Wednesday, September 4, 2013

7 Must-Reads for Wednesday

1. Despite doom and gloom about Social Security, the program's trust fund assets rose 6.5% in 2012. 

2. Russia offers tax breaks to promote developing its enormous tight oil reserves. The US Energy Information Administration, in a recent shale oil study, estimated that Russia holds the largest technically recoverable shale oil resources in the world, at around 75 billion barrels. America's shale oil resources ranked number two in the report, with an estimated 58 billion barrels.

3. US Refiners don't care if Keystone XL gets built.  Really, the only reason to build it now is the temporary construction jobs, but that's still a considerable investment and economic boost.

4. There's a fascinating report in the Washington Post about the dimensions of US offensive cyber-operations. "Under an extensive effort code-named GENIE, U.S. computer specialists break into foreign networks so that they can be put under surreptitious U.S. control. Budget documents say the $652 million project has placed “covert implants,” sophisticated malware transmitted from far away, in computers, routers and firewalls on tens of thousands of machines every year, with plans to expand those numbers into the millions."

5.Trade Deficit increased in July to $39.1 Billion.

Source: Calculated Risk.

Basically, we still import a lot of oil. Even though the amount of barrels we import is down (dropping 3.1% year over year), the cost of those barrels is up, what with oil prices breaking out to the upside.

Also, imports from China jumped 8.3% in July, while exports to China fell 4.9%. Pesky Chinese -- buy more of our crap, okay?

Nevertheless in the big picture US export volumes stand 3.3% higher than one year ago while both measures of capital and consumer goods are 1.4% and 0.5% better than a year ago. And speaking of good economic news ...

6. Chart of the Day: ISM Manufacturing.

Source: Bespoke

Yesterday's release of the ISM Manufacturing report for the month of August came in stronger than expected (55.7 vs 54.0), building on last month's surprising increase.  The ISM Manufacturing index is now at its highest level since June 2011.

My take: Keep your eye on the bond yields, which keep cranking up.

See also this analysis: "The overall ISM index rose in August to 55.7, somewhat higher than consensus expectations of 54. This represents a clear acceleration of activity, and follows a similarly strong report in July (55.4). Perhaps most encouragingly New Orders (red) rose to 63.2, the highest reading since April 2011."

Bonddad also offers analysis of the ISM Manufacturing numbers with easy-to-read charts. 

7. Finally, Niall Ferguson is a buffoon. Maybe the important and serious people should stop listening to him.

And finally-finally, I could write about gold, but it's up big one day and down big the next. I'm still looking for a short-term correction, one that I think will be a great set-up for the next leg higher. Pick your targets carefully.

Good luck and good trades to us all.

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