Tuesday, February 22, 2011

Libya – for the first time, unrest has come to an oil producing nation in the Mid East - the
situation in Libya has become the most violent and the government has imposed a near blackout (no
foreign journalists are allowed to enter). The eastern part of the country is largely under the control of
opposition groups and the protests have moved into the capital city of Tripoli. Several factions of the
military, as well as senior diplomatic figures, have defected from the government. Leader Gadhafi has
ordered his army to fire on his own people and has even scrambled fighter jets to bomb protest groups.
Libya’s Warfala tribe, the country’s largest, has thrown its support behind the protesters, giving the
opposition renewed momentum. Seif al-Islam Gadhafi, the son of leader Moammar Gadhafi, appeared
on TV early Mon and delivered a rambling speech warning of civil war and vowing to destroy the outside
agents trying to bring down the country; the younger Qaddafi warned of “rivers of blood” if protests
don’t stop. The leader of one of the tribes in Eastern Libya has threatened to cut off oil exports unless
the oppression of protesters stops (this has contributed to the spike in crude prices on Mon – Reuters).
There remains widespread speculation that the senior Gadhafi has fled Libya for South America
(although he appeared on TV early Tues morning and made a brief statement, denying rumors that he
had fled). All the major credit agencies have downgraded their ratings on Libya. WSJ/NYT/CNN/Reuters
Crude Markets - OPEC on Tues said it has a clear policy of meeting any supply shortage, but for
now there is no lack of oil, a Gulf OPEC delegate said on Tuesday. OPEC could call an emergency
meeting to raise output if supply were to be disrupted. Separately, Saudi Arabia's deputy oil
minister said it will not allow supply disruptions from the Mid East to impact global supplies of oil;
according to the Saudi minister, "The market knows that Saudi has a good chunky excess capacity and a
record of using it when needed," - CNBC
Treasury market – some large investors are speculating that 10yr yields will peak at 4% and then
fall during the back-half of the year. – WSJ
Wisconsin – compromise possible? There is a push by some moderate Republicans in Wisconsin
to reach a compromise pact w/the unions, eliminating most of their collective bargaining rights now but
reinstating them in ’13. Gov Walker is insistent that his bill will pass as is through the state legislature
but nothing can happen until the missing Democratic Senators come back to work, something that may
not occur until a compromise is broached. – WSJ
Munis – Moody’s forecasts a period of defaults and distress in the muni market but it doesn’t
see a wider crisis of confidence – FT
Cotton farmers and traders clash – some farmers are walking away from contracts struck when
prices were nearly half the current level. The disputes have prompted lawsuits. – FT
Setting up a showdown early next month with President Obama and Senate Democrats, House
Republicans pushed the legislation through after a marathon debate capped off by an all-night session
Friday that spilled into Saturday morning. During the bleary-eyed final roll call at 4:35 a.m., 235
Republicans were joined by no Democrats in support of dramatic spending reductions that they said
were needed to address a soaring annual deficit of $1.6 trillion; 189 Democrats -- as well as three
Republicans -- opposed it, accusing Republicans of writing the bill with a "double meat ax." – WP