Feb 23. Libyan revolution. Change at the margin.
–Five year notes are being auctioned today. The yield fell 14 bps from Friday afternoon to yesterday’s close as Libya’s revolution captured the attention of markets, especially oil (+8.5%). Ten year yield fell back below 3.5% (now 3.46%), down 13 bps from Friday close.
–Stocks fell with Nasdaq down nearly 3%, and S&P down around 2%, the latter’s fall cushioned by oil stocks.
–Walmart down 3% due to poor execution. Home prices down over 4% y-o-y but Consumer Confidence is soaring (to 70.4 from 64.8).
–When faced with revolution, it seems that most of the world’s ruling class either flees with all the plunder that can be transported out, or vows to ruthlessly crush the opposition. In the US, politicians flee their jurisdictions when faced with… an uncomfortable vote. I just can’t figure out why the rest of the world has lost respect for the US.
–Rolling crises that have recently transpired seem to be successively more immune to the medicine of monetary/fiscal policy. For example, the subprime crisis (initially thought to be contained), exploded and was eventually mollified with low rates. European sovereign debt crisis, (initially thought contained to Greece) has spread to Ireland and Portugal, with a German monetary firewall hoping to save Spain. But the N African and Mideast revolutions have transcended Wizard of Oz theatrics of western central bankers yet CNBC still advocates “buying the dip”. If I only had a brain.
–The subprime crisis was thought to be manageable because the percentage of those mortgages was small. Greece was thought to be isolated because the size of the economy relative to the EU is small. Libya’s oil production is relatively small compared to all oil produced. Change happens at the margin, in inches. As Al Pacino says on Any Given Sunday:
On this team, we fight for that inch
On this team, we tear ourselves, and everyone around us
to pieces for that inch.
We CLAW with our finger nails for that inch.
Cause we know
when we add up all those inches
that’s going to make the fucking difference
between WINNING and LOSING
between LIVING and DYING.
