect, thought it was a grand idea. Money was cheap and house prices had not declined for over a decade. Extrapolating that experience forward seemed the obvious forecast.

Now the rescue is en route. However, there is a slight issue: it is/will be based on assumptions about the length of a housing downturn. These guesses will be visible in the degree to which builders fiddle (with) the asset write-downs they should be making to reflect the state of the housing market. Taylor Wimpey plc has already begun this painful process.

The trend shows that property-sector managements have been persistently overly optimistic on this count. Not that analysts seem to be taking the hint. In May Panmure thought this yet Barratt today is at 63p/share. Worsening conditions (as they are) will imperil this rescue and risk showering further troubles upon the banks.

A final point which stretches beyond the property sector. Barratt carry £817m of goodwill relating to the Wilson Bowden purchase. Since IFRS was introduced in the UK in 2005 goodwill is no longer written down mechanically. It must be ‘judged’ impaired; and inevitably this is a difficult task done in hindsight - for who can judge impairment meaningfully in fast changing times?

£817m was over 35% of the buy price. That is a lot of value to put on the upmarket Wilson Bowden trade name; or its supposed superior ROA earnings potential; or whatever else is within the figure. Barratt are not alone in having paid handsomely for acquisitions. But where/if buyers have managed, in easy money times and contrary to prudence, to incorporate goodwill into any of their financing arrangements there will be trouble; and the incentive to under impair will be strong.

CNBC and you: research assistance sought...

2008-06-26T17:32:00.003+02:00

I wonder if readers would help grad student Alexandre Gaillard who yesterday sent me an interesting email?

Alexandre is working on a masters degree in finance at the Institut d'Administration des Entreprises / Hautes Etudes Commerciales in Paris. What he needs are anglophone investors to take his online survey. The survey is designed to inform his thesis covering the impact of media influences on stockpicking by both private and institutional investors.

Alexandre is working with CNBC on this. Some readers may be familiar with the 2001 work of Jeff Busse and T Clifton Green on CNBC's impact amongst daytraders and momentum followers - it is a hugely interesting area. By participating in the survey (15 minutes) it is possible to sign up to receive the eventual results and Alexandre's final thesis.

The link to the survey is right here:

It's how you play the game

2008-06-26T11:42:00.010+02:00

Cartoon credit: Kipper Williams &
the Guardian newspaper

There was an unfortunate episode in yesterday’s one-day cricket match between New Zealand and England. England took advantage of a collision and injury to a New Zealand batsman to run him out. This is equivalent to scoring a goal whilst holding down the goalkeeper.

England declined to recall the batsman. The umpires declined to take responsibility and declare a dead ball which would have cancelled the act. And so the destructive characteristic within man's ‘will to win’ combined with officials' timidity to prevail over fairness.

Gordon Brown yesterday in parliament said:

"We do not want to do further damage to the Zimbabwean people, but when businesses are helping the Mugabe regime, they should reconsider their positions."

The UK's Prime Minister deserves praise for a classic piece of hollow political umpiring. Simple words, impossible definitions and pass the buck all in one sentence. But in case anyone accuses him of prevarication on a difficult issue only last week he was firmly against stripping the now Orwellian figure of Mr Mugabe of an honorary knighthood the UK gave him in 1994. This on the grounds that it would be a mere symbolic measure.

Some declarations are beyond ridicule. But let it at least be said that Mr Brown’s political antennae are not good enough to keep him in his job beyond the next election (due by summer 2010).

International businesses involved in Zimbabwe such as UK quoted Anglo-American and WPP plc find themselves caught between the search for profit and the desire to be considered moral entities. Both groups have somewhat sheepishly defended the do-nothing gambit. Their dilemma is not enviable; nor their reaction unexpected. But the beyond-our-control rationalisation is a piss-poor choice that most would be ashamed to teach a son or daughter.

In 2004 Australian cricketer Stuart MacGill declined to tour Zimbabwe on moral grounds. It was a brave decision despite the career risk and knowledge it would change nothing. A similar dose of (belated) political and commercial decisiveness on the other hand would produce results. Such, possibly, as the free and fair elections taken for granted by so many.

Don't hold your breath.

Footnote: New Zealand won yesterday’s game in an refreshing demonstration of natural justice. But that’s sport.

Chaos everywhere

2008-06-19T10:32:00.003+02:00

There used to be certain events that, while not racing certainties, heavily favoured laying money on because they contained moments that were easy to predict or hedge: test match cricket involving Australia; the US Presidential Election; and any major international football tournament.

None of these are gimmees anymore (or maybe just for this year) but it is Euro 2008 that is especially upsetting (the others are merely intriguing). Don’t these Dutch, Turks and Portuguese understand that a fundamental precept to modern football hedging (or straight betting if you are a bit mad) is that 38% to 40% of all goals are scored in the first half?

Knocking in 10 or so in the last quarter of an hour makes a simple mockery of carefully planned hedges (and the target itself) in addition to bollocksing up tournament ratio totals. No longer are goals randomly falling over time in any given first or second half. Take your Poisson distributions and have a laugh instead.

Non-linearity in 2008, it seems, extends well past financial markets. Tough to hedge any of them.

NB: Photo credit, China Daily

Prisoners' dilemma: Moody's vs Standard & Poor's

2008-06-16T10:48:00.008+02:00

A brief guide to underwriting rights issues in the UK's banking sector

2008-06-13T10:38:00.007+02:00

Client feasted a shade too much on risk with no eye on the collateral? Credit burn? Black hole in the balance sheet?

This three step guide to Successful Underwriting may help.

Step 1:
Keep some noise about the greater good, the necessity to raise capital in an orderly fashion and the dangers of volatility during cash calls. Don't mention why your client needs to beg reluctant shareholders unwilling to take up the rights to do so.

Step 2:
Have PR call the Financial Services Authority knowing inaction is not an option for them (generally only a choice when it's not too late to take action) and studiously ignore all references to your insurance obligations towards rights left on the shelf.

Step 3:
Keep the aide-memoire below handy

Related articles:
FSA may restrict short-selling of shares during rights issues
FSA Forces Disclosure of Short Sales in Rights Offers
Cleaning up the shorts, FSA-style
FSA to force short-seller disclosure to stop abuse
FSA tightens short-selling rules

French Freebies: who says strikes are all bad?

2008-06-12T10:22:00.005+02:00

An alert for readers of French: due to industrial action by newspaper distributors LaTribune.fr and LesEchos.fr are offering free access to their entire websites today. LeMonde.fr will be uploading a free .pdf version of today's edition at 11h00 Paris time.

French house prices fall –3.3% in May. FNAIM conclude “the market is still in the process of stabilization”

2008-06-11T21:36:00.009+02:00

Please consult your Kübler-Ross scale for Property Agents:

Denial – What? Are you crazy? This is nothing – just a blip
Anger – I can’t BELIEVE you think it’s over!
Bargaining – C’mon, just let me sell a few more houses at last year’s prices
Depression – Am I really pond-scum just like all those clients said?
Acceptance – Nothing really wrong with selling tents, is there?

The last post here in April on property prices in France quoted the Fédération Nationale de l'Immobilier (FNAIM) in their quartely letter thus:

“the risk of subprime contagion is limited…the USA is not in France”

and:

“In spite of a decline in prices of -1.0% during Q1 2008, the market environment does not look positioned to enter a scenario of generalised price declines.”

The data for May came out today. Month over month the decline (including apartments) is –1.3%: quarter over quarter it’s -0.72%; year over year it’s –2.7%; and year to date about –2.5%.

FNAIM, however, use a rolling 12 month average which indicates a gain of 1.7%. This allowed them, despite the weakness of the recent data, to say:

“It is clear that, so far, the market is still in the process of stabilization”

For greater accuracy when reading this sentence please substitute "FNAIM" for "market" and "denial" for "stabilization".

How much more of the FNAIM's 'stabilizing' is required for normalcy to reign is not specified. As for the clarity referred to it can been best seen in the chart below from Kurt Saturax at bulle-immobilier.fr

The key point is that even on the FNAIM calculation (yellow) the trend is down (direct link to Kurt's chart here). Moreover, this latest data comes in a traditionally seasonally strong period. Given this, and the prevailing dearth of credit, it is foolish of FNAIM to continue to suggest an annual gain in property prices is on the cards.

Are we almost there yet?

2008-06-11T17:28:00.008+02:00

Only 3 weeks since the last showing of Exhibit 1 but a repeat seems appropriate.

Exhibit 1: Comparing the 2000 to 2002 collapse to now

What has changed? Longer term sentiment (perhaps) driven by (possibly) recognition that signs like banks agreeing (with prodding) to support a stricken peer rather than try to pick up its business are really not indications that the worst is over.

Bonus: Useless headline of the day - Bradford & Bingley shares: buy, sell or hold?

The Netherlands: gave the world modern financial economy...and football how it should be played

2008-06-09T22:45:00.009+02:00

What other international football squad is so enjoyable to watch as the Netherlands when they play as they did tonight against Italy?

Is there another squad capable of offering a a midfielder (Sneijder) who sarcastically applauds his defensive countryman (van Bronckhorst) for an errant pass into touch; and minutes later combines with the same to score a truly stunning end-to-end goal? And against the World cup holders. When they are good, they are sublime.

But when bad? Heard of the fox that, when caught in a trap, will gnaw its leg off to escape? Eleven Dutch footballers can do that without the assistance of the trap.

Enjoy it while it lasts.

Crude trading: failure to communicate

2008-06-09T00:01:00.005+02:00

Oil Rises to Record on Weakening Dollar, Morgan Stanley Outlook - Bloomberg

Was Friday the first time Israel made its intentions towards Iran clear?

Was strong Asian demand for energy resources discovered overnight by brilliant Morgan Stanley (MS) research?

Has the dollar hedge of buying oil suddenly been dreamed up?

Israel has been keeping noise about a military strike very openly since (at least) 2002. One cannot even argue that the radical change in the US intelligence assessment last December that Iran (probably) halted its military nuclear programmes in 2003 has intensified Israel’s rhetoric.

Similarly, it is fairly certain that an analyst at MS conditionally predicting crude at $150/barrel has not based it on information hidden from the rest of the market. What is out there has been evaluated at length by a rich diversity of opinion. One report cannot have more insight.

And then the buck. Having recently checked the charts, since 2002 there appears – may have to look carefully, mind – a profound relationship between debasing that currency and all the commodities it is priced in.

No. What we've got here, Captain, is failure to communicate.

If buyers want to, in essence, double count Israel, Asian demand and the weak dollar when calculating an appropriate price for crude who is to stop it? But take a look at delivery prices to September (crude), April 2009 (heating oil) and May 2009 (Brent).

They are all higher than cash (ie contango). Which is a bullish sign (despite this contango not being particularly pronounced): some buyers at least are so convinced of future price increases that they want to enter the oil storage tank business. Others are buying as the price rise becomes a justification itself – momentum.

The combo of rationalisation and momentum faces a poor historic price appreciation precedent where oil contango is concerned - suggesting that the bull case is best played with Other Peoples Money and a handsome pension pot.

This does not question the the broader argument that fundamental demand is pushing oil up. But it does attack the idea that it accounts for a record spike like this. Contrarians will be watching how the contango moves during the peak US driving season this summer.

UPDATE: Oil shortage a myth, say industry insider Seems doubtful the contangonists read the Independent...

Bad US data news as noise. Don't discount BS.

2008-06-06T15:49:00.013+02:00

As per comment on the prior post, there are still no hovering spacecraft over downtown Manhattan. But there is an item of data being greeted today as though it fell off one of them. US unemployment sits at 5.5%.

Of course, on recent form equities may go back to living the fine Ari Gold management rule that 'Bad news is not news'. Until today optimists drew comfort from the security blanket of older data showing consumer spending holding up despite a nightmarish housing market. ‘Weathering’ has been a key word used to describe what markets were perceived to be doing during the storm. And already, on this latest data, voices (including, worryingly, the statmeisters themselves at the US Bureau of Labor Statistics) are talking about how tough it is to seasonally adjust the May numbers - ie it's too big. Hmm. So is it noise or signal? Maybe the optimists have a point.

Or not. Some will not want to discount the bullshit factor the noise view might be shovelling: the notion that unwinding may simply take more time than optimistic churn traders plan for somewhat undermines the ‘weathering’ crutch.

UPDATE:
Barry Ritholtz seems, with some assistance, to have got to the bottom of it.