Flooding on the Mississippi River is approaching New Orleans, leaving officials with a dilemma on how to handle it. In about 72 hours, floodwaters will hit the Old River Control Structure — essentially a canal linking the Mississippi River with the Atchafalaya River. This structure controls how much water goes into the two rivers; under normal conditions, the Lower Mississippi gets 70 percent of the flow and the Atchafalaya gets the remainder. The U.S. Army Corps of Engineers is currently debating doubling the flow of water into the Atchafalaya and opening the Morganza Floodway downstream, which — in theory — would remove the flooding threat downstream on the Lower Mississippi, including New Orleans, at the cost of flooding the Atchafalaya Basin, a lightly populated area with only a few thousand acres of cropland. The graphic above shows the worst-case flooding scenario estimated by the Army Corps of engineers if the Morganza Floodway is not opened. (Stratfor)

After last weeks confusion if one of the better Strategist, Rosenberg, went bullish from being permabear, we don’t know, but here is Rosenberg’s full report. Good reading, but is he bullish or bearish now?

It is a shame that some media types decided to cherry pick and distort yesterday’s commentary. For the record, here is what I said about the near term market outlook:

“On a very near-term basis, and despite my long-standing macro concern list, which has not gone away, it does look like the market is set to rise further. The technicals are suggesting as much, though I do await what Walter Murphy may have to say on the matter. I had said before that a breakout to new highs led by higher volume would be an important technical signpost. Well, we achieved that Holy Grail yesterday — both in level terms and with respect to the change. This is not about throwing in the towel, it is an acknowledgment of what the market internals are flashing at the current time from a purely tactical and technical standpoint.”

brunch with dave

After averting government shut down some weeks ago, the Us needs to sort out the debt ceiling soap opera. With only days before the debt ceiling is breached, politicans seem far away from reaching a deal.

“Senate Minority Leader Mitch McConnell said he wants “significant” cuts in federal spending, including for Medicare and Medicaid, in exchange for agreeing to raise the U.S. debt limit.

Speaking to reporters after Senate Republicans met with President Barack Obama in Washington, McConnell also said he would insist on a two-year cap on spending, set at Congress’s discretion, to help bring down the deficit.

“To get my vote, we’re going to have to establish a cap in year one and year two,” he said.

McConnell said he wants broad changes to the Medicare and Medicaid health-care programs to help restore the nation’s fiscal balance. While he said he favors addressing the long-term solvency of Social Security, that is unlikely to happen now because of Democratic opposition.” (Bloomberg)

http://www.bloomberg.com/news/2011-05-12/mcconnell-seeks-significant-spending-changes-in-debt-plan-1-.html

Mr Taylor has been around for some years. One of the more respected in this industry. Let’s enjot the last legs of this bull, until it all ends abruptly. Bllomberg reports;

“John Taylor, founder of the world’s largest currency-hedge fund, said the rally in higher-yielding assets is coming to an end with Europe’s sovereign debt crisis resurfacing, growth sluggish and banking systems unsteady.

“This is the end of the nice slow moving risk rally that has lulled us pleasantly to sleep since the first half of 2009,” Taylor, chairman of New York-based FX Concepts LLC, said in an interview. “This warning is worthy of a brass band and bright lights as the other side of this low volatility rally will most likely be a scary descent that will have a very negative impact on markets. Our statistical models say we are about at the end of the road for risk.

Higher-risk assets, such as equities, the euro and emerging market currencies, have either peaked or will do so by end of July, according to Taylor, who manages about $8.5 billion and uses statistical models to help predict future movements in assets. Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a Bloomberg survey released today found.”

We wonder if Greece will open inquiry into this statement;

“There is absolutely statistically no way that Greece can survive,” said Taylor, who just returned from France. “There is a one in 10,000 chance; if the Germans give Greece their money to pay back their debt then they’ll be fine. But there is no way Germany will do that.”

http://www.bloomberg.com/news/2011-05-12/currency-hedge-fund-manager-taylor-says-risk-rally-is-coming-to-an-end.html

As we have reported for the past weeks, debt ceiling is soon (b)reached. We will bring you the latest figures after today’s summary. Meanwhile Reuters reports of how the debt ceiling is taken care of among policymakers. Sounds like kindergarten.

“With pressure mounting in Washington for a budget agreement that can clear a path to raise America’s debt limit, only one thing is clear: nobody yet knows how to get there, and a deal appears as far off as ever.

“Nobody can get a handle on this because there is no handle,” said a veteran Republican strategist. “The overall picture really is as muddied and unclear as it looks. Anybody who says they know what’s going to happen here is lying. They don’t.” (Reuters)

http://www.reuters.com/article/2011/05/12/us-usa-budget-debt-turmoil-idUSTRE74B6CW20110512

We reported about TEPCO early this morning, but here is some additional information. No more sushi, that’s for sure.

“Tokyo Electric Power Co., the operator of the crippled Fukushima Daiichi nuclear power plant, revealed Thursday that holes had been created by melted nuclear fuel at the bottom of the No. 1 reactor’s pressure vessel.

The company said it has found multiple holes adding up to several centimeters in welded piping. Earlier in the day, it said the amount of water inside the troubled reactor was unexpectedly low — not enough to cover the nuclear fuel — hinting that a large part of the fuel melted after being fully exposed.

The finding is raising concerns that the company will face difficulty achieving its plan to bring the damaged reactors to a stable condition known as a ”cold shutdown” in about six to nine months, observers said.”(Kyodo)

 With yesterdays crackdown on Mr Raj, US Justice department, is gaining some momentum. Could the negative outcome in the Raj trial spill over to Goldman Sachs?

Reuters reports; Goldman Sachs Group Inc. declined the
most in more than a year after an analyst told investors to sell
the stock on concern that the Department of Justice faces
growing pressure to bring claims against the firm.
     The bank dropped 4.7 percent to $140.93 at 12:49 p.m. in
New York Stock Exchange composite trading, the biggest decline
since a 9.4 percent plunge on April 30, 2010.
     Goldman Sachs, the fifth-biggest U.S. bank by assets, was
one of three banks singled out in a report on the financial
crisis by the U.S. Senate’s Permanent Subcommittee on
Investigations last month. The panel, whose findings were
referred to the Justice Department and the Securities and
Exchange Commission, said Goldman Sachs misled clients about its
bets on mortgage-related investments.
     “It now appears that the pressure on the Justice
Department to bring a criminal lawsuit against Goldman is
building to a high pitch,” Richard X. Bove, an analyst at
Rochdale Securities LLC, said in a note today to investors.
     Stephen Cohen, a spokesman at New York-based Goldman Sachs,
declined to comment on Bove’s note and the stock price decline.

After the bond auction, market is on risk on mood. This feels really liek we are back to wax on, wax off market. Gold above 1500, silver bounced off 32 level, going into plus territory soon. Aud/JPY gaining some, but overly super strong. Teflon market still in no trend. Only disturbing to this rally is Goldman Sachs performance today…..

Rolling Stones attacks Goldman. After yesterday’s article People vs Goldman, the stock is taking a beating. Matt Taibbi is delivering a huge article accusing Goldman Sachs of all kinds of crimes. For the ones who missed the article yesterday,

http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511?page=2

Since we have experienced some disturbing action in the markets last couple of days, SPX refuses to break up, we examine if Sell in May is the way to go? Below link to Malekan’s week old New Saying video. Rather self explanatory.

http://omidmalekan.com/?p=424