About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, March 30, 2011

US Dollar

Within the US, the dollar has held its purchasing power well since mid 2008. Now, with a ZIRP
still in effect and with the CPI recently hitting a new all time high, USD purchasing power is
starting to tick down. This will work a hardship on savers, who must put savings at risk to earn
higher returns. As well, folks who rely heavily on Social Security will be dunned, since the
rise in Medicare premiums is clipping the inflation adjustment for Social Security pay out while
earnings on savings are as near to zilch as you can get.

On my long term capital market line, cash equivalent investments are deeply "undervalued". The
super long term line has the 91 day T-bill currently fairly valued in a range of 3.1 - 3.3%. Lately,
the bill has had trouble earning 0.1%.

There are of course offsets. 401k and pension plan values have recovered sharply, so the value of
financial assets has improved overall. Even so, dollars not at risk are set to depreciate in value.

My old rule is that it makes little sense for foreigners to hold dollars when US purchasing power
is falling.

Monday, March 28, 2011

Global Stocks & US "Sweet Spot"

Foreign markets fell further than did the US in the deep panic of mid 2008 / early 2009. In turn,
they rallied far faster than the US in the opening months of the global bull market. However, since
mid 2009, the US market has gradually regained and maintained relative strength on a global basis.
It has been a classic "easy money" bull here, with low interest rates and inflation and a powerful
recovery of profits, all underwritten by the most expansive Fed policy since the 1932 - 1945 era.

QE2, the Fed's latest policy of liquidity infusion, is slated to be retired on 6/30/11. Already, there
is plenty of chatter about what monetary policy may bring following the end of Jun. A comparatively
tighter policy may bother all the worlds' stock markets initially, but resumption of a positive
environment could leave the US in a less favorable position via a number of other segments of the
global market and result in a step up in global diversification by US investment managers.

Excluding the US, the global market has been dogging it for the past nine months. So far this
year, 56% of the world's bourses are up, but only 16% are doing better than the US. There has
simply been no need for the big US players to wander from home. As we approach the big
moment later in the year, the global environment should get a more careful assessment.

For my money, the Fed ought to go right into QE3 if business credit demand  and broad measure
liquidity growth do not soon accelerate markedly. If there is a QE3 program, it should be
more moderate and open ended and the Ron Pauls of the world should be told to go stuff it.
This view, as you might guess, is the minority view as of today. One more point. Mr. Obama
is now on tap to run again next year. You can bet his economic policy people are going to
desire a probing discussion with the Fed before They pull whatever trigger They are going to
pull on 6/30.

$SPX in a global context.

Saturday, March 26, 2011

Stock Market

The weekly coincident fundamental indicator has been trending up fairly sharply since late Aug.
2010. It made a new cyclical high this past week on the strength of falling initial unemployment
insurance claims and rising industrial commodities prices.  It is now about 10.5% below the all
time high set in mid 2007. (The SPX is about 16% below its comparable period all time high).
Looking out closer to mid year, there may be some seasonal weakness in sensitive materials
prices and a period of plateauing by the jobless claims indicator (timing inexact on both counts).
Weekly correlation of the indicator with the market contines to run around  +.61, and the trend
remains supportive of a rising market.

So far, the boyz have made the SPX 3/16 closing low of 1257 stick. The simple trend line down
off the 1343 2/18 high has been broken and my 25 day momentum oscillator has reversed to the
upside, wiping out the moderate oversold that appeared on 3/16. the market is closing in on
confirmation of an uptrend ($SPX).

Note the 12 day ADX in the bottom panel. The black line is not yet rising -- no signal of trend
underway -- and +DI (green) has yet to cross up through -DI (red). Getting close, though. Notice
also that when +DI has fallen down to a reading of 10 over the past year, it has been ok at
signaling a low.

Friday, March 25, 2011

Stocks & Industrial Commodities Prices

Below, there is a link to a chart which compares recent months action of the CRB raw industrials
spot index to that of the SP 500. Now, over the years, the comparison is not nearly so close
primarily because industrial commodities prices were quiescent over much of the 1985 - 2000
period. But stock players have been much more interested in this comparison over the past
decade. SPX vs. CRB industrials.

Thursday, March 24, 2011

Stock Market Note

Sensitive materials prices comprise an economic leading indicator. Industrial commodities
composites present a challenge because of their price volatility week to week. But I map them
closely because they help substantially with bond trading and also because materials prices and
the materials sector stock composite (XLB) can sometimes be very helpful in trying to sort out
broad stock market direction in that they sometimes give you a little "heads up" on the market

There looks to be a test ahead for the materials sector. As you will see on the chart below, the
relative strength of the XLB as well as the narrow industrial metals group composite both face
resistance just ahead. Successful breakouts might well help support recovery of the SP 500.
(XLB). Failures at resistance could signal that more caution might be in order.

Wednesday, March 23, 2011

Japan Shares

There has been a flurry of trader and investor interest in the Japan stock market in the wake of the extraordinary disaster which has befallen it. Players are now interested in the prospects of
higher share prices ahead as a battered nation seeks to rebuild after its losses. From a value
perspective, the market is as reasonable as it has been for many years. The market chart (link
below) shows a breakaway downside price gap which will eventually be closed, and also shows
that the market has stayed above recent years' support.

Most everyone knows the history of the Japan market over the past 30 odd years, and comparatively
few US investors have played this market aggressively over the years, save for special situations
and diversification requirements. I suspect this is true of other major financial centers beyond Japan.
What this tells me is that there are few investors out there who really know Japan and its economic
issues and companies very well. There may be excellent plays within Japan over the next several
years particularly as regards infrastructure and energy reconstruction, but if you want to join in
on the rebuilding "play", you probably ought to study up very hard first as you would with any
prospective turnaround situation.

EWJ shares chart.

Tuesday, March 22, 2011

Energy Sector

The S&P energy sector ($SPEN) has outperformed the market since late summer '10 primarily
on the strength of a run up in the oil price which started a little earlier last year but kept on
rallying through the seasonally weak Oct. - Dec. time slot.

The $SPEN had peak earnings of $51 per share in 2008. Earnings tanked to $17 in 2009 on weaker
volumes and price busts in petroleum and gas, but rebounded to $35 in 2010 on recovering volume
and higher petroleum and oil related price realizations. Analysts look for a further rebound in net
to about $42 this year on higher oil volumes and prices. The sector is selling for a reasonable
multiple of 13.7x 2011 eps. The northern hemisphere gasoline build will wind up before long,
and the oil price will be due for another seasonal dip.

Sector earnings for the first and second quarters should be fine on a yr/yr basis, but given the
importance of the oil price trend to the relative strength in performance to the sector, players
will have to look past any seasonal weakness in the oil price to the third quarter for the sector
to maintain its relative strength. This is hardly a done deal given the recent fast dip in the $SPEN
composite when the oil price weakened briefly in the wake of the monster quake in Japan.

$SPEN chart / sector relative strength.

Since the sector has been primarily a price momentum play, oil sector players need to keep
this well in mind in addition to value considerations they may apply.

The other factor at play here is that of the 10 major market sectors, only the energy group and
the heavy duty industrials show marked relative price strength so far this year. Thus, the oil and
oil service stocks, while favorites, may have elevated price risk should a less favorable
turn come for the oil price.

Sunday, March 20, 2011

Stock Market -- Technical

Based on my 1/3/11 technical post, the market has behaved about as I thought it would through
mid March. Better lucky than smart.

I think there is another but subdued upleg to the advance that began at the end of Aug. '10. For me,
that's the good news. The bad news is that  I have no idea when it will start or from what level.
The market has spiked off the 3/16 intraday SP500 low of 1349. The odds are just 50% that we
have put in the short term low. I would not mind it at all if the market spent a week or two bouncing
around the 1280 - 1250 level to allow that 25 day m/a to work lower. $SPX

Since I now have a mechanical sell signal on my 40 wk price oscillator, I plan to be cautious as
I have great respect for this indicator, not so much for short term timing, but for helping me to
realize study is needed to noodle out what the right side of the trade will be going forward. So,
I am moving out of wheeler - dealer mode into the contemplative.

Friday, March 18, 2011

Corporate Profits -- Longer Term

The recovery of corporate profits is ending the large rebound, bounce back phase which started
in early 2009. Profits are now entering a phase where strong growth momentum can occur, but
is far less assured.

Profits tend to expand strongly in the wake of a depression or deep recession as sales recovery
and cost cutting produce cash flow that rapidly moves up to exceed the fixed cost burden. The
current earnings recovery has only been exceeded in momentum by the immediate post WW2 
period,when the economy moved exceptionally easily into peace time growth.

Normally, it is wisest to view a profits recovery in a time frame of 4-5 years off the cyclical
trough. That well established rule of thumb would put the peak of the current recovery / expansion
out to somewhere over 2013 - 2014.

Profits can expand out past the 4-5 year frame if certain important conditions are met. The most
important factor for a long run of profits growth is the balance maintained between economic
supply and demand. One main reason why  many profit recoveries have not lasted beyond
the 4-5 year time frame is that cycles in the growth of capacity do not match up that well with
the growth of demand. Capacitiy growth cycles tend to run for longer periods of time, and,
periods of weak capacity growth also tend to run for fairly lengthy intervals. The last long
period of relatively strong capacity growth lasted from 1992 through 2001. Since then, the
US has been in a period of weak capacity growth, including a net shrinkage of capacity over
the past 2 years. Given how technology and depreciation schedules move along, I think the
US is due for a significant makeover looking out through 2015.

The other critical factor in the recipe for a lengthy run in corporate profits growth is the
avoidance of a credit crunch. Looking back, I regard the tightening rounds in monetary
policy in 1994 and again over 2000-2001 as being too extreme given the superb balance
then extant between economic supply / demand. Looking forward, the Fed has to maintain
a better balance between money and credit growth if It is to foster a lengthy recovery /
expansion period.

So, looking ahead, you should watch not just monetary policy but the development of capital
spending as the recovery progresses. And, by capital spending, I mean not just equipment
and machinery, but new green field development as well. Right now, and measured yr/yr,
production growth is far outstripping capacity growth. If this condition obtains once the US
factory operating rate exceeds 80%, then we can expect a shorter, more normal cycle of
profits growth.

Fed's famous "gap" charts for production, capacity, cap. uty%. Charts

Thursday, March 17, 2011

Earnings Indicators & Comment

My earnings indicators suggest srrong net per share performance for the SP500 well into the first
half of 2011. Unlike 2009 and 2010, costs are rising, especially in recent months. However, top
line or sales increase  measures suggest sufficient strength to offset a rising cost curve and allow
profit margins a degree of further expansion. The one exception continues to be the finance sector
where the major net revenue component -- the spread between what is earned on interest bearing
assets and the cost of funds -- has yet to lift given the flatness evident in banking sector assets.
The offset for financials to flat revenue has been the gradual reduction in reserves for loan losses.

You should note that The Street is reserving the strongest earnings in 2011 for the second half of
the year -- a typical maneuver. Street estimates for Half 1 '11 look easy to beat given the top line
growth momentum which picked up in latter 2010 and is continuing into the current year. For the 12
months ended 6/30/11, SP500 net per share is projected by consensus to be around $89. On my
Market Tracker, that puts SP500 value at 1473, which represents a 15% premium to the current
level. Clearly then, investors remain more cautious on the outlook even with the strong rally up
from the summer 2010 lows.

The issue that stands out the most when one looks at earnings expectations for 2011 is the very
powerful growth expected for sales. And here is where I have been more cautious, since my
top line growth measures are decent but are not in league with the 14%+ gain projected by
The Street. And, with The Street looking for a very strong Half 2 '11 earnings performance, the
sales for SP500 companies are going to have to be especially strong to cover deteriorating cost
structures that are developing.

I would also be remiss if I did not point out that the leading economic indicators I use have been
moving strongly higher over the past 6 months. Although this development is obviously good
news for corporate profits, it bears noting that as an economic recovery becomes well established,
one cannot count on long and strong runs in these indicators and that one should be careful not
to extend hefty run-ups to far out in time.

Wednesday, March 16, 2011

Waiting on Japan....

In a post on Sun. 3/13 (below) I expressed my fear for Japan. I took the view that the potential was
there for a most dire and grim calamity based on a quake / tsunami for which there is no modern
precedent. The situation there has not met my worst fears, but it is headed in that direction as
the potential for a radiation emission catastrophe could hamper relief efforts for over 500K people
facing extraordinary privation and imperil Japan's economic and political balance. I deeply hope I
am wrong, but unfolding events still suggest otherwise.

To add to this toxic mix, we are watching what is at best a middling nuclear plant manager, TEPCO,
facing an extraordinary event aftermath that goes far beyond what prudent contingency management
would suggest, as well as a weak political regime that for now appears out of its depth.

TEPCO seems to have little critical intelligence on status of the reactors, especially the spent fuel
rods which are encased therein. The company is working on power lines to restore the pumps
needed to cool the reactors. Godspeed on that.

I have argued since early Jan. of this year that the US stock market faced a sharp correction to start
some time between mid Feb. and mid Mar. The correction started before the Japan disaster, so I
think it is difficult to determine how strongly Japan is weighing on the minds of market players.

Sunday, March 13, 2011

Monetary Policy

A more challenging period for policymakers may lie ahead. Right now, my policy gauge indicates
50% odds in favor of lifting the Fed Funds Rate, but if present trends hold in the shorter term, the
odds will soon turn to +75% assuming commercial and industrial loans continue the uptrend just
started. The one critical indicator which remains on the low side is factory capacity utilization
which at 76%+ is still well below the 80-82% level which normally signals that a more pronounced
cyclical acceleration of inflation should be in the cards. Since capacity growth itself may only be
starting to recover, operating rates can rise significantly further this year on moderate production

The standard maneuver to raise the benchmark FFR% is to draw reserves out of the system. From
a timing perspective, I think Bernanke at least would prefer to allow completion of the $600 bil.
QE 2 program on 6/30 before turning toward reversing the build up in Federal Reserve credit. A
substantial number of Board members may wish to reverse or freeze the QE program earlier
than does Bernanke if private sector credit demand starts accelerating sharply as it has in
previous recoveries after demand finally turns the corner.

There is a growing number of economists / strategists who now think that with the economy
looking stronger, the QE programs will end on 6/30 if not very shortly thereafter. So, it is
becoming more popular to prophesize on how to play the markets after QE. On this score, I
intend to follow my policy gauge indicators and leave the strategizing to others. I say this
because we need to see how firmly C&I loans may recover to determine the wisdom of
cutting off or shelving QE. On this score, my short term credit demand / supply pressure gauge is
just returning from negative territory to equilibrium at zero%. A fast rise in the gauge would signal
that credit demand growth is outstripping the growth of the broader base of loanable funds, a
situation the Fed has rarely ignored. Far more modest upward pressure on the gauge might, for
example, give the Fed some pause. Also, remember that the banks are starting to lend more
even though loan loss reserves remain at very high levels. We may have to factor that into the
equation as well.

You can keep an eye on the 1yr. Treas. bill % to see how market players may be handicapping
Fed. policy intent. ( When business loan demand accelerates, banks may well liquidate shorter
duration Treasuries to meet that demand.) 1yr. T-bill%

Japan -- Do Not Let Your Sun Set....

Most Japan economy experts are going on record to say that as bad as the situation looks, Japan
will bounce back from the disaster it confronts. I hope they are right, but in my bones I fear for
this proud country. I think it is foolish for folks to believe that they can readily discern the effects
of a 9.0 scale quake on a modern island economy, a quake so powerful that it has shifted the country
by measurable feet. There is likely to be widespread, if not readily visible or easily discernible
structural damage of all sorts to the country. Similarly, the effects of multiple, sizable aftershocks
to the land and its infrastucture should not be underestimated. The emergency at affected nuclear
power plants has yet to peak out, with durable disruption to the nation's power grid already becoming
manifest and with radiation contamination and risks still not at all fully charted. The tsunami has
destroyed the logistics of northerly eastern Japan. Although the most heavily affected areas may be
lightly populated compared to overall density in Japan, hundreds of thousands of people face great
privation that will not be easily alleviated.

I hope the government there makes sure that it asks the world for more help than it believes it may
need. I hope every effort is made to get the nuclear power companies the assistance they require
and to make sure they in turn provide the government and the public with timely and full disclosure
of the risks inherent to the security of the power system and the safety and health of Japan's

Japan, as most financial and investment people know, is an insular society with a deteriorating
demographic when it comes to growth. There will be a scramble to rebuild and get back to
"normal". Perfectly understandable, but may be a step backward compared to a more open
look at what the country might do in the wake of this calamity to better secure its future and to
reverse it fortunes to the plus side.

Saturday, March 12, 2011

Financial System Liquidity & Stock Market

My broad measure of financial system liquidity -- the primary source of private sector funding --
has been very slowly edging up since the cyclical low point reached in mid 2009. Measured yr/yr
through Feb. '11, it is up about 1.2%. This is entrirely due to a rising level of cash and equivalent
provided primarily by the Fed's QE programs. Since total banking system credit is now closer to
expanding yr/yr, the base of liquidity growth may be edging toward broadening out and accelerating
(Total banking system credit and the loan book chart). For now, however, it is the Fed's QE programs that are carrying the load for liquidity expansion and there is little evidence to support the view that
QE should be stopped.

Private sector credit has contracted over most of the past three years, so, net-net, the US stock
market has been funded primarily by the draw down of cash reserves such as money market funds
(MMFs). Since mid 2009, MMFs have been drawn down from $3.5 tril. to $2.5 tril.with the
total balance now below late 2007 levels. Obviously, some of these funds have been drawn for
other than financial reasons, but it should be clear that reserves have been greatly reduced and
that at some point, both the economy and the stock market are going to require a stronger flow
of private borrowing, with this especially true for stocks.

Friday, March 11, 2011

Stock Market -- Technical

As discussed yesterday, the daily market chart has turned down. The weekly chart is still
positive, but may well be tested right ahead. $SPX weekly

At this point, with no new insights on the technical front, I am content to let the forthcoming
action play out for a week or two and move on to other matters.
I understand that the capital and commodities markets are critical tools of price discovery, but
today's arguments and handicapping of the quake / tsunami in Japan was appalling even by the
Street's very low standards.

Thursday, March 10, 2011

Stock Market Notes

Short Term Technical
Today's break downward puts the market in a confirmed short term downtrend. $SPX

The word is out that Street strategists are raising SPX forecast target levels for 2011. This
development reflects rising estimates for SPX earnings and sales for 2011 and is based on a
hefty acceleration of SPX sales per share in Q4 '10 as well as continuing sharp improvement in
the leading economic indicators through early Mar. '11. S&P has index sales rising by an
exceptional 14.2% for the year, with net per share forecast to be even slightly better. The estimate
for 2011 eps is now 96.20. That would put the SP500 Market Tracker up to 1587 for 12/31/11 --
a new all time high. Analysts are looking for dramatic outsized earnings gains from the energy
sector (+27% y/y) and financials (+40% y/y). Hardly anyone would embrace the 1587 projection
for the market this year, because most strategists are shading their p/e ratio estimates.

I have not started to tinker with my earnings expectations for 2011 yet and am holding at $89
per share for now.

Saudi Arabia
Fri. 3/11 is when organizers hope to have large scale protests of Saudi autocracy, even in
sunny downtown Riyadh. Protests from Shia denizens in the Saudi East have started, but the
real test will come if the Sunni majority in the country also takes to the streets. Saudi officials
have made it clear that they plan to confront such demonstrations. Don't miss this show.

Tuesday, March 08, 2011

China -- Shanghai Composite

Big China's stock market has been captive to sizable speculation away from stocks and into both
commercial and residential real estate since mid-2009. Moreover, accelerating inflation over
much of 2010 crimped the p/e multiple on the Shanghai as players raised the return rate at which
future earnings are discounted. Now, the inflation thrust measures have been signaling yet higher
inflation ahead, but the Gov. has moved in to administer certain prices and to re-shuffle the weights
of the CPI components and, presto, inflation is showing signs of moderation. The stock market
has recently responded positively to the Gov.'s signal. In addition, China's money M-2 has continued to decelerate down from an alarming 30% yr/yr growth to 17.2% through 1/11. I continue to be of a
mind that we will see M-2 fall below 15% yr/yr in the months ahead, which will take further pressure
off the inflation rate down the road. There are signs that the real economy is cooling some as well,
but I think the politics of the Party still tilt in favor of bringing the growth of money under greater
control first.

I view the Shanghai Composite as fairly valued in a range of 3000 - 3200, and I note that the 3200
level has proven to be a growing source of resistance ($SSEC chart).

Since underlying inflation pressure has not peaked yet, it is hard to say for how long players will
go along with the idea that the China CPI is moderating. the market is in an uptend now, but for
it to be convincing, the Shanghai -- now 3000 -- has to move up to and take out 3200 resistance.
I do continue uncertain re: the Shanghai short term, but with a major changing of the political
guard coming in 2012, I think the Party would like to see a rising market to herald it. So, I am
looking for a bull run to start at some point this year.

Sunday, March 06, 2011

Stock Market -- Technical

The daily and weekly market charts show violations of uptrend lines, but no classic breaks of
trend yet. The daily price charts are on shaky ground while the weeklies are still ok. The weekly
NYSE cumulative adv / dec line made a new all time high this week, a positive sign. The uptrend
in my weekly buying pressure index remains solidly intact although the six week flash of +60
indicates the market is moderately overbought on breadth.

Looking at indicators out toward 40 weeks, there has been some deterioration in momentum, but
my important 40 week price oacillator is also still in positive territory. This indicator is overbought,
as it shows momentum against the 40 week m/a at levels seen only about 10% of the time over the
past 22 +years.

I have been looking for a sharp 7% or so market price decline to occur over the mid Feb. / mid Mar. period. So far, we have had only something of a sideways move and there are no bell ringer signs
in my work that suggest a skid is right at hand. Since the window on this expectation closes in
another week and a half, I'll have to re-assess the outlook then if there is no price correction in
the interim. I shall probably have to do that anyway since the daily and weekly charts have violated
their respective trendlines.

In summary, the advance underway since the end of Aug. 2010 is losing momentum and is getting
raggedy. It is mature with significant price risk but the probable expiration date has yet to be spelled


Thursday, March 03, 2011

Leading Economic Indicators

Shorter Term
Both the weekly and monthly lead indicators I follow have recovered smartly since late summer -
early autumn 2010 and suggest faster but still moderate growth for the economy ahead. The
momentum of improvement for the indicators has been very strong. This pace of improvement can
continue for a while, but some decay in the rate of progress is likely before too long in time. I
mention this not because the economic recovery would be imperiled, but because the stock market
has been exceptionally attuned to the momentum of progress of the leading indicators. Thus, when
the slowdown comes, the market will at least pause.

Some current measures of economic activity such as the ISM report on manufacturing are showing
broad strength only seen about 5% of the time over the past 25 years. That fact should help you
keep the promise of continued economic recovery and its pace in perspective.

Looking toward mid 2011, there is a critical issue looming. The Fed, after a hiatus of several
weeks, has resumed the QE2 program and is now on plan to complete adding $600 bil. of
monetary liquidity to the economy through 6/30/11. My guess is that if private sector credit demand
does not finally begin to accelerate meaningfully, Bernanke will want to continue the QE program
beyond mid June. If this situation eventuates, there will be a big hue and cry from several
different quarters that the Fed is being reckless, and there could be a nasty political fight. but,
the hard truth is that without liquidity growth, be it money or credit inspired, the evidence of the
past century is that the economy will sink. The Fed's QE programs have been the very backbone of
the economic recovery over the past two years and have provided the confidence needed to
generate the cyclical bull market in stocks.

Longer Term Indicators
In sum, the longer lead time economic indicators are solidly positive for now. The Fed is providing
liquidity support, the real wage is growing, the FICA tax has been cut by 2%, short rates are at the
minimum, the yield curve is nicely positively sloped and the economy is miles and miles away
from a classic cyclical overheat. The one negative is that the price of oil has crossed a threshold
where it will pose a stronger headwind to growth.

There are a couple of important factors to keep in mind re: the longer term leading indicators:

***** The issue of liquidity growth must be resolved favorably by mid year 2011.

***** With 2012 a national election year, there will be pressure to extend the one year FICA tax
           reduction unless the economy is growing strongly enough to produce a substantial and firm
           decline of the unemployment rate. Otherwise, emerging fiscal drag could tinge the economic
           outlook for 2012. Ditto any grand scheme to slice the federal budget deficit before the
           economic expansion is clearly self-sustaining.          

Wednesday, March 02, 2011

Oil Price -- More Thoughts

1. Folks in Saudi Arabia are trying to plan a  "day of rage" in country on Fri. 3/11, perhaps after
Fri. prayers. Given SA's pre-eminent importance as an oil producer, traders may well try to keep
the volatility going in the market through mid Mar. The Saudis have turned pro-active in handing
out fiscal and monetary goodies to quiet discontent in the meanwhile.

2. The guys in the trading pits are kiting the price on Libyan developments even though production
there has been scaled to a minimum with a Saudi production "patch" commitment in place. So the
oil price lilly is being well gilded now on no new relevant info.

3. Over the past decade, the oil market has shown enough price volatility to support a further
upside move in price to $110 or slighly more per bl. without a drastic, more enduring change
in the calculation of excess capacity at the wellhead. There can also be $25 - 30 bl. declines
that follow on to a speculative run. That has been the nature of the beast.

4. Investment manager and trader discipline is starting to show signs of ebbing away with the
oil and oil services groups. Consider the $OSX services composite which is now at a 37%
price premium to its 200 day m/a. ($OSX). Dumb stuff.