Finance Trends Letter

Color me surprised to find an MSN Money article on the Fed's decision to stop publishing the M3 money supply figures for public release. Jim Jubak's latest installment, entitled, "Fed kills a key inflation gauge" , deals with this very topic. Although it comes after the fact of M3's discontinuance (publication of M3 data ceased on March 23), I am still a bit astonished to read the contents of this article. Jubak has addressed in print some of the important issues associated with the loss of this data, but I have yet to see many other mainstream news sources do the same. Whiile he doesn't exactly go in for the kill (Jubak relates some of the Fed's possible motives for shelving M3 as being drawn from the realm of "conspiracy theories", a device which provides him with some cover), the article does a pretty admirable job of relating why the eradication of this data is important. In the following passage, Jubak relates his bewilderment over the remo

I liked the opening of this editorial by Richard J. Greene, so I thought I'd include part of it here. I think it really sums up what is really going on with inflation, and succinctly describes the phenomenon that the man in the street is starting to notice. "The man on the street is increasingly beginning to figure it out that the Government has been lying to him and, in effect, stealing from him. The retired person is finding out because after his cost of living adjustments he is just not making ends meet. The purchaser of inflation-adjusted securities is noticing that after his return of capital the capital does not purchase what it once did. The sender of a Federal Express letter can find a fuel adjustment charge of $4.13 now for just a single letter! Even producers of gold and silver, the ultimate defense against inflation, notice the price of steel and fuel are rising even faster than their end products. These are all dead giveaways that inflation is higher than reported

Gold broke out to a 25 year high Thursday and the COMEX June gold contract ended the day up $13.20 to close at 591.80 an ounce. Silver was up $0.54 to close at $11.66, a 22 year high. See Reuters article for more info. The backers of the NYSE listed Gold Shares ETF (ticker: GLD) hope to extend the product's reach to Asia and the Middle East. In an interview with Dow Jones Newswires, George Milling-Stanley of World Gold Trust Services, GLD's sponsor, said he wants to increase investment demand for gold through ETFs. "We want to grow the market," said Milling-Stanley citing his biggest challenge for the ETF. "Our goal is to have 24/7 coverage. Right now GLD trades about 16 hours a day," said Milling-Stanley. "We would like to see a product in Asia." The full article can be read here .

Update: The video this post refers to is no longer available at the Howestreet.com web site. We've tracked down another Marc Faber video interview from the Howestreet.com archives for you instead. Here is Marc Faber in a 2005 interview , discussing his book, Tomorrow's Gold: Asia's Age of Discovery with Sterling Faux on the Corus Radio Network. You will have to select the Windows Media Player option in order to play the interview; the pop-up window player options no longer seem to work. Enjoy. For more recent posts on Marc Faber, including interviews and commentary, see the results from our Marc Faber blog search. Marc Faber speaks about geopolitics, monetary policy and commodity prices in a video monologue brought to us by howestreet.com . Highly recommended. Just click the link and you will see the interview link with Faber at the top of the main page. The video will automatically open up in a seperate media player window when you select an interview. If the video stops

Link to the International Herald Tribune site, which features a New York Times article detailing the confidential memo that centered on a January 31, 2003 meeting between President George Bush and British PM Tony Blair.

Mergers and acquisitions activity in the oil & gas industry has surged in recent years; the value of deals last year tripled to $160 billion according to a Financial Times report by Carola Hoyas. An industry study suggests oil execs and government leaders have been "on a frantic buying spree" to secure assets. The full report, prepared by research firms Harrison Lovegrove and John S. Herold, will be released in April 2006. Among its key findings : buyers loosened their valuation criteria for deals due to competitive pressures; national oil companies played an increasing role in the battle for assets; and the continued importance of unconventional resource deals.

Financial Times reports that Shenhua Energy, China's biggest coal company, hopes Beijing will back its plans to build coal-to-liquids plants by making energy from large scale plants part of the country's strategic oil reserves. Coal-to-liquids refers to the process of converting coal into liquid fuels, such as diesel. Methods for coal liquefaction are derived from the Fischer Tropsch process, and most expertly exploited in recent times by South Africa's Sasol . The firm's current capacity of CTL is about 150,000 barrels per day. Shenhua hopes the government will set a floor price for oil, thereby protecting it from losses in the event that oil prices were to drop below levels that make CTL profitable.

China has imposed a windfall profits tax on domestic oil producers. This occurred alongside a government imposed price hike in oil products. Price increases of 3-5 percent for diesel and gasoline at the pump were announced over the weekend. According to one report , refiner Sinopec will fare best among the nation's major oil companies. China National Offshore Oil Corp (CNOOC) is expected to be hurt the most, because of its position as a top offshore oil producer. PetroChina pulls through, despite refining losses . Price charts for PetroChina , CNOOC , and Sinopec (source: Bigcharts).

An NPR article entitled, " Wind Farms Draw Mixed Response in Appalachia ", describes the problems some wind energy projects face in gaining approval. While proponants of wind farms point to the projects' environmentally favorable attributes (no carbon emissions, energy from a non-polluting renewable resource), wind energy still has its detractors. In some areas, local residents are turned off by the noise from turbines, and many feel the windmills scar the local landscape. Turbines are often built on ridges and hilltops, leaving many to worry about their visual impacts and the resulting effects on tourism and property values. Environmental groups have long been concerned about the impacts that windmills might have on bats and migratory birds. Clearly, improvements in windmill siting and design will be needed for wind farms to gain more converts. The interesting thing about many of the proposed wind energy projects is that they are often driven by legislative mandates. Ini

Jay Taylor has some interesting comments about the path America seems to be following. In an interview segment on the Korelin Economics Report , newsletter writer Taylor voiced his opinion on the country's future in view of its move away from the Constitutional foundation on which it was based. This is a brief interview (Segment 4 of the March 25 broadcast) but an interesting one. I might note that a similar alert was sounded in an interview with newsletter writer Jim Wille, during the 3rd hour of the most recent Financial Sense Newshour broadcast.

I want to recommend the guest expert interview from this weekend's Financial Sense Newshour , for those who haven't heard it. Jim Puplava interviews John Howe, author of the book, The End of Fossil Energy . Very interesting opinions expressed here on planning for energy decline and rethinking the system of living that has been engineered in human civilization's recent past. I was surprised to hear the range of topics discussed in the first 7 minutes of the interview, partly because they were the basis of a very recent conversation I had with the lovely Colleen Quindlen (CQ). Anyway, do check it out. You might not agree with everything, but it's an interesting conversation to hear.

Google shares are up 7% today on news that the company will join the S & P 500, a leading stock index of publicly traded companies. Google (GOOG) will replace oil & gas company Burlington Resources, which is being taken over by ConocoPhillips. Google investors and enthusiasts have been pining for the company's addition to the widely followed index ever since the company went public, less than two years ago. The S & P 500 selection commitee often looks to include representatives of new, emerging industries in the U.S. economy. Criteria for company selection and Index changes can be viewed here .

A couple weeks ago I posted an editorial by William F. Engdahl on the issue of the proposed Iranian oil bourse. The main question concerning the formation of an Iranian oil exchange is whether its oil-for-Euros trading mechanism would serve as a blow to the dollar's reserve currency status. In turn, this has caused some observers to suspect the proposed bourse is the driving factor behind US' aggressive campaign for action against Iran. I though I'd include a few articles on the subject and collect them together in one post. That way, interested readers can review the statements supporting or refuting such a theory, and make up their own minds. Personally, I have no real opinion on the issue, except to say that many of the writers make some interesting points and most come down solidly on one side of the issue. Here then, are the crucial articles debating or expounding the importance of an Iranian oil bourse. First, the article that really seemed to make the rounds and get

Polysilicon, a crucial material in solar panels, is in short supply and it could lead to a disruption in the manufacture and installation of current generation solar panels. Spencer Jakab reports in the latest Barron's (March 20, 2006) that a scramble for polysilicon has pushed prices up 10-20 fold since the start of the decade. The resulting slowdown in the rate of solar panel installations comes just as rebates and incentives for taxpayers are making solar power increasingly attractive for homeowners. A recent Slate article takes a look at the polysilicon/solar demand situation and this EETimes piece shows how the polysilicon shortage has affected one company in particular.

The SEC has approved an AMEX listing of the Barclays iShares Silver Trust. The exchange-traded fund will be the first to track the price of silver, with each share representing 10 ounces of silver. The iShares silver tracker will be physically backed by silver bullion held in London vaults. See more info regarding the silver ETF here .

Well, as far as I can tell there is no futures market in opium, aside from a few such references cropping up in the results of a Google search. I must say though, that the post title's jesting tone belies the seriousness of the topic: Afghanistan's opium production and its link to the international drug trade. Recent efforts to move Afghanistan's economy away from opium production have faltered, according to recent reports. A March 20 Financial Times article says farmers opium growing provinces were promised aid and compensation for not growing opium, but that delivery of funds and assistance has so far been limited. By all indications, farmers have scrapped compliance with the stated goal of eradicating opium crops and are instead increasing production. "Afghanistan saw a 20 per cent drop in the area used to grow poppies in 2005, but a recent survey by the United Nations Office of Drugs and Crimes indicates that the crop is likely to surge this year. Diplomats say t

An interesting article by Ronald Cooke entitled, " Alternative Energy: It's Time to Evaluate Our Options ". In this article, Cooke examines our energy options as we come to the end of an era of "cheap oil". He divides the energy universe into two basic application groups, mobile fuels and stationary fuels, and goes on to evaluate possible energy sources according to risk profile, reliability of supply chain and economics. Cooke makes some very interesting arguments, and I found his comments on energy subsidies especially worthwhile. Check it out, at the link listed above.

An Indian wind turbine manufacturer is ready to break into the Chinese market for wind energy, thanks to a new mandate requiring China to get 10 percent of its energy from renewable sources by 2020. According to an article in the Indian newspaper, The Hindu, the potential for wind energy in China is great; current capacity is 1,260 Megawatts and China's ambition is to bring that number to 30,000 Megawatts by 2020. The energy law will require the purchase of the more expensive renewable energy at prices fixed by the government. The drive to setting up set up renewable energy programs has led the Chinese to collaborate with outside firms, largely European. An Indian company highlighted in the article, Suzlon Energy, will set up a wind turbine factory in Tianjin, China. " The factory, scheduled to begin operations in August, will manufacture rotor blades, generators and control panels and will have an annual capacity of 600 MW for all components ." Foreign companies are oft

Is cheap money the driving force behind recent merger activity? I've noticed a steady increase in consolidations across a variety of sectors in any number of localities. It seems like some of the more successful companies have been collecting cash and are undecided over what to do with it. The more favorable dividend tax rates in the US have led some companies to increase or reinstate dividend payouts over the past few years, while others have decided to enact share buybacks or acquire companies. In the resource, energy, and utilities sectors, a lot of deals seem to be driven by fear or a rush to replace reserves (in the case of the oil and gold companies). Some mergers have taken on a political dimension, with the recent utilities mergers in Europe and the failed ports deal in the US shining a light on increased feelings of protectionism and nationalism. But what of the recent exchange mergers? Are they driven by a real desire to improve efficiency and offerings, or is it a bit of

Why buy a stock when you can buy the whole exchange? Well, now you can. With an increasing number of stock and commodity exchanges going public in recent years, a craze for shares in financial exchanges has developed, giving investors a chance to own shares in companies that were once member-owned firms. Lately a wave of consolidation has swept over the financial exchanges, with the big news this week being the proposed merger of Nasdaq and the London Stock Exchange (LSE) and the possibility of the NYSE playing a role in the unfolding drama . Deutsche Boerse is mulling over a merger with Euronext, while both firms have in turn expressed interest in the LSE . Meanwhile, New York Mercantile Exchange (NYMEX) shareholders have approved a private equity group's $170 million dollars bid for a 10% stake in their firm. What's more, even though the deal values all of NYMEX at $1.7 billion, the value of the exchange could be quoted higher as it nears a public offering, according to a Fi

An ad campaign from coal producer Peabody Energy claims energy from coal can meet the demands of the modern world. From power generation to fueling your car, Peabody's ad claims, "Yeah...Coal Can Do That", while billing coal as the, "Energy for the 21st Century". Industrial historians and environmentalists might be thinking, "I thought it was the energy of the 19th century...".

Note: Please see our post update regarding interview links. Over the weekend I watched an hour long interview with investor Paul Van Eeden on Robtv. If you are interested in catching Paul's views on gold, junior mining shares and the outlook for companies in the commodities sector, I would definitely recommend watching it. Speaking of which, you might also want to catch Marc Faber's segment from last Friday. While giving a brief example of the effects hyperinflation might have on certain asset classes, he elicits an "I'm sorry, can you repeat that?" reaction from anchor Jim O'Connell. While I'm almost certain it was a staged response, I was delighted nonetheless. Update: The March 2006 interview clip has been found and re-added to this post. See our most recent Paul van Eeden interview clips post and search the blog for more content.

Ronald R. Cooke has recently posted an " Open Letter to ExxonMobil " to the Financial Sense website. In it, Cooke briefly takes the company and Chairman Rex Tillerson to task for their public stance regarding the "Peak Oil" theory and the debate that has grown up around it. The proponents of "Peak Oil" maintain that world production of crude oil is peaking and that subsequent oil discoveries will fail to bring us back to the levels of production we enjoyed at the peak of the production curve. Under Chairman Tillerson, ExxonMobil seems to be continuing former chief Lee Raymond's stance on the "Peak Oil" issue: downplay or deny the notion of peak oil and use the opportunity to highlight technological improvements in the energy business (see the included graphic of the Exxon Mobil PR ad at the end of Cooke's letter). Although most of the major oil companies have downplayed the idea of a resource shortage, some executives have been forced to

Some folks in Canada are urging a mortorium on the development of "oil sands" (or tar sands). A group known as the Parkland Institute has released a report that ties Canada's oil sands development to America's energy demands and its author wonders if this energy source is "fueling the American war machine". The report, "Fueling Fortress America", calls for a moratorium on tar sands development until a public inquiry can be made concerning the environmental and social impacts of such projects.

A panel discussion article featuring Jim Rogers, Marc Faber, and William Thomson. The topic: commodities, what else? If you've heard some of Marc and Jim's interviews in recent years, this topic will not be new, but if you are new to the story they present, then by all means read on. I always like to see what they have to say anyway!

A recent article by F.William Engdahl responding to the notion that the proposed Iranian oil bourse is the driving factor behind a march to war with Iran. According to the author, the oil-for-Euros standard that the new oil exchange is supposed to create is an unrealistic outcome. Engdahl makes his case against the recently popularized notion of an Iranian oil bourse unseating the dollar's hegemoney in this editorial from Financial Sense.

Paul Van Eeden's recent post on 321gold is an interesting overview of the international economic balancing act from the 1990s to the present day, with a view to the future of the dollar and the gold price. A lot of things are discussed here: interest rates, foreign trade and deficits, and the outlook for foreign currencies such as the Chinese Renminbi and Japanese Yen. The good news is that Van Eeden has taken a group of important inter-related subjects and explained them clearly and briefly. Paul Van Eeden's recent article, "Change is upon us" .

The Financial Times reports that a silver tracker fund (ETF) is expected to launch soon on the London Stock Exchange. According to the article, "LSE silver tracker fund in the offing" , the silver linked exchange traded fund will be introduced by ETF Securities within the next month. The product is seperate to the silver-backed ETF Barclays Global Investors has filed approval for with the SEC. "Unlike the gold and oil-based ETFs and the BGI initiative, the proposed silver fund in London will not be physically backed by the underlying commodity." The Silver Users Association has argued against the proposed US silver ETF on grounds that the silver market is too small to support large amounts of metal being allocated to investors. The London based ETF may have had less difficulty with its approval simply because it is not attempting to take physical silver out of the market, thereby avoiding conflict with industrial users. ETF Securities had earlier launched the worl

An article on the current cost of home ownership in the U.S. appeared in a recent issue of the Financial Times (3/3/2006). The piece starts off with the tale of one California man who had decided to sell his historic 5 bedroom home in favor of renting, a move that surprised many in his circle. But his timing may prove out: an HSBC survey of housing shows that the cost of ownership in some key markets has far exceeded the costs of renting. In markets like LA and San Francisco, the extra cost of home ownership over renting is about 100%, even with the tax deductions given to mortgage payments. A graphic within the FT article showed that Austin was the only key market where buying a home with a repayment mortgage did not incur added costs over renting. For more info, see the HSBC survey at this link .

The recent weekend edition of the Financial Times (March 4/5) reports that Australia will continue its ban on the sale of uranium to India. Despite India's nuclear capabilities and its recent nuclear agreement with the U.S., Australia restricts its sales of uranium to countries that have signed the Nuclear Non-Proliferation Treaty. Negotiations are in place to sell uranium to China, based on the fact that Beijing has signed the NPT. An interesting editorial on the subject from The Australian .

The board of directors at Berkshire Hathaway have tapped a manager to succeed Warren Buffet as Chairman and CEO of the company, but Buffet will not say who. The future head of Berkshire, who will probably not take Buffet's place for some time, was selected from a small group of internal managers at Berkshire. Read the Reuters story for more.

Silver has ended the week by holding above $10 level. Action has been very good for the metal, with a lot of talk surrounding the issue of whether or not there will be a silver ETF forthcoming to boost demand . David Morgan has been following the advance and putting out a lot of good information on the fundamental outlook for some time now. Let's see what he and Jim Puplava have to say about the recent price action in this week's Financial Sense Newshour .

Signs of inflation are evident in the European economies, but officials and commentators seem to affect surprise over the fact that an inflationary outlook persists despite their much favored quarter point hikes in interest rates. In this Times Online article , European Central Bank chief Jean Claude-Trichet offers the opinion that inflation is likely to stay above the ECB's chosen "ceiling" of 2% for this year and the next. The rest of the article goes on to describe the usual guessing-game nonsense of whether or not the prescribed interest rate hikes will come, and if so, when. Interesting to see no mention of the money supply figures in Europe or any discussion of how that might be fueling the observed inflation. In fact, it was not until the third article I read on the subject that money supply was mentioned. About halfway through the Telegraph 's article, " ECB warns there is more rate pain ahead ", the ECB's chief economist Otmar Issing addresses

The list of last week's percentage gainers on the Amex list in the latest Barron's seemed to be dominated by mining stocks in the precious metals sector. The group followed hot on the heels of news that Desert Sun Mining (DEZ) and Western Silver (WTZ) would both be taken over. WTZ led the movers with a 36% change for the week. Others in that list included: MFN, DEZ, SIL, MRB, NSU, and CLG. For anyone wanting more information on the outlook for mining shares, I would definitely recommend checking out the Financial Sense precious metals pag e as well as the weekly broadcasts of the FSO Newshour where mining shares are often discussed. Of course, these resources should be treated as educational starting points; do your due dilligence and consult with a trusted, knowledgeable financial advisor.

On page B1 of today's Wall Street Journal (3/1/06), Lee Gomes wrote an amusing piece about his stint writing "original content" for web masters who try to design high traffic sites geared around a specific topic. The desired content is often similar to (or pulled from) content on exisiting pages, but must include include certain search keywords and contain enough original phrases or word changes from existing copy to rate highly in web searches. Gomes hires himself out for the task of producing such "original content" and in the process, learns something about web economics and the effectiveness with which search engines provide us with information. Drawing from Google's search mission the idealized image of a "satellite orbiting high above the earth, capturing all its information but interfering with nothing", he finds instead that "search engines are more like a TV camera crew let loose in the middle of a crowd of rowdy fans...Seeing the c