The Saudi Market Got Crushed Today, As Mideast Unrest Spread To Oman

The Saudi market crashed 4.9% today as Mideast unrest continues to spread. And it's not just Yemen and Bahrain and Libya.

Two protesters were shot dead in Oman.

Here's a look at the Saudi market over the last month.

Note the recent collapse.

Singapore Stocks May Extend Gains

(RTTNews) - The Singapore stock market on Friday halted the four-day losing streak in which it had declined more than 110 points or 3.7 percent en route to a five-month closing low. The Straits Times Index finished just above the 3,025-point plateau, and now traders are looking for continued support when the market kicks off trade on Monday.

The global forecast for the Asian markets is generally positive, although the upside is likely to be limited by surging oil prices and tensions in Libya. Oil companies are expected to provide support, along with technology, finance and property stocks. The European and U.S. markets finished firmly higher on Friday, and now the Asian markets are expected to follow suit.

The STI finished sharply higher on Friday with broadly based gains, particularly among the financials, properties and commodities.

For the day, the index surged 52.08 points or 1.75 percent to finish at the daily high of 3,025.16 after dipping as low as 2,971.80. About 1.3 billion shares were traded, while there were 405 gainers and 115 decliners.

The lead from Wall Street is optimistic as stocks saw substantial gains on Friday, with easing volatility in the price of crude oil drove buying interest in the recently battered equity markets. Traders largely looked past a weaker than expected reading on fourth quarter GDP growth and a consumer sentiment reading that surprised to the upside in the U.S.

In U.S. economic news, the Commerce Department reported that U.S. gross domestic product increased at an annual rate of 2.8 percent in the fourth quarter, downwardly revised from the previous estimate of 3.2 percent growth. Despite the downward revision, the positive number still indicated the sixth consecutive quarter of growth for the U.S. economy.

Meanwhile, Reuters and the University of Michigan reported that their consumer sentiment index for February was upwardly revised to 77.5 from the preliminary estimate of 75.1, well above the January reading of 74.2. Economists had been expecting the index to be unrevised.

On the geopolitical front, the United Nations Security Council has took a unanimous decision to impose sanctions on Libyan government headed by embattled leader Muammar Gaddafi over its violent clampdown on protesters. The punitive actions include imposing a comprehensive arms embargo on Libyan government, asset freeze on Gaddafi and his family, and a travel ban on the Gaddafi regime.

The major averages moved sideways late in the day, holding on to strong gains. The Dow gained 61.95 points or 0.5 percent to end at 12,130.45, the NASDAQ moved up by 43.15 points or 1.6 percent to 2,781.05 and the S& P 500 rose by 13.78 points or 1.1 percent to 1,319.88. Even with the gains, the major averages still closed notably lower for the holiday-shortened week. The Dow fell by 2.1 percent for the week, while the NASDAQ and the S& P 500 posted weekly losses of 1.9 percent and 1.7 percent, respectively.

In economic news, Singapore's industrial output gained 10.5 percent on year in January, the Economic Development Board said on Friday. That was bigger than the 9 percent increase seen in December and the 6.9 percent growth forecast. Stripping out biomedical manufacturing sector, manufacturing output grew 18.9 percent annually, faster than the 10.8 percent increase posted in December.

On a monthly comparison, manufacturing output advanced 15.4 percent, which completely overturned the preceding month's 12.1 percent plunge. Economists had expected only 7 percent increase.

Also, Singapore's factory production jumped a seasonally adjusted 15.4 percent from a month earlier in January, more than double the 7 percent growth forecast by analysts, official data showed on Friday. January's surge completely overturned the preceding month's 12.1 percent plunge, the Economic Development Board said. On a yearly basis, manufacturing output was up 7.7 percent, again beating forecasts for a 6.9 percent increase.

China lowers its economic growth target a tad

By CHARLES HUTZLER
Associated Press

(AP:BEIJING) China is slightly lowering its annual economic growth target, to 7 percent from 8 percent, the premier said Sunday, in a move that signals a shift in government priorities to put the breakneck economy on a more sustainable footing.

The tweak to the growth rate, announced by Premier Wen Jiabao in an online chat with Chinese citizens, is largely symbolic. Economic growth has exceeded the 8 percent target each of the past six years that it has been a fixture of government plans. Last year, growth reached 10.3 percent, making China the world's fastest-expanding major economy.

Along with the growth, however, inflation has picked up, especially for food and housing. Economists and senior Chinese officials have said for months that Beijing must downshift the economy to help tame prices and move toward growth that is driven more by consumer spending than by the hefty investment and bank lending that fueled the latest spurt.

The questions selected for the premier's well-orchestrated online chat highlighted popular concerns about inflation and home prices _ problems that Wen acknowledged could cause protests if left unchecked.

" Rapid inflation affects people's livelihoods and may affect social stability," Wen said. He later added: " I know the impact that prices can cause a country and am deeply aware of its extreme importance."

Asked about the high rates of growth set by local governments and worries they could worsen environmental degradation, Wen said that the 7 percent target would be embedded in the current five-year plan for 2011-2015 " to raise the quality and efficiency of economic growth."

" We absolutely cannot again sacrifice the environment as the cost for high-speed growth, to have blind development, and in that way to create overcapacity and put greater pressure on the environment and resources," he said. " That economic development is unsustainable."

The premier's two-hour online chat on the government's Xinhua News Agency website came six days before the opening of the national legislature's annual session, during which the largely powerless, Communist Party-controlled body will approve the five-year plan and other policies.

Wen has held the Internet chat on the eve of the National People's Congress for three years. The event is designed to give a more modern cast to the often distant, authoritarian leadership and show its concern for the public. Wen is the leadership's most popular figure. Grandfatherly, polite and solicitous, he is sometimes shown on state television consoling victims of natural disasters and dining with workers and the poor.

In one of the more colorful gripes Wen heard Sunday, a person who identified himself as a worker complained about the local officials who cut off electricity supplies to meet severe targets Beijing issued to save energy. The worker, who used the online name Fengyun Bianhuan, said that in his neighborhood, the cutoff forced people to use flashlights while cooking breakfast.

Wen said that when he learned about such measures, he became angry and ordered local government officials to stop. Some officials were disciplined for their actions, he said.

The premier also struck a sympathetic note on one of China's most divisive social issues: controls that divide the population into rural and urban households and use that classification to deprive rural migrants of urban social services when they move to cities. Wen said rural migrants now number 240 million _ far higher than previous figures.

The migrants and their children " should never be discriminated against in pursuing jobs, receiving compulsory education and training just because they are farmers under the household system," he said.

Several times, Wen underscored that the government's top priority is to raise living standards. He said preserving jobs was the chief reason the government resisted pressure to allow the Chinese currency to rise in value rapidly. The United States and other trading partners have criticized China's currency policies, saying that by keeping the yuan, or renminbi, low in value, Beijing is making Chinese exports cheaper.

Wen said many Chinese exporters are engaged in assembling components into goods and face competition to keep prices low. " If the renminbi appreciates greatly all at once, this will cause many processing enterprises to go bankrupt or out of business. The trade orders will shift to other countries, and many of our workers will lose jobs, especially those migrant workers," he said.

Just When It Looked Safe To Get Back In The Water...

Just when I’ve begun saying it’s safe to get back in the water, we get some shark sightings. They are a still a long ways off, but we need to keep our eyes on the deep waters and stay close to shore. This week we will look at a variety of data points and see what conclusions we can come to.

But first, I need some help from a few of you. Official publication date for my new book, Endgame: The End of the Debt Supercycle and How it Changes Everything, is March 8. I will be looking to do as much press as possible. If you are official press, drop me a note and we will get you a copy. Radio? TV? Call me.

Second, I want you to mark your calendars for April 28-30, when I will host, along with my partners at Altegris Investments, what I think will be the single best investment conference of the year. It will be the 8^th annual Strategic Investment Conference in La Jolla. Let me give you the Killer’s Row line-up of speakers, in alphabetical order: Martin Barnes (Bank Credit Analyst), Marc Faber, Niall Ferguson (author and Harvard professor), George Friedman of Stratfor, Louis-Vincent Gave of GaveKal, Neil Howe (The Fourth Turning), Paul McCulley (if he ever surfaces from his fishing vacation), David Rosenberg, Dr. Gary Shilling, Jon Sundt (of Altegris) and, of course, your humble analyst. I mean, really. Most conferences have one or two top-tier headliners. We have nothing but the best. These guys are all great speakers, but getting them on panels together? Way cool. Plus some of the best hedge-fund managers (personal opinion) show up to give you their thoughts. And maybe a surprise last-minute guest or two. If this conference lineup were a baseball team, they would sweep the World Series. Oh, and the best part? Your fellow conference attendees. The interaction among them is what truly makes this conference the best.

We (well actually, Altegris) will soon start sending out invitations, but you can register today at http://hedge-fund-conference.com/2011/invitation.aspx?ref=mauldin. Sadly, the conference is limited to accredited investors with a net worth of more than $2 million, as there are funds presenting that require that minimum (and some even more). Those are the rules we have to live with, whether I like them nor not (I don’t, as long-time readers know). But we follow them religiously.

Every year the conference sells out. Every year some of you wait to the last minute, thinking we can “always take one more.” We can’t. There is a limit to the space. If you have attended in the past, call your Altegris representative and make sure you get on the list. Do not procrastinate.

Now more than ever you need to consider the place for alternative investing in your portfolio. I work with partners around the world for both accredited and non-accredited investors. If you would like to know more, then go to www.johnmauldin.com and click on The Mauldin Circle, register there, and someone will call you. Seriously, the teams at Altegris (for US accredited investors), CMG (for those with net worth less than $2 million in the US), ARP (Europe), and others have some very innovative and interesting funds and managers on their platforms that really deserve a look. Even if you can’t make the conference, your portfolio will thank you for finding some alternative investments that make sense in these times. Now, to the letter. (In this regard, I am president of and a registered representative of Millennium Wave Securities, LLC, member FINRA.)

When Irish Eyes Are Voting

Most of the world is focused on the Middle East and Libya, and rightly so. We will look at that in a minute. (Sidebar: the White House spelled the country “Lybia” in a recent tweet. Can you imagine what the liberal media would have done to poor Dan Quail if that tweet was from him? Just saying.) And I agree the Middle East is important. But my eyes are focused on what I think is the far more important event of the day, and that is the election going on in Ireland.

I have written about Ireland before, but we need to once again focus on what are not smiling Irish eyes. Ireland was once the envy of Europe, with one of the highest growth rates in the world. It was not long ago that Ireland could borrow money at lower rates than Germany. Now rates are 6% and likely to rise with the new government. Let’s look at a few data points from a brilliantly written article by Michael Lewis, who ranks as one of my favorite writers. When he writes, I read it just for the education on what great writing should look like, as well as for the always fascinating information. The article is at http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 .

(I am often asked about how you can become a financial writer by young people who are starting out. I have just two suggestions. Write a lot and then write some more. Writing is no different than the piano or guitar. It takes a lot of practice, and then more practice. You don’t start playing concerts on day one, and your writing won’t be worth much either, but you will get better. Second, study the great writers and learn from them. Try to copy the styles of the guys you like for practice. Take the best and make it your own style. Lewis is one of the best.)

· Housing prices in Dublin had risen by 500% since 1994. Rents for homes were often 1% of the price of the home. A $1-million-dollar home went for $833 a month. That is a very clear bubble.

· Irish home prices implied an economic growth rate that would leave Ireland, in 25 years, three times as rich as the United States.

· In 1997 the Irish banks were funded entirely by Irish deposits. By 2005 they were getting most of their money from abroad. The small German savers who ultimately supplied the Irish banks with deposits to re-lend in Ireland could take their money back with the click of a computer mouse. Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros—or basically the sum total of all Irish public bank deposits—had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier.

· As the scope of the Irish losses has grown clearer, private investors have been less and less willing to leave even overnight deposits in Irish banks and are completely uninterested in buying longer-term bonds. The European Central Bank has quietly filled the void: one of the most closely watched numbers in Europe has been the amount the ECB has loaned to the Irish banks. In late 2007, when the markets were still suspending disbelief, the banks borrowed 6.5 billion euros. By December of 2008 the number had jumped to 45 billion. As Burton spoke to [Lewis], the number was still rising from a new high of 86 billion. That is, the Irish banks have borrowed 86 billion euros from the European Central Bank to repay private creditors. In September 2010 the last big chunk of money the Irish banks owed the bondholders, 26 billion euros, came due. Once the bondholders were paid off in full, a window of opportunity for the Irish government closed. A default of the banks now would be a default not to private investors but a bill presented directly to European governments.

· A political investigative blog called Guido Fawkes somehow obtained a list of the Anglo Irish foreign bondholders: German banks, French banks, German investment funds, Goldman Sachs. (Yes! Even the Irish did their bit for Goldman.)

· [And this is the kicker!] “Googling things, Kelly learned that more than a fifth of the Irish workforce was employed building houses. The Irish construction industry had swollen to become nearly a quarter of the country’s G.D.P.—compared with less than 10 percent in a normal economy—and Ireland was building half as many new houses a year as the United Kingdom, which had almost 15 times as many people to house.” [That makes the US housing bubble look small by comparison.]

· And just for fun: “A few months after the spell was broken, the short-term parking-lot attendants at Dublin Airport noticed that their daily take had fallen. The lot appeared full they couldn’t understand it. Then they noticed the cars never changed. They phoned the Dublin police, who in turn traced the cars to Polish construction workers, who had bought them with money borrowed from Irish banks. The migrant workers had ditched the cars and gone home. Rumor has it that a few months later the Bank of Ireland sent three collectors to Poland to see what they could get back, but they had no luck. The Poles were untraceable: but for their cars in the short-term parking lot, they might never have existed.”

Now, let’s turn to that repository of all things leftist, the UK Guardian, as they write about today’s elections.

An Extra “15 Million” Homes

“Though the campaign has shed disappointingly little light on realistic options ahead, the financial numbers are scary. After 2000 the early Celtic Tiger years became a property-led speculative bubble, made worse by weak planning laws and 300,000 too many new homes. The crash saw GDP collapse by 11%, unemployment triple to 13.3% and government debt quadruple to 95%, which will rise to 125% by 2014 on IMF estimates.”

Let’s think about that for a moment and compare it to the US. We built somewhere between 2 and 3 million too many homes in our bubble, depending on whom you ask. Total Irish population (including Northern Ireland) is 6 million people. If the US had built the same number of excess homes, there would have been 15 million of them! And the banks just kept lending!

Irish taxpayers are being asked to pay French, German, and British bond banks and the ECB, which bought that debt. It is 30% of their GDP, along with the rest of the debt. At 6% interest, that means it will take 10% of their national income just to pay the interest. It guarantees that Ireland will be in a poverty cycle for decades. The ECB and the IMF seem to think the solution for too much debt is more debt. And in order to pay the ECB, the Irish must take on an austerity program that guarantees even worse recessions and higher unemployment.

The government that agreed to take on the bank debts is going to be voted out in spectacular fashion today. Whether one party can win or has to form a coalition government is not yet clear, but the mandate is to renegotiate the Irish debt. Both the ECB and the Germans have said that is not possible, that deals have been made. But asking Irish voters, you don’t get the sense they feel the same obligation.

Even the venerable Martin Wolf of the Financial Times agrees. Writing last week:

“So what might a new government seek to do? Its degrees of freedom are, alas, limited. Even excluding recapitalisation of the banks, the primary fiscal deficit (before interest payments) was close to 10 per cent of GDP last year. Under the IMF programme, this is to be turned into a surplus of 1.5 per cent of GDP by 2015. Given the lack of access to private markets, the deficit would have to be eliminated even more quickly without the official assistance. Again, the debt overhang would be huge, under any plausible assumptions. Ireland is doomed to fiscal stringency for decades, given its poor growth prospects, at least in comparison with its Tiger years.

“Apart from the Armageddon of a sovereign default, two partial escapes exist. The more trivial would be a reduction in the rate of interest on Ireland’s borrowing: a 1 per cent reduction in the rate of interest would save the state 0.4 per cent of GDP a year. That would be a small help, at least. A more valuable possibility would be a writedown of existing subordinated and senior bank debt, which currently amounts to €21.4bn (14 per cent of GDP).

“The ECB and the other members of the European Union have vetoed this idea, fearful of contagion. Indeed, the assistance package was partly to prevent just such an outcome. Yet the idea that taxpayers should bail out senior creditors of massively insolvent banks at such risk to the solvency of their state is both unfair and unreasonable. If the rest of the EU is determined to protect senior creditors, it should surely share in the cost of doing so. Why should the taxpayers of the borrowing country pay all? The new Irish government should make this point firmly.” ( http://www.ft.com/cms/s/0/436234b8-3ebb-11e0-834e-00144feabdc0.html#ixzz1F1aZpM1L)

There are a significant number of Irish voters who wonder why they should pay any of it. Not the majority (yet), but enough. This is the Maginot Line for the ECB. If they renegotiate with Ireland, then Greece will be at the door in a heartbeat. Ditto for Portugal.

As one story I read about Ireland said, “Parties we go to now are going away parties as people, especially young people, leave for other countries with better opportunities.” The mood of the country will grow more dour.

Look at this chart. Notice how well Iceland did after it simply repudiated its debt. It wasn’t easy, and inflation is brutal, but they are better off than if they had taken on a debt burden that would have made them indentured servants to British taxpayers for decades. The ECB, the IMF, and the rest of the EU is asking Ireland to willingly fall into a lengthy depression. Would walking away from the debt, or restructuring it, be any worse?

What if the opening negotiating line started was, “We will repay the principle, but no interest, and the timeline has to be stretched out over 25 years?” And no payments for five years. Oh, and we have about 300,000 houses you can have as our first payment.

Yes, the Irish would be frozen out of the bond market. It would result in an even more serious recession. But they could actually grow their way out of it over time. A lot faster than if they were trying to pay off the debt at 6-7% interest. And remember that Argentina, for God’s sake, got money just a few years after defaulting – twice, if I remember right! If Ireland got back on a sound footing, they could once again find acceptance in the bond market.

I know, that sounds radical. But give it a few years of austerity and see what the next elections bring. Irish debt will default, not because the Irish don’t have hearts of gold or don’t want to not pay their debts, but because they are under such a burden they can’t. And eventually enough voters will realize that. It may not be next month, or even next year, but it will come. You can only ask so much of a people. Defaulting on sovereign debt is only unthinkable in elite European Union circles. And asking German voters to pay for those defaults? Care to run on THAT platform?

This has the potential to really roil the debt markets, not to mention the interbank markets. The US is doing ok, except that job creation has been slow. A European debt crisis could throw a wrench into the world gears.

And that is the heart of the problem. The Irish really do want to do the right thing. The Greeks, not so much. Portugal? Spain?

The leadership of the EU is living in denial if they think that more debt is the answer to too much debt. It is all well and good for the Germans to tell everyone to cut back (and they should) but to do so means that the countries go into recession and have even less money to pay their debt burdens. They get into a debt spiral and the only way out is restructuring, which is default by a nice name.

Somewhere, sometime, this is all going to end in tears. The EU will be better off restructuring the debt, letting insolvent banks go the way of all flesh, or financing them and letting the euro drop like a stone, which will only make their exporting companies more competitive (not good for the US and China, but we don’t get to vote in the EU). Or they can break up. I think the former is better than the latter, but that’s just me.

The world went crazy with debt. The US, Japan (where I fly to in less than 12 hours), much of Europe, and Great Britain. And now we have to deal with it. Acting like adults would be best, and recognizing that some countries just can’t assume their banking debts is just being realistic. A lot of people made bad choices and now those choices are coming home.

It is all so very sad. People are hurting. I read the blogs in Ireland and it brings tears to me Irish eyes (or the large part of me that is of Irish heritage).

There are no easy answers. No easy button. The only button we have is the reset button, for the Blue Screen of Death. That means pulling the plug and starting over. This time with realistic debt levels and bond markets.

Some Thoughts on the Middle East

Let me offer a different, and perhaps cynical, view of what’s happening in the Middle East. First, the army was in control in Tunisia and Egypt, and still is. Some things will change, and hopefully the false, crony capitalism will be one of the things to go but I don’t think we will see sweeping changes for some time. Libya is 2% of the world’s oil supply. Other than that, they are like Greece. They are not that big a player. Gaddafi is on his way out. His bank accounts are being frozen. He will end up in Venezuela or some equally wonderful place. Couldn’t happen to a nicer bad guy. The new leadership will most likely be the army, and it will get the oil turned back on as soon as possible. (See the trend here?)

By the way, the idea that Saudi Arabia can make up for Libyan oil is a little fanciful. Libyan oil is light sweet crude, and it takes three barrels of Saudi oil to make as much diesel as Libyan oil. Oil could get very volatile and move up strongly if Gaddafi hangs on too long. $4 gas is not out of the question here in the US if he doesn’t leave soon but at the end of the day, not too much will change in Libya.

The key place to watch is Bahrain. Now THAT is an issue. It is a strategic country with the US 5^th fleet based there, and it has a large Shiite population that could ally with Iran. There is no real way of knowing what will happen there, and that is something I have my Google notes set to watch, along with talking from time to time with George Friedman of Stratfor. Nice to have friends with inside information. But even he is not sure tonight.

Saudi Arabia? Pay attention, but so far it looks like the changes are still in the future. One day it will change, but it doesn’t appear imminent (although anything can happen).

The one thing that I hope changes? Maybe the Iran street will force some change. I am on record saying that one day Iran will be our new best friend. The population is young and getting younger. They’re on the Internet. They see what the world is like and they want it. Maybe not this year or next, but it will happen.

(Quick sidebar: My friend Barry Habib pointed out an interesting trend: the first day of the month has been a big up day for the markets. And I think we could have a solid job number on Friday.)

Tokyo, London, Oregon, and Dallas

It is time to hit the send button, as I have to get up in a few hours to catch an early flight to Tokyo, where I will only be for 48 hours. It will be interesting to see how my body does with the jet lag, so soon after Bangkok. I am just now back to normal.

I return on Tuesday and have to be ready to speak on Thursday. Reservations are now open for the second " America: Boom or Bankruptcy?" event, on March 3rd at the Dallas Lincoln Centre Hotel, from 10:30 am to 2:00 pm. It is called “Fed Friday.” I spoke last year, and it was lots of fun. The 2010 event sold out. David Walker will be on the program with me. You can register at www.fedfriday.com

I will also be providing the keynote address for the West Coast-based investment advisory firm of Arnerich Massena at their 2011 Investment Symposium, on April 11-12, in Newberg, OR. Contact Bonnie Chirrick at 503-239-0475.

My friends from Copenhagen JGAM are coming to Dallas for a 2-day event April 14-15. My partners at Altegris and CMG and I will speak Thursday and Friday. JGAM has also invited Martin Barnes of BCA and Charles Rheinhard of Morgan Stanley to give presentations about the economy. Seats are limited, because attendees are invited to my house that night for a Texas BBQ dinner. If interested please contact Thomas Fischer at info@jgam.com for availability, by Friday, March 11.

Never have I been so busy. I am actually looking forward to getting on a long plane flight and catching up on my reading. And getting to have dinner with Chris Wood of Greed & Fear fame is something I have always wanted to do. I told Chris I wanted bodyguards there after my speech. Telling the Japanese that they are a bug in search of a windshield might not be popular. And by the way, if some writer uses that line (and you know who you are), at least have the courtesy to quote me by name. I don’t come up with that many good lines.

I see a three-week working vacation in Tuscany this June, a few days in Kiev with friends, and then Geneva in late June. I can’t wait. I will be working on my next book. Life is fun. And let me say what a pleasure it is to be able to let Tiffani do the really hard work while Dad just goofs off reading and writing, with a little travel thrown in. Big things are happening. And if you haven’t visited the new website, please do so. www.johnmauldin.com – and give me some feedback. I do read it!

Have a good week! Sayonara for now!

Your trying to figure out how to stay on US time analyst,

John Mauldin
John@FrontlineThoughts.com

Copyright 2011 John Mauldin. All Rights Reserved

Thoughts From the Frontline is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting www.JohnMauldin.com.

Please write to johnmauldin@2000wave.com to inform us of any reproductions, including when and where copy will be reproduced. You must keep the letter intact, from introduction to disclaimers. If you would like to quote brief portions only, please reference www.JohnMauldin.com.

To subscribe to John Mauldin's E-Letter please click here:
http://www.frontlinethoughts.com/subscribe

Check Out How Tight The Noose Is Around Qaddafi's Neck

A great map from the Wikipedians, showing the Libyan territory controlled by Qaddafi, and that controlled by the revolutionaries.

Look at Tripoli, and how isolated it is, and you can see why Qaddafi is resorting to extreme brutality to hold onto it.

Shayne Heffernan Weekly Market Outlook

This week the S& P has built a wall of resistance at 1,360, and there is strong support at 1,300. For now we are more inclined to favor caution in the market and buy equities should the S& P break below 1306.

The S& P is up 4.8 per cent since the start of the year and more than 25 per cent since the start of September, last weeks decline of 1.7% still makes this on of the best February’s in a while.

There is a strong possibility of more bad news from the Middle East, best keep your money in your pockets and wait early this week.

US crude futures spiked as much as 20 per cent during the week to a high of $US103.41 per barrel, though they later fell below $US100. The CBOE Volatility Index VIX rose 17 per cent this week and at one point was up 30 per cent.

The surprise rally in crude prices was a result of spreading tensions in North Africa and the Middle East.

On Monday, new restrictions on short selling with go into effect. Under the new rules, the circuit breaker will kick in with a 10 per cent price decline from the previous day’s close and will last for the duration of the trading day, as well as the following day.

Another reason to hold tight early in the week is the news that is coming out of China. What is being reported by the western media as “tightening” is actually some positive steps forward, China, Asia and ASEAN will finish this week with gains.

In China the government plan to set its annual gross domestic product (GDP) growth target for the 2011-2015 period at 7 percent, highlighting the need to raise the quality of growth and improve living standards.

China also stated State Council, the Cabinet, would discuss Wednesday proposals to raise the threshold of personal income tax.

The plan, if put into effect, would benefit middle and low-income groups and increase the total demand from the economy.