I was so worried about the data this morning I couldn’t sleep!
My concerns are discussed in depth in last night’s post so I won’t get into it here but the numbers will begin to come out while I write, although very close to the publishing line so all I can say at the moment (8am) is that everything is looking like I was worried it would, with a big boost in the futures looking like a bull trap for foreign traders who seemed more enthusiastic about our "rally" yesterday than we were.
Bush is about to come on TV and remind us that we are on the brink of restarting the Cold War or maybe a Hot War with Russia over the Georgia crisis. "Russia has tended to view the expansion of freedom and democracy as a threat to its interests." Yes, Bush just said that… Try to imagine being Russian and not being insulted by that statement! I can believe that Bush doesn’t know this but Russia does hold elections, and they have been subject to no more International scrutiny than, say, the 2000 US elections and none of their Presidents had to go to court to be declared the winner.
While we may give the President a pass, because we know Bush probably spent all day just learning how to pronounce Tbilisi, people living in Russia will only hear the US President saying they are against Freedom and Democracy - two things they suffered and fought very hard to win their whole lives and supposedly have been living under since President Yeltsin stood on a tank in front of Russia’s parliament in 1991, shaking his fist as he spoke out against the communist hard-liners, who now hold less than 1/3 of the Russian Duma (Congress).
Of course Bush is right in that we should condemn ANY nation that is goes to war on a flimsy excuse to conduct a naked act of aggression that is all about seizing land, oil and other resources, mindlessly destroying a civilian populace in the name of "peacekeeping." Of course, we are experts at peacekeeping, Bush failed to mention in his speech today that we already had 100 military "trainers" in Georgia who have been been training troops there for quite some time. Since most of Georgia borders only Russia and the Black sea, you might see why Russia would get the wrong idea when Bush sends troops to train a Georgian army, who did actually start this by attacking Russian positions last week….
This is simply another move we’re taking to send troops to aid oil companies, who have huge investments in the oil and natural gas pipelines that run through Georgia from Central Asia, providing Billions of dollars of annual revenues for US oil companies. Putin has been calling Bush a hypocrite, saying: "Of course, Saddam Hussein ought to have been hanged for destroying several Shiite villages," Putin said after the U.S. airlifted Georgian troops home from Iraq. "And the incumbent Georgian leaders who razed 10 Ossetian villages at once, who ran over elderly people and children with tanks, who burned civilian alive in their sheds — these leaders must be taken under protection." I’m not really trying to get into the merits of this conflict but let’s just be aware that it’s not going away quickly and and it involves vital oil interests, so let’s not get too complacent..
Asia was mixed this morning, not at all surprising, as the entire global economy shows signs of slowing, which is probably doing more to keep the price of oil down than the rising dollar. Hong Kong had its first decline in growth in 5 years and the Hang Seng dropped 232 points in an ugly close. Europe is off ahead of our open but have picked up slightly as our Empire State Index came in at a very surprising +2.8 vs. a -5 expected, that is also boosting our futures, at least until we get the industrial production reports. The Empire State index is for August, when we are improving, the Industrial production is for July, when we were still hurting…
Most of Europe’s gains came off a weak Euro play, led by airlines -- Ryanair (RYAAY) is a good momentum play this morning and we can sell the Sept $25 puts for $2.50, 10 for the Stocks Portfolio -- and exporters. That’s good but it’s not about fundamentals, just currency fluctuations that can quickly reverse.
9 am - Net Foreign purchases came in weak at 53.4Bn vs. 57.5Bn expected and down very sharply from 83.2Bn in April. It’s old news but it knocked the futures down a bit. Look for this number to be sharply higher in the August report, which we will not get until October unfortunately. 9:15 - We got a 0.2% increase in July Industrial Production, worse than June’s 0.5% but better than expected and I think a very good sign that we quicly turned things around in July. Capacity Utilization was right in line at 79.8%, up a point from June. Don’t forget Michigan Sentiment at 10 am, but I’m in a better mood already!
If the markets head down, we’ll take advantage of the dip to improve our positions, but not too much risk over the weekend as we do have the makings for WWIII over in Europe.