The Saudis Double Down

Sorry if this begins to sound like one of our Peoplenomics reports, but  lot of people can benefit (and maybe hold on to some of their retirement dough) by understanding the Big Picture in global geopolitics and so this morning we focus on that before we get into specific headline-chasing.

In Monday’s report I told you to keep an eye on Saudi Arabia which is now – and indeed for a long time has been – the lynchpin of the West in the oil-rich Middle East; along with Israel, of course.  We didn’t have too long to wait for developments in this main plot underlying the Middle East story as we’re now reading about how the Saudis say they will fill any financial gap that results from nations withdrawing supporting for the repressive military government which removed democratically-elected president Morsi from power.

In short, the Saudis have told the US and others, that it won’t do any good for lesser Western powers to cut support to the military government in Cairo because, in Texas poker terms, the Saudis have just gone “all-in.”

Mind you, this is on top of a previous $2-billion promise of aid from Riyadh to the military government.

What we expect this to do is cause something of a Bushian “You’re either with us or against us” kind of mentality to form up. 

Sure enough, that’s what’s starting to appear around the fringes of the oil countries.  The informed observer will see a kind of “circling of the wagons” now as the Western/oil powers seek to align with Washington in order to ensure that Arab Spring and the current revolution continue giving the oil powers wide berth.

Example:  The Khaleej Times in the United Arab Emirates, for example, sums up their ASP coverage under the headline “Saudi backs Egypt against Terrorism

Strategically, there are a couple of ways this could play out..  One scenario is that Egypt, as a result of isolation by the US/West/Saudi/other oil countries will result in a schism in the Ararb world which could set the stage for more revolutions, including in the oil-rich countries.  But, for that to happen, the military government needs to succeed in their crushing of the Muslim Brotherhood.  That would be presumably followed by a seriously Western-leaning “civilian government” being installed with strong army backing, and then “democratic” elections with tightly controlled (western vetted) candidate lists, and the marketing appearance of democracy.

The second alternative would be for the Muslim Brotherhood to score a decisive win, which is why the battle in the press for the “hearts, minds, and pocketbooks” is so critical for them in here, as is the continuing repression by the military government, which arrested one of the Muslim Brotherhood’s key leaders.

The third alternative, and the one that I sense is a 50-50 outcome, would be for the region to grow in tensions (as in pre World War I Europe) until a crescendo event takes place which results in regional war.  But, barring that, al Jazeera’s Massoud Hayoun worries “Will Egypt repeat Algerian’s ‘black decade’?  Comparisons between Egypt’s present crisis and the upheaval in 1990’s Algeria gain credibility.”

Economics in general, and commodity markets in particular are instructive intelligence tools as we await further developments.  These make predicting further bloodshed easy, as well as a swing of the Muslim Brotherhood into a position of more direct conflict with oil powers.

How can such a prediction come from the People’s Economist?  Well it’s easy.  Let me walk you through what should happen according to financial charts: 

Initially, we will see moments of “success” being scored in here as the price of oil was down about six bits (75-cents) overnight.  Because gold and oil often run in tandem, we should also expect to see a pause here in the price of gold. 

But longer terms (over the next month or five) we should see oil heading toward the $140 level prior to this fall’s large market correction (target S&P 1,540).  Along way (perhaps September or early/mid October) gold should spike to the $1,400 area and then begin  a decline toward a long-term target in the $1,100 to as low as $750 range when, as a result of the market decline, players with large positions have to unload all kinds of assets (even great ones like gold) in order to cover their bets in various markets.

Which will be fine with people (like the US Federal Reserve) which has been dragging its feet on delivering gold to Germany and has stated that repatriation could take as long as until 2020.  What?  You’d now aware of this story about the Fed declining an audit of German gold?  Tisk, tisk…

As this outline of interlocking intrigue shows, this is a very complicated picture…just what we expect in as global hypercomplexity and the jagged summits of Peak Oil play out.

We’ll save the market implications and possible timing for Peoplenomics subscribers, but the big story (which even those missing it yesterday are starting to grok) is that there may be an internal conflict within the US over Egyptian aid and toward that end, the UK Telegraph headlines this morning that the “US says is reviewing Egypt aid amid claims of secret cuts.”

Since any cuts in Egyptian military aid (secret or otherwise) would have to be sanctioned by the Obama administration, we will perhaps soon learn whether there’s a non-public, private stance of the Obama administration is toward the MuBros. If there is, it could have serous blowback should administration officials be found to have delayed aid as the military government in Cairo needs all the support it can get right now, in order to keep the Arab Spring from impacting the oil patch countries.

And for the US political right, any adverse findings would be writ large in the MSM’s (mainstream media’s) faux news any old day now and that could become an issue in US elections in 2016.  Remember where you read it first.

Naturally, this will lead to market instability which we’ll dig into next after this critical ….

Dirty Musharraf – Historical Notes

In the Middle East/Southwest Asia, it often takes a long time for dirty secrets to finally leak out.  You may remember the charges made in a David Frost interview, with Benazir Bhutto immediately after an assassination attempt in 2011.

Yes, if you play that video, the real story comes out from about 4:00 to 7:00.  Who Bhutto is referring as the orchestrator seems like to be 13th Pakistani army chief of staff Pervez Musharrash, and by Bhutto’s account alleges that Omar Sheik had murdered Osama bin Laden sometime before November 2, 2007.

As anyone with an encyclopedia knows, Be4nzir Bhutto was then killed the next month likely because a) she could actually fight terrorism in Pakistan and b ) she outed that Osama bin Laden was already dead in 2007.

Which is why a questioning person would wonder why there was that mysterious chopper crash that killed several members of SEAL Team 6, why bin Laden’s body was hastily dumped in the ocean, and oh, that brings us up to this morning:

Pakistan’s Musharraf charged with murder of Benazir Bhutto.”

No doubt a conspiracy theorist would be able to make up a plot line where Musharraf and associates kept bin Laden on ice, and now that the clock has run out on his “protection/leverage” he’s  being hung out for trial.  If we knew any dot-connecting conspiricists, of course.

Intriguing to watch how slowly the big picture coves into focus over time in some of this stuff but it sure would explain why bin Laden was recovered from Pakistan and why the US didn’t turn on Musharraf sooner.     

Payback’s a bitch and we can’t have loose ends…With this particular loose end still about, we expect to read more unhappy headlines about Musharraf any day now, and before trial.

More after this…

Unstable Markets – Not Unexpected

Our Jakarta Bureau Chief files this report:

Hiya chief!

Don’t know if you’ve been tracking it, but the Indonesian stock market  has not only fallen off a cliff, but has jumped with a jet pack pointing the wrong direction.  On top of that, the rupiah has nose-dived to a bit over 11,000 to the dollar at the moment, down from 9,500 just a couple of months ago.

We might write this off to the head of SKKMigas (upstreak O&G ministry) getting nailed with a couple hundred thousand dollars in bribe money in his office, but there’s obviously more to this story.  i find it hard to believe that Fed bond buying speculation is trashing global markets this much. Currencies in countries that have had 5% to 6% growth for the past 5 years just don’t lose 10% of their value in a day for no reason.

We’ll be tuning in to this morning’s report to see what the head office says about this.  Interesting to note that local folks who couldn’t be bothered with markets and currencies are texting the Jakarta Bureau right and left to get an update…

Bernard Grover

Indonesia Bureau Managing Editor

Normally, the smart thing to do would be to call my EMT son when there is this much blood flowing, but since he has real work to do, I guess it will fall to me, so here goes:

  • As Bernard pointed out, Jakarta’s Composite was down 3.21% overnight.
  • Japan was down 2.63%
  • China was down 2.2%
  • And in Europe this morning when I looked, France and Germany were both down more than one percent, but the UK was down about 0.6%.

It shouldn’t cost you a degree in business to figure out what’s next for the US markets today, and tomorrow we will get addition insight as the Fed minutes come out.

Also tomorrow, we get into more discussion of Peak Oil and what fracking will do long-term plus we will do our monthly Port Index which is one of the finest economic barometers of real US economic activity out there in addition to the…well let’s say more on that tomorrow.

What we can safely say is that from an investment perspective, most of the other headlines about are really not very exciting at all, unless you have downloaded the latest from Wikileaks and are on the list to get a decryption key should anything bad happen to Julian Assange, who is the subject of much speculation of late.

Meantime reader Bill spied some MSM spin over here which involved the talking heads insisting the recent declines were on low volume.  Sorry, that’s not what the data says and, by extension, On-Balance Volume says more downside to come.

With Instability at Hand

President Obama is pressing for major banking reforms which would prevent any recurrence of the 2008 financial crisis.  Unfortunately for Fearless Leader, cyclical economics may not be listening to the bully pulpit.

Northern Colorado?

Yep, seems people in Northern Colorado are thinking about breaking away and forming a new state based on liberal polices on guns and energy.

Why, if this keeps up, look for the West to restart talk about the nation-state of Cascadia!  That one has been dormant for a while, but could it return?

Ever read the Wikipedia entry on Cascadia?

Cascadia is the name of a bioregion and proposed country located within the western region of North America. Potential boundaries differ, with some drawn along existing political state and provincial lines, and others drawn along larger ecological, cultural, and economic boundaries.

The nation would consist of British Columbia, Canada, along with Oregon, Washington, and portions of other states from the United States. At its maximum extent Cascadia would extend from coastal Southeast Alaska to the north, extending into Northern California in the south, and inland to include parts of the Yukon, Idaho, Wyoming, and Western Montana.”

I wonder if northern Coloradoists (Coloradoans?) have thought about “going Swiss” and setting up an independent country.,…I mean why stop at statehood, right? 

Fire Season

The big one in Oregon is getting a lot of screen-inches this morning as winds coming up the Columbia River gorge near The Dalles have caused 55 buildings to be evacuated

Nationally, the Drought Monitor (over here) has improved from where it was a month, or two, back so the big concerns now would be southeast Oregon, southern Idaho, and most all of California.  Another spot to keep an eye on would be the hills/mountains running north/south out of Santa Fe, NM which is tinder dry, too.

No Quake Watch

If you think energy from the Sun may have something to do with earthquakes (you did see the movie 2012, right?)  here’s a heads up for you:

A halo CME was detected by CACTus, first visible in LASCO/C2 on 19 August at 23h12 UT. Observations in STEREO B suggest this CME is backsided, but due to data gaps in STEREO A this can not be confirmed yet.

Keyword here is backsided.  No kill shot, no quake jitters.  But maybe when old Sol swings it around this-a-way…