Miracle Monday – Putin Wins with 99.7% of the Vote

99.7% – in Chechnya!

That's right, the very place where Putin brutally put down civil unrest and the same place where they still launch terrorist attacks on Russian targets apparently LOVES Putin.  All of Russia "loves" Putin as the former KGB Boss turned Russian Boss sailed to another Presidential victory.  Nationally, Putin scored about 63% of the vote with his worst showing in Moscow, where just 48.7% voted for him but, unlike the US, Russians choose between 5 parties so 48.7% is pretty good while 99.7% is INcredible (as in NOT credible)!

So it's "meet the new boss, same as the old boss" in Russia this morning and before you think "that can't happen here" – perhaps you should consider how our own propaganda networks covered this election.  Here's a video of Fox (of course) showing video of a "violent rally against Putin" complete with fire bombs, riot police, etc.  

Only it isn't Russia – it's Greece.  Fox knows their viewers are so gullible, they don't even bother to edit out the Greek letters on the bank in the background because, as any Fox viewer knows – Russian, Greek – all the same nasty unAmerican languages.  

CNN is no better, showing a soccer rally and narrating it as violent protests against Putin (end of same video).  The fact that these deceptions aren't considered major news in THIS country let's you know how dangerously close we are to seeing one of our own candidates getting 99.7% of the vote one day as one group of thugs or another consolidates their hold on our Government and our Media. 

So happy Monday to you!  It was a pretty boring weekend so not much to report other than the Eurozone PMI fell 2% in February to 49.3 (contracting) while China's Feb Service PMI dropped 9%, into negative territory at 48.4 (contracting).  China also lowered their GDP target by 6%, from 8% to 7.5% as Wen Jiabao says "the nation needs to shift to a more sustainable and efficient economic model."

Hmm, China's Premier says their growth is unsustainable – don't worry folks, move along – nothing to see here….  Unwilling to ignore the situation is Credit Suisse's Dong Tao, who says The commodity super-cycle underpinned by China has drawn to a close as Chinese commodity needs have peaked as the nation transitions to domestic consumption and away from exports and infrastructure building as a driver of the economy.  

"In our view, the golden age of infrastructure investment is behind us now, the golden age of the housing boom is behind us, the golden age of export is behind us, and the golden age of policy stimulus is behind us." 

This was not good news for oil, which dipped to $105.50 overnight and gold, which fell to $1,695 as well as silver, which touched $34 in overnight trading (we were short – see "Fake News Friday" and "Threatening Thursday").  This morning, as we expected in Member Chat, the Dollar is being taken back down from 79.55 to goose the Futures so we should be back to Friday's closing levels by the time the show starts at 9:30 but, after that, I'm not expecting a good day.  

Oil prices must be in trouble because they are releasing the TBoone on CNBC this morning.  David Fry sees USO topping out here at $42 and, as I mentioned, we went short USO with the April $40 puts, which we caught on Thursday's fake news spike at $1.08 and finished Friday at $1.45 (up 34%).  We're hoping to revisit that rising 22 dma at about $38 as we draw closer to the April contract expiration on Wednesday, the 21st.

A lot of that depends on whether or not Iran behaves themselves.  Our friend,
Ahmedinajad's party suffered a humiliating defeat in the elections this weekend but he remains President until 2013, yet with very little actual support left (ie. lame duck).  My comment to Members Saturday morning is worth repeating as Iran will shape much of the month of March:  

Now the focus will shift to who the likely President will be in 2013. The new Parliament comes in in June and I can't imagine an attack until we at least hear what they have to say. For Iran, it would be an excellent time to extend an olive branch – it's even possible for them to impeach Ahmadinadjad now so he doesn't really have the option of cranking up the rhetoric between now and then unless he wants to hang himself, HOWEVER, he may start a war on the assumption that he can convince people not to change horses during one – that's still a possibility but only stays with him through June. 

At the moment, the NYMEX strip is fairly crowded, with 251,000,000 April barrels that have to be rolled into what is already 406M barrels in the next 3 months – this is a very dangerous situation for the longs, who have to get rid of about 20M barrels worth of contracts per day for the next 12 days and it's not likely they can keep the fear factor high enough to unload that many barrels over $105.  

Of course, we do have summer driving season kicking off at the end of may for the Holiday weekend so hope may spring eternal, at least through the end of April, which is what happened last year until the first week of May, when oil fell from $114.83 to $95 (17%) in a week. We figure we'll get that drop eventually and, until then, we're happy to just keep rolling our puts along to stay in position to take advantage when it comes. 

It's difficult to know when the right time will be but, if you keep hanging out in the right place – then the odds of you being in the right place at the right time become much better!  

The current risk/return profile of the S&P 500 belongs in a "Who's who of awful times to invest," writes John Hussman, comparing today to 1972-73, summer 1987, and a number of peak spots post-1998. "A breakdown of the market from this range has been deferred only through repeated and extraordinary central bank actions."   ING's Paul Zernsky, on the other hand, thinks the S&P's 14.1 p/e ratio is still a good deal (I detailed how these figures are misleading last week).   

We're trying to stay neutral on the subject this week and just follow our levels but these is nothing I read over the weekend that made my change my overall view that the market has run well ahead of itself on inflated expectations and is due for a correction.  As I said to Members last week, I'm targeting 750 (down 6%) on the Russell by the end of the month, which means (/TF – Russell Futures) are a great short below that 800 line if I'm right and oil (/CL) of course below $107 is very playable of this morning's BS pump-job as well.