Argghh!: Somali Pirates Spark International Community

It is nearly a month to the day that we first wrote about Somali pirates hijacking a Saudi oil ship in the Gulf of Aden.

On the day the pirates made their demands Keith wrote in The Early Look (11/18):
“This morning the Saudi market is down another -3.5% and the United Arab Emirates tape is getting tagged for another -5.1% loss. This isn’t new. This is called deleveraging. This is “The New Reality.”

Today it’s clear the international community is willing to get in the curve of “The New Reality”. The U.N. Security Council voted unanimously yesterday on the US-drafted resolution to authorize nations to “use all necessary measures that are appropriate in Somalia in pursuit of pirates, as long as they are approved by the country’s transitional federal government.” The resolution encourages states to deploy naval vessels and military aircraft to carry out the operations.

China has proactively stated that it may soon deploy warships to the Gulf of Aden and Somali coast to escort its ships and prevent the disruption of commerce along one of the world’s most active sea routes. This comes in response to today’s pirate attack off the coast of Somalia in which the crew of the China Communications Construction Co. was forced to fend of pirates for five hours until coalition helicopters chased them off.

In this year alone pirates have attacked some 120 ships in the region, seized 60 of them, and have collected more than $120 million in ransom. Currently 14 ships and 240 crew members are being held hostage by pirates. This is non-trivial to say the least.

US Secretary of State Condoleezza Rice, who pushed for the resolution’s passage and stressed the importance of intelligence sharing to coordinate naval and military operations in the region, is cognizant of the unraveling political and security situation in Somalia. This in an important point to note for the resolution expects states to first get approval by the country’s transitional federal government. This last point seems unlikely to hold up.

UN Secretary General Ban Ki-moon has warned that Somalia may descend into “chaos” by the end of the month when an Ethiopian occupation force leave the country. Rice proposed a UN peacekeeping mission to Somalia, which Ban quickly rejected it, citing his past unsuccessful attempts to mobilize a strong international force in the region and unsafe condition for peacekeepers. To place Somalia under a UN flag, Rice would need the support of the vast majority of the 192 UN members to fund the operations.

China is putting its foot down and we’re behind any nation that steps up to the pirates. A joint effort from the international community is need to suppress them. This will have to come in the form of joint international intervention and must be proactively constructed with respect to the unstable Somali state.

Matthew Hedrick
Analyst


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more