Finance Trends Letter

For your viewing pleasure, "It's the Great Pumpkin, Charlie Brown" . Enjoy!

The Guardian recently ran an article on the agricultural commodities , highlighting that sector's performance against the strong multi-year runs enjoyed by the industrial metals, energy, and precious metals groups. Prices for wheat and corn crops are being affected not only by drought, but biofuel production and increased demand from Asia as well. A new group of speculators is also starting to pour into the commodities market; hedge funds are becoming more active in this arena and retail investors are gaining exposure to commodities through funds, ETFs, and other exchange-traded instruments. For more information on the new commodity ETFs and instruments such as exchange-traded notes (ETNs), please enter the terms in either the Technorati or Google blog search features for this site.

I wanted to talk about energy from oil sands today, in response to a couple of recent articles on the subject. Mainly what I and an increasing number of people want to know is, will oil sands prove a sensible solution for our energy needs? First, a little background on oil sands. Here's a brief summary taken from an earlier post on Alberta's oil sands boom : The oil sands, or tar sands (depending on your point of view), have always been something of a difficult resource base to exploit. Extracting the heavy oil from thick mats of clay and sand is an energy intensive and land disrupting process. The tar sands deposits are actually mined open pit style or extracted by steam injection, a method which requires large amounts of water and energy. Add the spectre of sizeable greenhouse gas emissions and it's easy to see that this activity will draw protests on multiple fronts. But even without outside protest, the companies involved in producing energy from the tar sands are enco...

This might be too much style packed into one session, but here goes: Stone Roses - "She Bangs the Drums" . Happy Mondays - "Step On" . Suede - "The Drowners" . Primal Scream - "Higher Than the Sun" . Keep rockin'.

From the Bloomberg.com article, "Soros, Bacon, Jones Hedge Funds Lag Behind S&P 500" : Investors in hedge funds overseen by George Soros, Louis Bacon and Paul Jones would have made more money this year by buying shares of a stock-index mutual fund. Managers of so-called macro hedge funds have lagged behind market benchmarks such as the Standard & Poor's 500 Index after being caught off guard by reversals in stock, bond and commodity prices. Macro funds, so named because they bet on broad economic trends, fare better when prices move up or down for a sustained period, which hasn't been the case in 2006 with investor opinions divided about the strength of the U.S. economy. The "macro" style of hedge funds not only underperformed the S&P 500, they also failed to outpace the overall asset class. Macro funds rose by an average 1.8 percent as of Oct. 24, compared with 5.6 percent for all hedge funds, according to data compiled by Hedge Fund Research I...

Nnnnooooo....(said in exaggerated Jack Tripper-style stage groan). A Halliburton subsidiary that has been awarded billions of dollars in federal contracts in Iraq has been accused by an independent watchdog of “abuse” of government regulations that protect US taxpayers. Stuart Bowen, the special inspector-general for Iraq reconstruction, said in an interim audit released on Thursday that Halliburton subsidiary Kellogg, Brown and Root (KBR) had, in effect, routinely inappropriately hidden data about one of its contracts from public scrutiny by marking the information as “proprietary”. The critical audit comes on the heels of a separate report released this week that found that overhead costs had consumed between 11 per cent and 55 per cent of the cost of a handful of reconstruction projects. See the full article at FT.com

" People never lie so much as after a hunt, during a war or before an election." - Otto von Bismarck Thanks to Penntrade mining news editor Tom Wobker for including this quote in his Northwest Mining Stock News update. If you survey the news today, you'll find at least one glaring example of the truth behind this statement.

I happened to see these Brian Eno quotes from Brainyquote.com and found them interesting enough to include here. Here are two that jumped out at me: I have lived in countries that were coming out of conflict: Ireland, South Africa, the Czech republic. People there are overflowing with energy. Then, further down the page... When I went back to England after a year away, the country seemed stuck, dozing in a fairy tale, stifled by the weight of tradition. Interesting. The second Eno quote reminds me of Kipling's famous remark on the benefits of traveling outside one's home country. “And what knows he of England who only England knows.” I wonder if any Finance Trends readers have had such a learning experience?

Also at Bloomberg.com, see the latest interview segment with Marc Faber, "Faber Sees Emerging Markets Outperforming U.S., Likes Argentina" . Always interesting to hear his thoughts, but personally I have to wonder how he can stomach some of the idiotic questions/debate points thrown his way by some of these sycophantic reporters and panel guests. It seems they are consistently interrupting the guest or throwing out idiotic statements in an effort to discredit logical and original thinking. Witness the guest speaker's assertion that liquidity is not coming from the U.S. Federal Reserve, but from "petrodollars". Of course, Faber makes short work of him. So sad.

Bloomberg reports that due to newfound transparency in the corporate bond market, bond traders and salesmen are witnessing the demise of their profession. With the advent of NASD's computer price reporting, their previously large incomes withered away. Now, many involved in the corporate bond market are losing their jobs. One-fourth of all corporate-bond traders, analysts, brokers and salesmen have lost their jobs in the past two years, according to Michael Karp, head of New York-based executive search and consulting firm Options Group. David Hendler, an analyst who covers financial firms for CreditSights Inc., estimates as many as 500 people work in corporate bonds at the five biggest firms. Since 2002, traders have been required to report trades of registered corporate bonds to a computerized NASD price reporting system known as Trace (an acronym for Trade Reporting and Compliance Engine). This has replaced the time honored dealer market in which customers would call up bond sal...

A Bloomberg.com article reports that experienced hedge fund operators are doing well with their commodity-focused investment vehicles, despite a slump in the leading commodity indexes. In, "Pickens, Farmer double their money during 2006 commodity rout" , reporter Saijel Kishan describes how experienced fund managers are achieving postive returns at a time when the Goldman Sachs Commodity Index is down year-to-date. Hedge fund returns are trouncing those offered by indexes of commodities, stocks and bonds. The Goldman Sachs Commodities Index, which the investment firm said in December would gain 9.5 percent this year, has lost 12 percent. The Dow Jones Industrial Average is up 12 percent, while 10-year Treasury notes have returned about 8 percent. ``Those that have worked for more than 10 years at the big commodity trading houses have seen it all before, they know how the markets work and how tricky they can be,'' said Jeremy Charlesworth, a director at London-based BD...

I read an interesting editorial in the weekend edition of the Financial Times on the subject of broker share loans. In, "The story brokers don't want you to read" , money manager Arne Alsin describes the process by which stock brokerages take advantage of retail investors and disrupt the shareholder voting process. Brokers lend investor property to short sellers, often at annual yields in excess of 10 per cent, without notice to investors. After lending investor property, brokers have the gall to keep 100 per cent of the proceeds. Broker lending of investor property generates $10bn a year for the brokerage industry. Because brokers are reluctant to share this booty, they wilfully and systematically discriminate between investors. They discriminate between those investors who have information and those who don’t have information. Investors who know when their shares are lent (in other words, institutional investors) demand a piece of the action. And they should. Those inve...

Thought I'd post this October 17 article from Bloomberg in which Marc Faber is quoted. He feels that gold and oil are probably in a good range for buying right now; although they might go lower in the near term, they present a good opportunity, according to Marc. Also be sure to check out the side link for Bloomberg's video on demand. You will see a link for a video interview with Marc Faber entitled, "Marc Faber favors Taiwan stocks, commodities and gold". Click on it and it will open in a new window. Good stuff.

This is not an area in which I claim to be an expert, but I think you may benefit from hearing the advice of a financial advisor who probably is. I f you'd like to hear some real straight dope on what you'll need to consider in arranging your savings and investments for retirement, listen to last week's Financial Sense Newshour with Jim Puplava. In the 3rd hour segment of the October 7 broadcast , host Jim and co-host John Loeffler discuss retirement planning and the need for income producing investments, especially those that can match or outpace inflation. Why is this topic so important? For the simple reason that many Boomers will overestimate their financial preparedness while underestimating the eroding effects of inflation on their savings and investments. If you like what you hear, check out the other 3rd hour "Big Picture" broadcast segments; Puplava and the gang have been devoting a lot of time to the issue of retirement planning lately. You can see a su...

The rumors are finally true. Today the Merc (CME Holdings) announced that it will acquire the Chicago Board of Trade (CBOT Holdings, as it is formally known these days) in a deal that combines the two largest U.S. futures exchanges. We've often heard speculation that the longtime rivals would merge, but until the two firms went public, it never seemed like it would come to pass. Now that CME has grown in size and stature as a publicly traded corporation, they have the motivation and the means to swallow up their smaller rival, CBOT Holdings. With a market cap of over $18 billion at today's trading price, CME is valued at over twice the $8.1 billion CBOT Holdings ( BOT ) commands at today's share price. CBOT Holdings has jumped over 13% in response to the buyout, and CME is up 3% as well. Looks like everyone seems pleased about the deal. I hear from my father, a longtime CBOT member and trader, that the Merc will abandon their building and set up trading operations in CBOT...

A very interesting article taken from Mises.org and reproduced at Marc Faber's site, Gloomboomdoom.com . In this essay, Nicholas Snow tells us about the "Three Stages of Invention" , and Frederic Bastiat's philosophy on economic protectionism. What would Bastiat make of our patent laws? Read on to find out. (Note: article link is to a PDF file).

This week's rock and roll post coincides with the closing of Manhattan's legendary music club, CBGB. Whether you were a regular there, or just read about it in the liner notes to Ramones Mania (like me) , you know what this place means to many rock and roll fans. You can read on for CBs memories as chronicled by Paul Collins for Slate and Jim Farber of the NY Daily News , but we prefer to keep on rockin'. Enjoy. Mott the Hoople - "Golden Age of Rock n' Roll" . Dinosaur Jr. - "Freak Scene" Small Faces - "Itchycoo Park" Wilson Pickett & The Midnight Movers - "I'm In Love" The Yardbirds - "Stroll On" (with Jimmy Page and Jeff Beck) .

Sorry for the dumb post title, but it just came to me. There is some important commodities related information to share, so please read on. The Bear Mountain Bull has highlighted a divergence currently taking place in the commodity sector. It seems that while commodity indexes based on futures contracts are down sharply in recent months, spot commodity indexes are hitting new highs. See the BMB site for more on this; you might find more to like while browsing their blog (there's some good market commentary, personal finance info, and general observations on the economy). FT recently reported on changes in the copper market that have come about because of large investment demand. In "Structural shifts in copper market" , Chris Flood writes: New institutional funds flowing into the copper market have resulted in a historic shift in the relationship between prices and stocks, according to Bloomsbury Mineral Economics (BME), the metals consultancy. The copper market has dev...

At FT.com you can read the latest "ask the expert" Q&A panel featuring Jim Rogers . Readers have sent Rogers their commodities related questions and he responds in kind. Check it out.

Has anyone read this essay by Hugo Salinas Price, posted at 321gold.com? If I'm reading it correctly, "The Evaporation of Civilization" seems to argue that cheap energy is accelerating the decline of our civilization. Here's an excerpt: Oil energy has overwhelmed almost all institutions in the world. This is a terrifying fact, for a society without institutions is the definition of a barbaric society. A world without enduring institutions which limit and order human life is a barbaric world. The last remaining institution is the one that characterizes barbarism: the Army. That is what we are approaching today. Price feels that an abundant energy source has hastened the decline of our social institutions, helping to create a world in which we're always running faster just to keep in place. This stage of our human existence is also marked by the use of false "money" and an overwhelming regard for science of measurement in place of philosophy. I'm not ...

A bit of an update on the exchange merger front. FT reports that Nasdaq could take control of the LSE going if hedge funds tender their 20 percent stake at £13. That stake, when combined with the 25.3 percent share of the LSE Nasdaq already owns, could clear the way for a takeover. Will Nasdaq get their deal or will another bidder swoop in to take the prize? Andrew Hill , reporting for the October 11 edition of the Financial Times, had this to say: At the moment, a bid from Nasdaq represents LSE investors' only realistic exit. If the US exchange can afford it - a big if - that leaves only one question: will Nasdaq bide its time until next May, when the floor on its bid price drops away, or step in earlier? It seems that Nasdaq is now in a stronger position to take control, or are perceived to have an advantage that did not exist last May when their credit rating was cut to junk status by S&P. More to come, as it unfolds.

The death toll in Iraq has climbed to over 600,000 since the beginning of the US-led invasion, according to a survey released by Johns Hopkins Bloomberg School of Public Health and Al Mustansiriya University in Baghdad. The survey findings were published today's online edition of the The Lancet, according to Bloomberg.com . The methodology behind the survey is currently being debated; President Bush has said that he does not find the report to be credible. ``I don't consider it a credible report; neither does General Casey and neither do Iraqi officials,'' Bush said when asked about the study at a White House news conference. The study's methodology is ``pretty well discredited,'' he said. The survey collectors visited 47 randomly selected areas and interviewed over 12,000 particpants to find the numbers of births and deaths for each household during a specified time period. The numbers were then multiplied to represent Iraq's total population of 26 mill...

We knew that foreign resource and mining companies had flocked to London's Alternative Investment Market (AIM) in recent years, but it still came as a bit of a shock to learn that Silicon Valley firms were looking to do the same. The front page of today's Financial Times carried this report by Chris Nutall : Dozens of Silicon Valley companies are lining up to float on Aim, London's junior market, as US businesses weigh up ways to raise funds at home amid the high cost of going public under the Sarbanes-Oxley Act. More than 100 technology companies have been considering listing on Aim, say industry insiders. London Stock Exchange officials have made at least six visits to the Bay area in the past year to hold seminars and raise awareness. Gary Benton, a technology lawyer for 22 years in the area and a partner in the Palo Alto offices of Pillsbury Winthrop Shaw Pittman, said the level of interest in the London market was unprecedented. "Even though Aim has been around fo...

A rare bronze sculpture of the Shakyamuni Buddha was sold for $15 million dollars at a recent Sotheby's auction in Hong Kong. The sale price was an auction record for a Chinese work of art, excluding ceramics, and almost doubled pre-sale estimates. Bloomberg notes that interest has shifted to traditional artworks and away from Chinese contemporary art, a recently fashionable area for collectors. ``China's Old Money has come out in force to buy the antique ceramics and the bronzes,'' said Lawrence Schiller, a film director and art collector, who bid at the auction. ``There are too many Chinese contemporary art pieces in the market, and buyers are wary about paying too much for them.'' The bronze statue of Shakyamuni Buddha was purchased by a businessman from the Chinese mainland who will display the work in a temple or gallery for one year. The question of whether the artwork, which had been in European hands, would be reclaimed by a Chinese buyer was definite...

I wanted to add a link to the September special issue of Scientific American Magazine. The cover theme is "Energy's Future Beyond Carbon" , an examination of the possibilities for our post-hydrocarbon energy needs. There are a couple articles in this issue that can be read for free online. I'm planning to see what they wrote about nuclear power in, "The Nuclear Option" . I'll also check out the article entitled, "The Rise of Renewable Energy" , which can be found at Berkeley's RAEL site. Thanks to The Dines Letter for the heads up on this article series.

Tunes to lighten our spirits and energize us, because...well, why not? Besides, times like these can make you want to say, I'm "Going Underground" . Hey, I never thought models could be cool until I saw this. Elefant with, "Misfit" . Remember this one? L.A. Guns, "Never Enough" . Now y'know where Nirvana got the idea for the "In Bloom" video from. And last but not least, Roxy Music & "Ladytron" . Even though they seem to be playing over the album track, this video is unbelievable. Enjoy.

From The New York Times : Anna Politkovskaya, the veteran Russian journalist and author who made her name as a searing critic of the Kremlin and its policies in Chechnya, was found dead on Saturday in her apartment building, shot in the head with a pistol, the authorities and her colleagues said. Ms. Politkovskaya, 48, was a journalist with few equals in Russia. She was a special correspondent for the Novaya Gazeta newspaper and had become one of the country’s most prominent human rights advocates. In recent years, as the Russian news media faced intensifying pressure under the administration of President Vladimir V. Putin , she maintained her outspoken stance. And she became an international figure who often spoke abroad about a war she called “state versus group terrorism.” She was a strident critic of Mr. Putin, whom she accused of stifling civil society and allowing a climate of official corruption and brutality. She was found dead by a neighbor shortly after 5 p.m. A Makarov 9-mil...

A group of 130 Georgians living in Russia were deported after Russian officials rounded up them up and put them on a plane bound for Georgia. Many were accused of immigration offenses and criminal activity, while others were simply told they were no longer welcome in Russia. The deportations represent the latest in a series of shots exchanged by the two sparring nations. Tensions between the two countries increased last week after Georgia arrested four Russian army officers and charged them with spying on military installations. The soldiers were soon released, but this did not stop Moscow from staging a retaliation. From the Times Online : On the day that Tbilisi released the Russian soldiers, Moscow severed all transport and postal links with Georgia, and has also stopped issuing visas to Georgians, banned key Georgian exports to Russia and raided Georgian businesses in Moscow. Yuri Chaika, Russia’s Prosecutor-General, insisted that its retaliatory measures were "being carried o...

Reports from the Wall St. Journal indicate Google is looking to acquire YouTube for $1.6 billion dollars. The talks have been described as tentative, and the deal could disolve at any time. Here's CIO.com on Google's bid to buy the leading online video community: In September, YouTube nabbed almost 46 percent of all U.S. visits to video Web sites, while the video section of News Corp.’s MySpace.com came in second with 21.2 percent, according to Hitwise. Google Video came in third with 11 percent, followed by Microsoft’s MSN Video with 6.8 percent and Yahoo’s Yahoo Video with 5.6 percent. YouTube, in typical startup fashion, approached the market aggressively, opening up their service to anyone wanting to upload their videos, and quickly became a phenomenon. It embraced tagging and sharing features, creating the most popular online video community. Meanwhile, Google took a much more conservative approach, at first only featuring videos obtained through formal agreements with p...

News is that US Secretary of State Condoleeza Rice flew into Bagdhad today for a surprise visit . Rice has recently been on a tour of the Middle East and her meetings with Iraqi government officials will likely involve discussions about the civil violence that is tearing the country apart. The Reuters report of Rice's visit (linked above) notes that, "Washington has made the training of Iraqi security forces the focus of hopes to start withdrawing 140,000 U.S. troops." Meanwhile, an adjoining article on the FT.com front page carries the headline, "US forces in Iraq to exceed 140,000 " . Published not two weeks ago, the opening paragraph of the article stressed the announcement by US officials that "American troop levels in Iraq were likely to remain well above 140,000 for the next few months". What is going on here? Further down the page we read that, as recently as August, some members of the Senate armed services committe were surprised to hear that ...

Sol Palha's recent contribution to Financial Sense is an overview of world markets entitled, "Dow 11700 and Other World Indices ". What's interesting about this piece is that moves in the world share indices are measured against the movements in their respective national currencies, as is the Dow Jones Industrial Average against the dollar. From this viewpoint, Palha comments on the real underlying strength of the various international share indices versus the Dow. Here, Palha explains why it is important to look at the market's performance in tandem with its currency strength: Currency devaluations or gains play a very significant role in market direction. The masses do not understand their significance and hence fail to recognize and understand what the main ingredients for a true bull are. Once you have knowledge of how currencies work you can then sit down and slowly position yourself for the larger long term moves. If the Dow should trade past 12000 almost e...