Sanctions Politics
Research for Online Investors

01/06/12

The market received good news this morning with Non-Farm payrolls increasing 200,000 in December and the Unemployment rate dropping to 8.5%.  The private sector added 212,000 jobs with a slight contraction in government employment.  You would think the market would have shot higher on better employment numbers, you would be wrong.

Our old nemesis, the eurozone debt crisis and its tentacles grabbed the market’s attention.  The market fell at open then recovered to claw our way back to even as we go to press.

Iran announced more military exercises in the Persian Gulf are planned for next month.  Rear Admiral Ali Fadavi said the exercises would focus on the Strait of Hormuz.  Reuters reports the Admiral as saying “Today the Islamic Republic of Iran has full domination over the region and controls all movements within it.”

Iran has threatened to close the strait if new sanctions slow Iran’s oil exports.  Earlier this week Iran warned against the U.S. aircraft carrier USS John C. Stennis returning to the gulf.  The sanctions referred to were signed by President Obama on New Year’s Eve.  They make it illegal for any institution that does business with Iran’s Central Bank to do business with U.S. financial institutions.

The sanctions are aimed to force Iran to end enriching uranium.  Iran says their nuclear program is for peaceful purposes only.  Russia has offered to sell the fuel rods to them, but Iran refused and has charged ahead with enriching their own fuel rods.

Scientists at the Atomic Energy Agency along with the U.S. and other countries are concerned Iran could be refining the uranium to weapon’s grade which would allow Iran to build an atomic bomb.

The European Union is expected to pass similar sanctions concerning eurozone financial institutions by the end of January.  This makes it difficult to pay for Iran’s crude oil.  Iran exports 2.6 million barrels of oil per day.

The European Union imports approximately 500,000 barrels of that production.  China was importing about 550,000 barrels per day in 2011, but cut their imports to 250,000 per day this week.  China is demonstrating their capitalist tendencies.  They are happy to buy the Iranian’s oil, but at what price?  They want a steep discount to continue to buy it since the Iranians cannot sell it anywhere else.

This is where your dollars go when you buy a widget at Walmart…to China and eventually to Iran to pay for their oil.  Will China doing business with Iran bar them from U.S. financial institutions?  You have got to be kidding!

They are going to recycle our dollars to buy cheap Iranian oil giving them lower energy costs to produce more widgets to dump on our market...and Obama won't do anything about it.

The U.S. sanction’s law allows the president to sign waivers for certain countries to avoid damaging their economies.  Turkey and Japan are seeking waivers from the U.S. so they can continue buying Iranian oil.  Greece wants a waiver from the E.U., suggesting they would like at least 12-months before they comply.

The threat of tightening sanctions has caused inflation in Iran and citizens are flooding banks to exchange Iranian Rial currency for dollars.  Iran has elections scheduled for March 2nd.  The Washington Post reports that President Mahmoud Ahmadinejad’s (Mahad Achoo) allies are being challenged by hard-liners from the Revolutionary Guard for parliamentary seats.

Final candidates have to be “pre-selected” by a council of Shiite clerics and jurists to appear on the March ballot.  The council will decide who is allowed to run this month.  Mahad Achoo’s term as President runs through 2013.

There are no candidates from the “green” party that protested the 2009 elections.  Most of its leaders are in jail or under house arrest.

Saudi Arabia has committed to increase production to keep world oil prices from rising as Iranian oil is removed from the market.  Brent crude oil is trading $11.00 per barrel higher than West Texas Intermediate this morning.

This morning, the Labor Department reported that nonfarm payrolls (jobs) increased by 200,000 in December. Today's chart illustrates the percent increase in the number of jobs for every decade since the 1940s. You can see that up until this millennium, the number of jobs at the end of a decade has always been at least 20% greater than 10 years prior. During the last decade (2000s), not only was that 20% plus growth not achieved, the decade actually ended with less jobs than when it began. This negative job growth is particularly troubling since the US population had increased by 10% during the same time frame. Two years into the current decade (see gray column), current job growth is positive. If job growth during the current decade were to increase at the same pace as what occurred during the first two years, the decade would end with a 10% gain in jobs (see gray dot). This is certainly better than the decade just passed; however, it is well off the 20% plus pace of decades past.

Chart courtesy of www.chartoftheday.com

Mailbag:
The senate knew exactly what it was doing.  It never wanted this agency to do anything so they were never going to approve a director for the agency. What a bunch of crooks. Obama hit ‘em where it really hurts.---subscriber G.O.

John’s reply:  No, he hit you where it hurts.  What the President did was unconstitutional, but why be bothered by that when we have the great "hope-ster" as president?  Don't be surprised when local banks close and your cost of using a bank increases because of compliance costs.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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