Good News / Bad News

They finally got the Sonofabitch C&%*sucker Zarqawi. About time.

That’s the good news; the bad news is, markets don’t seem to care much; Futures are down pretty significantly, as Japan sold off 3%, with most of Europe down 2%. Crude slipped below $70.

This suggests a few things to me: 

1) The forces in place taking markets lower are beyond the reach of short term news;   
2) Iraq has become such a debacle that the death of a significant scumbag is not that important;
3) The short term swings in the price of Oil, which hasn’t been appreciably below $60 very much for most of the past 2 months, is less significant to markets than previously believed.

Today will be interesting — watch for rally attempts in the futures pit, and a shot at reversing the sell off intraday.


UPDATE JUNE 8, 2006 7:32am

I hadn’t seen anyone discuss this, but the Bovespa in Brazil got shellacked yesterday — The ETF was  whacked 4.15% . . .

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  1. andiron commented on Jun 8

    barry, tell me honestly, did you really like the zarqawi news in your ursine guts?
    in any case, zarqawi’s death could prove to be even more inspirational for the insurgents…we will see.

  2. DBLWYO commented on Jun 8

    A different perspective on Abu is that he was finally getting so far out of control and alienating even the Sunni populations that AlQ would soon find it more than expediant to usher him into martrydom. Let me, in general, refer you and you readers to for hardnosed analysis based on ground truths and in this case the article:


  3. Frank Rizzo commented on Jun 8

    Damn, did I just stumble upon DailyKos? What the hell happened to this site?

    BR: Yeah, that sort of crap is totally unacceptable to me.

    And the funny thing is, last night’s open thread was an intelligent and productive conversation . . .

  4. S commented on Jun 8

    Convenient timing to get him just as the mid-term election campaigns start to heat up. What’s the over/under on capturing or killing Osama before the elections?

  5. sell_the_dow commented on Jun 8

    Hate to burst your bubble fellow Ritholtz fans, but here is what a real Iraqi insurgent says about this guy:

    Interviewer: Is Al-Zarqawi, with all these capabilities, real, or is he an illusion?

    Muqtada Sadr: Personally, I believe he is fictitious.

    Seems like an awful opportune time to knock off a so-called terrorist kingpin with equities on thin ice, and the dollar trying to sustain its dead cat bounce. Unfortunately Zarqawi wasn’t the one dumping all those DJIA shares.

  6. RS commented on Jun 8

    What I found interesting in that regard is that the Brazilian Real has not fallen but has actually risen against the US Dollar during this decline. This is different from what we saw in the past in that market.


  7. sh commented on Jun 8

    nor surprized about Sadr’s quote , he’s Shia , Zarqawi was Sunni… hated each other

  8. B commented on Jun 8

    Most people think this is a direct result of Japan’s sopping up the carry trade. I tend to think at this point such news is irrelevant. So, Japan still hasn’t raised rates. If they only raise rates by 25 bps, how does that really affect the carry trade? May be less money in the system but I would suppose the marekt is reacting to the imminent American consumer slowdown.

    Shanghei Index finally joined the party after a massive run this year. People think China is immune to economic cycles. I think not. Their miracle has yet to actually feel any type of American consumer slow down…..YET. If this unfolds as it appears it will, this would be the first time China has to deal with reduced global demand for its goods.

    S&P or IMF or someone I just read issued a warning that a slowdown could kill off over 1,000 of Russia’s smallest banks. Chinese banks are basically insolvent except for their consumers. China’s current account surplus of US Treasuries is about $800 billion. Their nonperforming loans are estimated at………$900 billion to $2 trillion. China is at the biggest crossroads in a long long long long time. Why are the feeders for China’s growth falling hard? We could see a great depression in China many times worse than what we saw in a much more sophisticated Japan. The exact same scenario is unfolding.

  9. econjohn commented on Jun 8

    geez, the comments going to need monitors soon … barry, can you delete the moronic, irrelevant and childish namecalling above? (leave the intelligent, relevant and mature ones though.)

    BR: DONE!

    That sort of crap will get people banned from posting comments

  10. me2200 commented on Jun 8

    I’m surprised oil isn’t falling more. Remember the “terrorist premium” at the start of the Iraq war ?

  11. sell_the_dow commented on Jun 8

    To sh, that’s like saying Britain hates Italy because one is Protestant and the other is Catholic. In the real world people do not think in completely polar terms.

    For example:

    Voice over: The Servant of the Two Holy Mosques, King Abdallah bin Abd Al-‘Aziz Aal S’aud, met with Muqtada Al-Sadr at Al-Mina Palace last night.

    A few months ago the Sadr in Saudi Arabia.

  12. Bynocerus commented on Jun 8

    Good News, Bad News
    You know I’ve had my share
    Well the market went south for another day
    But I still don’t seem to care
    (cue insane Jimmy Page guitar solo)…

    I got the bright idea (although by no means novel I’m sure) the other day to short overseas ETFs based on weakness here in the US markets. So after the happy little reversal yesterday, I decided to short some JPN. I didn’t think THAT would happen, though. Think I’ll make a nice offering to the Trading gods, take my profits and think about how this is gonna work in the future before deciding this is the wave of the future.

  13. royce commented on Jun 8

    The market was unlikely to react of Zarqawi’s death. He wasn’t having any effect on corporate profits, nor are his people the one’s screwing up Iraq’s oil infrastructure. And as you say, if the big driver of growth in the U.S. has been low interest rates and the housing boom, where does he fit into that? He was basically a small-time terrorist with a local presence in what amounts to a very big market for violence in Iraq.

  14. GRL commented on Jun 8

    2) Iraq has become such a debacle that the death of a significant scumbag is not that important

    I respectfully beg to differ.

    The death of Zarqawi is far better news than it appears to be on the surface.

    It shows that the Sunnis in Iraq are giving actionable intelligence to the Americans/Iraqi government.

    If the Sunni establishment really supported the insurgents (or at least the foreign Jihadist elements thereof), Zarqawi would be protected. He was not.

    This, in turn, means the Sunnis, for now, have bought into the political process going on in Iraq, and will be part of at a government that is, as a result of their participation, at least marginally viable.

    Most important of all, it means we have a rat’s ass’ chance in hell of getting out of that sh*thole sometime before the next Ice Age.

  15. GRL commented on Jun 8

    Oh, and if you want some bad news, take a look at what is going on with respect to NATO, the Ukraine, and Georgia.

    There, you are seeing the seeds being sown for the next Eurasian war.

  16. Memory commented on Jun 8

    Didn’t they kill Al-Zarqawi three times already? Third times the charm I guess, if you belive that.

  17. Barry Ritholtz commented on Jun 8

    Fingerprint proof and facial confirmation — I think they got him this time

  18. M.Z. Forrest commented on Jun 8

    Although not a market tech by any means, the DOW seems to have blown past its 100ma after two tests. Now it seems to be approaching its 200ma.

  19. C commented on Jun 8

    “I hadn’t seen anyone discuss this, but the Bovespa in Brazil got shellacked yesterday — The ETF was whacked 4.15% . . .”

    Blame it on the Bossa Nova?

  20. Mike commented on Jun 8

    Al-Zarqawi does not equal Bin Laden.

    Al-Zarwari=Shell Game

  21. me2200 commented on Jun 8

    Two things:

    a) Commodity traders are very dumb. CNBC just had a Mr. Rosensomething on talking about the Jim Rogers 20 year commodity cycle and how we are only 3 years into it.

    OK… just maybe the use of commodities is related to consumer spending and just maybe we have been operating in an environment of easy money for the last few years. With tightening liquidity, consumer spending is going to decrease and as a result the use of commodities will decrease as well.

    Why is it that commodity traders never look at the end user part of the equation ? I’ve seen this a number of times. Its like because commodity producers don’t have to do any marketing, they can never forecast.

    2) Last night on Mad Money, Jim Kramer dispelled the notion of an intra day rally. He said they never or rarely occurred, for a number of reasons. He was spouting stats too quickly for me to follow it.

    So… the DJI touched -170 at about noon and bounced higher. It is sitting at -117 right now. Anyone think we will close lower than -170 today ? Do margin call trades get cleared at 2 PM ?

  22. GRL commented on Jun 8

    From Stratfor this morning:

    Following the announcement of the death of al Qaeda in Iraq leader Abu Musab al- Zarqawi in a targeted U.S. airstrike, Iraqi Prime Minister Nouri al-Maliki announced that the three vacant security positions in the Iraqi Cabinet have been filled and approved by the Parliament. By providing precise intelligence on al-Zarqawi’s location, it appears that Iraq’s Sunni political leadership has demonstrated the willingness to deliver on a U.S.-brokered deal to solidify the political arrangement in Iraq.

    * * *

    Knowing that the jihadist insurgency led by al-Zarqawi cannot survive without an active Sunni support network in the country, the Shia and Americans would not give political guarantees to the Sunnis until they clearly showed the ability and willingness to contain the insurgency. The death of al-Zarqawi represents the first real concession delivered by the Sunni political leadership to secure its political standing in the country. His elimination also serves as a catalyst for developing the U.S. exit strategy in Iraq.

    (And, not to plug, but, Barry, if you don’t already, you should subscribe. It’s worth it.)

  23. S commented on Jun 8

    Many experts keep talking about commodity cycles lasting 15-20 years. And that is historically true.

    But hasn’t mining technology advanced at all since the last major commodity cycle of the 70s? I have to believe it has. Which makes me believe the miners are now able to dig deeper and faster than they could 35 years ago. They can likely refine the stuff faster than before, and ultimately bring it to market quicker. Doesn’t this imply the mines will be depleted sooner, making for a shorter cycle?

    I think it might be dangerous to say that just because past cycles were a certain duration then they will ALWAYS be that duration. That kind of thinking implies a static world and ignores advances in technology.

    But then, I’m not a Harley riding, globetrotting billionaire frequently on TV talking my book, so take it with a grain of salt (or a pound of copper, or an ounce of gold…..).

  24. royce commented on Jun 8

    I’ve been struck by by just how often that 15-20 figure has been invoked lately by people pushing the commodity story. Just sits out there by itself, stripped of context and backed up by generalities about busy asians and gold-loving Asians. There’s something too facile about that kind of analysis. It doesn’t account for all the “what ifs” out there that could stand in the way of continuous, rising demand.

  25. Barry Ritholtz commented on Jun 8

    It doesnt seem like the materials industries really began adding additonal infrastructure / capacity until very recently

  26. me2200 commented on Jun 8

    Sounds like we agree that the commodity cycle is going to be a bit different this time. One has to remember that the 1970s were full of inflation. In fact the Fed printed money so people could handle price increases, which fed further inflation.

    This time it appears we’ve got a Fed that is going to fight inflation. The White House just released a revised economic forecast. Growth at 3.6% versus 3.2% before. Inflation at 3% versus 2.something before. The 3% inflation number bothers me. I think it is time Bernanke got on with more rate hikes if that is the case. I’d like to see 50 basis points, ASAP. I was happy to hear that the FOMC briefly discussed 50 BP last meeting.

    I can see that Larry Kudlow is going to be crowing long and hard abut the revised GDP number being 3.6% versus 3.2%.

  27. me2200 commented on Jun 8

    “It doesnt seem like the materials industries really began adding additonal infrastructure / capacity until very recently”

    They didn’t have to ! Oil was $18 a barrel, lots of supply. Copper was $1.something a pound. Lots of supply.

    As soon as we slow down a bit, we will have lots of supply again, too. And the companies that did big acquisitions will get burnt. Anyone remember Gulf Oil ?

  28. royce commented on Jun 8


    That’s a fair point, and it’s something to think about. On the other side, if the current high level demand is the result of huge amounts of stimulus and certain systemic imbalances soon to be corrected, we could see a scenario where demand falls back within existing capacity. If demand drops significantly, the chance of the kind of shortages Rogers evisions would probably shrink, too.

    Also, I’m not rejecting the idea of a long term bull market; I’m just a little suspicious of how often that single meme is invoked when the subject comes up.

  29. B commented on Jun 8

    “Many experts keep talking about commodity cycles lasting 15-20 years. And that is historically true.”


    Can you point me to a graph showing any particular commodity experiencing a rising price for 10-20 years? ie, A commodity bull? Obviously one that corrects here and there. Sans, OPECs game with oil, that is.

  30. Cherry commented on Jun 8

    That shows Sunni political leadership is willing to bargain? Huh? Z was a nobody. Overhyped Military myth.

    The “real” Sunni army is ex-Republican Guard members who setup Gforces all around Iraq after Saddam’s “ouster” to do what they have been doing, causing disruptions, picking fights with Shiites to cause more disruptions. They are laughing at Z. The fight is over, Iraq’s government is nothing more than a puppet stringed nobody who doesn’t have much more longer to live. Civil War it shall be.

  31. Detroit Dan commented on Jun 8

    Zarqawi’s death is good news. He was the worst of the terrorists in Iraq, from what I’ve heard. This will make things easier for President Gore (or whomever) in 2009…

  32. me2200 commented on Jun 8

    I’ll give you some trends all right. Wheat and copper have been depressed for years and years. Until recently oil didn’t move much since the early 1980s. Zinc has been an absolute joke, as has aluminum.

    Sure, all these moved recently. But for the 15 years prior to that their value fell in inflation adjusted dollars. Remember back in the dot com days ? How many times did someone tell you to load up on zinc ? Zilch !

    I don’t know a lot about Rogers, but every squirrel finds a nut sooner or later. Sure oil is soaring right now along with copper and zinc. We also had record high homebuilding for the last 4 years and now the speculators have the market cornered on some of these commodities. Sure, their prices have gone up. but I think that is all about to change when the stimuli are removed. The US now has 4 million unsold houses and a home ownership rate of nearly 70%. It might take a while until we need as much copper and zinc as we have been using.

    That is my take. If I’m wrong, please tell me. I’d love to make some more money on commodities.

  33. Kai Middleton commented on Jun 8

    Iran appears to be hoarding gold:

    Iranians are going for the gold – at least until someone else cuts them off.
    To forestall an effort by the West to seize Iranian assets in Europe, the Iranian leadership decided last fall to begin a massive, secret repatriation of its international currency reserves, according to Central Bank of Iran documents.

  34. VJ commented on Jun 8

    ‘GRL’ posted:

    “I respectfully beg to differ. The death of Zarqawi is far better news than it appears to be on the surface. It shows that the Sunnis in Iraq are giving actionable intelligence to the Americans/Iraqi government.”

    Actually, it’s far more likely that it was al-Qaeda that dropped the dime on Zarqawi.

    A) Zarqawi was replaced as the leader in Iraq for al-Qaeda months ago:

    B) The al-Qaeda leadership was pissed with Zarqawi’s actions in Iraq:

  35. S commented on Jun 8


    If you have access to Stifel Nicolaus research (the old Legg Mason guys), they put together a very comprehensive report when they initiated coverage on the E&C infrastracture builders. In it, the analyst presents alot of data showing the commodity cycles are long lasting and last many years.

    I can’t find it on my PC so I must have deleted it. I think it was published sometime around the first of the year…or early spring.

  36. juan commented on Jun 9

    While specific to oil, I think that – especially when updated – this excerpt from a September 1998 report by Matt Simmons says all you need to know about the commodity price run up:

    “Effectively, the changing perceptions of a small handful of speculators now appear to set the price for West Texas Intermediate crude oil, which in turn sets the general price for almost all other crude grades throughout the world.

    If this is true, the world’s most important commodity is being priced by a handful of hedge funds or individual speculators who, as a group, invest less than $100 to $150 million at any period of time. The 1997/98 “MG equivalent” could be the build-up of an historically high short position in crude oil contracts over the past three months by this small group.

    This does not mean that these speculators are necessarily wrong in their bearish views. Our intention in this report is to highlight that in the NYMEX crude oil market, price is not the beacon for fundamentals. Rather, it reflects the psychology of a small group of financial players. Therefore, it is crucial to evaluate the facts relating to supply and demand, rather than focusing on price.

    For all those that fervently believe price movement always reflects fundamental changes in physical markets, the discussion in this paper bears careful reading. Our work strongly suggests that large swings in the funds’ net position in oil contracts on the NYMEX have driven virtually every significant movement of crude oil since the MG position was unwound in early 1994. The single exception was a brief period in the fall of 1996 when physical tightness in the market itself set the price of oil.”

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