Dear rss free blog,


will be no issue Monday, Yom Kippur. The Day of Atonement) is the
holiest day of the Jewish calendar. when God seals our fate for the
coming year. On Rosh Hashanah (New Year) it is written; on Yom Kippur it is sealed.
On Yom Kippur 1973, Israelis noticed military vehicles driving in the
streets and reserve soldiers were called from synagogues to duty. At 2
PM sirens sounded all over Israel. It was under attack!
    The Yom
Kippur war came as a surprise, a joint attack against Israel by Egypt
which crossed the cease-fire lines in the Sinai Peninsula, and by Syria
which attacked along the Golan Heights. The thin Israeli defense lines
were annihilated by massive Arab forces.
    Unlike other armies,
Israel depends on Israeli Defense Service (IDF) reservists, many of
whom were fasting and praying on that day. They hurried to join the
battle to defend their country. After a few days of fierce fighting,
Israeli forces managed to stop the invaders and infiltrate behind their
lines. IDF forces under Gen. Ariel Sharon crossed the Suez
Canal into Egypt, effectively cutting supply lines of the invading
Egyptian forces. Facing no opponents, the Israeli army stopped
voluntarily 101 km from Cairo.
    In the north, the Syrians met
stubborn Israeli defense led by individuals and small units that slowed
their advance. One single tank commander, Avigdor Kahalani, managed to
destroy over 200 Syrian tanks. Another small tank unit called “Zvika
Force” stopped a full Syrian division. The IDF pushed the Syrians back
into Syria and got within 35 km of Damascus, capturing Mount Hermon,
“the eyes of the country”.
    But because the IDF was so close to
the two Arab capitals, the two superpowers of the day, the USA and the
USSR, imposed a ceasefire Oct. 24, 1973. The Israeli government headed
by Golda Meir and General Moshe Dayan both resigned for mishandling the
    Yet the apparent miracle reinforced the Israeli sense of
destiny which had already led the country to hold on to Arab-inhabited
areas like the West Bank and Gaza, captured by Israel in 1973 in an
earlier victory against attacks by Arab states.
    More recently,
the invader, in Lebanon and Gaza, was the Jewish State (however
provoked, and however frustrated by informal Palestinian attacks), not
the Arab States. On a day when Jews examine their consciences, this is
a change they will have to think about too.
    In my penitential mood, I have been reading Gertrude Himmelfarb’s new book, The Jewish Odyssey of George Eliot,about the origins of Eliot’s last novel, Daniel Deronda.
For those who did not read her books in high school English classes as
I did, Eliot was the pseudonym a Christian-born woman, Mary Anne Evans,
who advocated Zionism as Deronda learns of his Jewish heritage.
Although it is only incidental to her story, Himmelfarb tackles the
accusations of the late Edward Said, an Arab historian of ideas, who
blamed the Jews of the Zionist movement for wanting to settle “a people
without a land” in “a land supposedly without people”, ignoring the
Arabs who lived in Palestine. Actually Said should have blamed the
British. Not just Lord Balfour and Gen. Allenby in the 20th century,
but also Judaeophiles of the 19th century like Eliot and Lord

     On the wall across from the UN headquarters in NYC, the following is written:  They
shall beat their swords into plowshares, and their spears into pruning
hooks; nation shall not lift up sword against nation, neither shall
they learn war any more. (Isaiah 2:4)  

     A note for
readers puzzled by the halt in the crude oil price increase and trying
to figure out what it means for the dollar and gold. The answer is not
much. The price of oil normal suffers from contango, meaning higher
prices for oil tomorrow than for oil today. (The reverse is true of
some commodities which display backwardation, lower prices tomorrow
than today.)
    With contango in play, you can stockpile oil in
empty offshore tankers and pay the tanker-owner a rent which comes out
of the contango, the extra money you will get when you sell the oil.
This storage game is played by hedge funds and traders, as well as oil
companies and banks.
    But now both the US and China are
importing more oil so the the tankers began moving the stored oil to
ports. The impact was to keep the price below $70/bbl. But the contango
slipped even further down so the result was that the tanker rental
costs became too high for the tomorrow oil price.  That meant still
more crude was being siphoned off even more ships. Now a shipping
brokerage figures that only half as many tankers are being used to
store oil now as 6 months ago. But the number of crude floating storage
is still 4 times normal levels and will probably fall further.
There are good reasons why the price of oil will go up eventually,
however, notably that the new oil finds will be very expensive to bring
on stream. $70 oil just won’t swing it. For paid subscribers this has
implications for our stocks. 

    Apart from Israel and Czech
Republic, another central bank thinking about raising rates is
Norway’s. The problem is the same: a relatively healthy economy at risk
of inflationary pressures, 1.9% annualized price hikes for Norway now
(excluding oil and gas). But the Rijksbank connot raise interest rates
because the inflow of rent-seeking carry trades would push up the
    These days, the reason for the Chinese stock market
weakness is said to be the authorities’ plans to cut back on the
stimulus to fight potential inflation. Some of that logic is also
feeding into the U.S. market psychology. Again there is a logical way
to invest if you think China’s central bank is turning hawkish: you buy
stocks producing what Chinese people want to buy. Or in sectors where
China has an edge regardless of price.
    What I hear is that even
Brazil is pondering higher interest rates. Sanitizing the potential
inflows to stop the currency moving upward can be prohibitively
expensive. But if enough countries are in the same position, perhaps
their CB governors will be under less pressure individually. I suspect
there is talk about these matters going on in Pittsburgh.

    *Now for paid subscribers…