Equities closed essentially unchanged as crude rallied about 1.7% to close over the psychological $40 mark.  There were no major headlines for yesterday’s rise except a reiteration of next week’s OPEC/Russia meeting to cap production. The dollar fell to a nine month low.

What I found of great significance, escaping the attention of most, was the spike in Saudi Arabian deposit rates.  The loan to deposit rate is about 112% thus suggesting a possible liquidity crisis in the desert kingdom, the result of plunging oil prices, fighting several wars amplified by massive transfer payments to quell their restless and unemployed youth.

Students of the financial markets know that any spike in deposit rates is negative, suggesting anything from issues that could be quickly tweaked to the precipice of a full blown financial crisis…think the Thai Bot and Long Term Capital Management.

Many times I have opined the current collapse in prices is threatening the existence of various oil producing nation states not just western corporations.  According to the IMF 7 of the 13 OPEC members is on the edge of the fiscal abyss.  Russia—who is not a member of OPEC—is also teetering.

I am not suggesting Saudi Arabia is on the verge of insolvency as 7 of its fellow OPEC countries, I am stating the kingdom’s banks are fully loaned and must go outside of its traditional sources to fund its deficit.

First quarter earnings season commenced last night.  The bar is set very low as the market is prepared for the worst quarter since the financial crisis.  At this juncture analysts are expecting results to decline about 9%.  I am certain the interpretation and the analysis of reports will change throughout the reporting period.

Last night the foreign markets were up.  London was up 0.01%, Paris up 0.23% and Frankfurt up 0.60%.  China was off 0.34%,  Japan up 1.13% and Hang Sang up 0.31%.

The Dow should open nominally higher as crude is up another 1%.  I am certain the earnings’ banter will begin to rise a deafening crescendo as Alcoa exceeded on EPS but missed on revenues.  Shares are off about 1% in premarket.   The 10-year is off 9/32 to yield 1.76%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.