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Strange day

This morning I woke up to the radio going-on about how oil prices had dropped, getting to my Bloomberg terminal at 7 this AM, I looked at oil prices and saw, WTI at $110/bbl – not far from Friday’s close, so a big WTF moment, then I realized that overnight WTI crude had gone up as high as $112/bbl.  Hence the radio freekout.

This morning, TSX opened down 45 pts, and is now near -85 pts, the news is that commodity prices are off.  So I checked “King” copper, and he’s up.  Mr. Aluminum (he’s up too, so are steel prices).  Oh and VIX index is down at 18, like everything is fine, 18!  So I just don’t know what’s going on here.  Actually, European and Asian markets were all off in Monday’s trading  – that makes more sense than commodities reflex, and the reality of the U.S. market is driven by POMO activity (Feds’ money injection machine).  My guess is that around 3 this afternoon the U.S. market will roll over.

Kaddafi (or Gadafy depending on your preferred spelling) is looking at a serious problem with the “rebels” and is in the process of buying time (maybe looking for a country that would take him and his family in?) from the “Coalition” (read the French Air Force here).  Hence oil prices are off a little this morning.  Fundamental problem in the oil market is the excessive speculation in the OTC market – we are talking net long position close to the 2007 peak.  The other problem in the oil market is demand and supply – there is virtually no systemic spare capacity:  America’s oil production has not changed in a decade, Mexico is falling fast (will start importing by 2020).  Canada is still growing but from a low base.  Middle East has not risen for more than 4 years.  Iraq oil is the only game in town now for supply growth.  Finally, and this is the kicker whereas in 2002 demand was 80/20 OECD/Developing world, it’s now 50/50 – and developing world is growing fast.

Back home we are in election mode.  You almost have to disregard the news cycle because the level of BS is simply astonishing.  Worse of the lot are the Conservatives (my natural affiliation), who are picking up cash from thin air on a daily basis (actually on Sunday nearly $7 billion magically appeared).  Ignatieff (the guy running for the Liberals) continue to behave like a university professor – and a particularly pompous one at that (you know the type, he’s always got to show how *&$# smart he is!).  Fortunately, I live in an electoral riding which consistently picks the Liberal candidate – Conservative candidates usually finish in 3rd place, so my very reluctant conservative vote will be wasted.  Moreover, I really really like the Liberal candidate – smart and well spoken.

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