Good morning.  I managed to make it into the office today.  The only one who could make it.  I happen to be fortunate to live in an area with clear ingress and egress, for now.  I’m extremely fortunate.  Houston is a mess.  A really, really big mess.  Flooding is everywhere.  Giving you some perspective, Houston usually receives 50 inches of rain a year.  We’ll get that, maybe more, this week!  What the news reports can’t show you is how widespread the flooding is.  Miles and miles.  The National Weather Service says “The breadth and intensity of this rainfall is beyond anything experienced before.  Catastrophic flooding is now underway and expected to cotinine for days.”  We got a little break last night and the water receded a few inches but it’s been pouring raining since I woke up this morning.  Local officials are saying this is a one in five hundred year flood.  Thousands of people (maybe hundreds of thousands!) will have extensive damage to their houses and vehicles.  It’s bad.  Really bad.

Not sure how long I’ll be in the office.  Blog is going to be short today.

Equities and the Economy:

• Yellen’s and Draghi do not offer clues on monetary policy.
• S. stocks closed mixed on Friday.

Fed Chairperson Janet Yellen and ECB President Mario Draghi offered few, if any, clues on the future central banks’ monetary policies in their speeches on Friday.  With little insight to move investors stocks closed little changed and mixed.  The Dow closed up 30 points at 21,814, the S&P 500 rose 4 points to 2,443 and  eh Nasdaq settled lower at 6,265.   For the week all three indexes posted nice gains with the Dow adding 0.6%, the S&P 0.7% and the Nasdaq rising 0.8%, its first weekly gain in five.

This morning the Dow is down 32.

Oil

• Harvey shutting in refineries.
• Crude prices down.  Refined products prices sharply higher.

Hurricane Harvey has forced numerous refiners to close.  This has resulted in the demand for crude to fall and the supply of refined products, i.e., primarily gasoline and diesel, to decline.  After having fallen on Thursday, WTI posted a small gain on Friday closing up 44¢ at $47.87.  Brent settled 37¢ higher.  Gasoline prices have popped.  The wholesale price of gasoline hit a 5 month high on Friday, and is up another nickel this morning.  Gasoline prices have risen about 12.5% in the past 2 weeks.

With traders understanding more about Harvey’s impact, i.e. more refinery closures, WTI is getting hammered this morning down $1.21.

Courtesy of MDA Information Systems LLC

Natural Gas

• A/C load diminished by Harvey.
• Prices take a hit.

Although Harvey will definitely result in natural gas being shut in, traders on Friday were viewing it as net bearish with it also killing A/C load and associated natural gas demand and the September contract closed down 5.7¢ at $2.892.  This morning they’re taking a different view thinking that gas may be shut-in linger than originally thought and pushing prices 4.4¢ higher.  Additionally, storage levels are about 7% lower than a year ago at this time.  The bears are reconsidering.  The September Nymex contract expires for the month tomorrow.

Elsewhere

To error is human.  To really mess things you need a computer.  And it gets really messy when you’re talking about computers used in the military and for defense.  For example, on October 5, 1990, an early-warning system at NORAD warned of a massive Soviet nuclear missile strike approaching the United States.  It was determined that a fault in the computer system had removed two zeros from the radar’s ranging components detecting the missile attack at 4,000 km (2,500 miles).  Turns out the radar was actually detecting a reflection from the moon  400,000 km (250,000 miles) away.

On June 3, 1980 a massive Soviet missile attack was again registered by computers.  100 nuclear armed B-52s were immediately put on alert.  A computer fault was detected in time, but 3 days late the same error occurred and again the bombers were put on alert.  The problem was later traced to the failure of an integrated circuit which was producing random digits representing the number of missiles detected.

On January 10, 1984, Warren Air Force Base in Cheyenne, WY recorded a message that one of its Minuteman III Intercontinental ballistic missiles was about to launch from its silo due to a malfunction.  To prevent the possible launch an armored car was parked on top of the silo.

So you’re saying, “That was a long time ago.  We know have “smart” weapons.”  The Tomahawk missile is one such smart weapon.  It’s supposed to be able to hit a postage stamp from 200 miles away.  But when launched in the Bosnia war only 2 out of 13 actually hit their target.  One skimmed over a farm house a few miles off target exploding in a farmers field killing 7 sheep, a cow and a goat. Needless to say the farmer was extremely upset, and demanded that as part of the compensation he get to keep the nosecone as a souvenir.