Finance Trends Letter

Happy New Year from Finance Trends! (Cheers, darling - allright...)

The year is out and almost everything has ended on an up note, at least as far as the financial markets are concerned. We've seen a year of big-time deals, new financial products launched, consolidation across all sectors and locales, rising global stock markets, and record prices for art and auctionable goods. The operative phrase in 2006 was "global liquidity", and a clutch of articles (including some of our own) chronicled this wave of liquidity and the markets that floated higher on its rising tide. With that in mind, I want to relay one more observation now that the year is done and the final results are in. I'm sure many of you have noticed that almost all share markets were higher this year. Looking over the past few issues of Barron's and the year-ending tables in the Financial Times global indexes confirms this trend. There seemed to be hardly any down performers on the year among share indexes tracked. In fact the only areas that ended the year on the do...

A couple of stories from the Financial Times highlight the recently amplified trends of foreign companies delisting from American stock exchanges and choosing to go public in London. In "Easier to check out - but a US listing is still a trap" , FT reporter Robert Bruce compares US listings to a roach motel - "They check in, but they don't check out". Ouch. However, he does go on to report that the SEC is trying to make it easier for companies to delist from American exchanges. See the article for more. More in the vein of "New York's loss is London's gain", as Joanna Chung reports on Europe's revived ranking in the global listings business. From, "Flurry in London sets bullish tone" : Europe held on to a significant slice of the global market for company listings this year - helped by a flurry of companies from emerging markets that chose to raise capital in London. Companies raised $91bn in Europe, accounting for about 38 per cen...

Mergers and acquisitions in the gold mining industry have surged, with more deals done in the past year than at any other time in recent memory. Bloomberg reports : Dec. 27 (Bloomberg) -- Gold-company acquisitions this year surged to the highest level in at least a decade, and the industry may continue its buying spree in 2007 as producers struggle to find new deposits. Goldcorp Inc.'s $8.5 billion acquisition of Glamis Gold Ltd. was the biggest of 357 deals valued at a total of $24.3 billion this year, data compiled by Bloomberg shows. That eclipsed the $16.2 billion spent last year on 341 transactions, including Barrick Gold Corp.'s $10 billion purchase of Placer Dome Inc. Producers are rushing to boost supply because mines are being depleted faster than new reserves are being found, and a six-year rally in gold prices is providing cash to buy assets. The number of discoveries of at least 2.5 million ounces has declined for eight straight years, according to Metals Economics ...

Some of the day's top news items. "Nigerian Pipeline Explosion Kills at Least 200" - Bloomberg. "Saddam Hussein to Be Hanged Within 30 Days After Appeal Denied" - Bloomberg. "Three Groups Prepare for Battle in Somalia" - AP/Guardian. "Longetivity gene keeps mind sharp" - BBC News. "Founder of Wikipedia plans search engine to rival Google" - Times Online. A dded commentary on this topic from the gang at Slashdot .

For your viewing pleasure, "A Charlie Brown Christmas" . Enjoy!

B eing an essay on the nature of fiat money and credit ... Okay: some items I wanted to share with you about our modern financial economy. A few insights into how fiat money and central banking systems make the modern world go 'round. I thought this might make for good background reading on a subject that is rarely broached in mainstream media and daily public conversation. It will also help us understand the greater forces at work in our modern, "hot money"-driven financial markets. Especially given the focus we've put on this week's events in Thailand and the emerging markets arena. What is driving the rising tide of global liquidity that is fueling all the fast-paced investment flows and speculation? What is it about this environment that's driving deal-making and acquisitiveness to such great heights? I spoke briefly with Dr. Marc Faber by email this week and I asked him about what had happened in the Thailand stock market. The panic in that market (as re...

Here's an article from Bloomberg that I wanted to include. Some of you may have read this piece on Russia yesterday, but for those who missed it and would like to get a glimpse of what's going on behind the stage curtains, have a look. See: "Russian Killings Signal Start of Presidential Election Campaign" . Lots of interesting stuff coming out now in the Western press concerning present day Russia. Earlier in the week, Wall St. Journal ran a front page article on one of the men behind the scenes, Vladimir Surkov , who helped organize Putin's rise to power. Also, I notice the latest issue of The Economist features a cover depicting Vladimir Putin as a 1930s gangster, and brandishing a gasoline pump nozzle made to look like a Tommy gun. The caption reads, "Don't Mess With Russia". What will happen in the coming years? I'm almost afraid to ask.

Thailand's SET Index hasn't completely retraced its losses following yesterday's 15 percent plunge, but we did see something of a rebound in stock prices in Bangkok and emerging markets across the world. As Bloomberg.com reports in, "Emerging-Market Stocks Gain; Thailand Rescinds Capital Control" : Emerging-market stocks rallied from the biggest drop in three months after Asian nations said they won't impose capital controls, less than 24 hours after Thailand's failed bid to limit foreign investment. Thailand's SET Index jumped 11 percent in Bangkok after the government exempted equity from restrictions that had sent the benchmark on its biggest slide in 16 years yesterday, wiping out $23 billion in market value. Stocks in South Africa, South Korea, Malaysia and Russia rose, helping push the Morgan Stanley Capital International Emerging Markets Index, which tracks 25 markets, 1.3 percent higher. Central banks in Malaysia, the Philippines and Indonesia ...

Currency controls on foreign investment led to a rout in Thailand's stock market Tuesday. Now that impositions on foreign stock investors have quickly been withdrawn, the market is expected to go higher. Bloomberg reports : Thailand scrapped currency controls on international stock investors one day after their imposition by the central bank prompted the biggest stock market plunge in 16 years. The government lifted a requirement that banks lock up 30 percent of new foreign-currency deposits for a year for funds earmarked for stocks, Finance Minister Pridiyathorn Devakula said in Bangkok. The rule, intended to slow a 16 percent gain in the Thai currency this year that threatened exports and economic growth, sparked investor selling that wiped out $23 billion of market value in Thai stocks. ``The surprising speed and responsiveness of this policy reversal should help forestall a deep and lasting impairment of Bank of Thailand credibility,'' Michael Kurtz, a strategist at Bea...

"China to import 140 mil tons of crude oil" reads the headline of a recent China View article. BEIJING, Dec. 16 (Xinhua) -- China's crude oil imports are expected to reach 140 million tons in 2006, up 10.2 percent on last year, according to the Ministry of Commerce (MOC). Liang Shuhe, deputy director with the Foreign Trade Department of the MOC, said that China's demand for crude oil would total about 290 million tons this year, of which 48 percent were imports. According to Liang, China's total output of crude oil is expected to reach 183 million tons in 2006, with 7.40 million tons for exports. Liang said the fast growth of the economy has forced China to depend more and more on imports because of the limited domestic production, predicting that the steady increase in imports was likely to continue. Statistics from the MOC show that China's crude oil imports increased by 14.1 percent in the first ten months of this year to reach 120 million tons. The Chines...

Investor and financial writer Marc Faber speaks with Bloomberg about the state of the world economy and the investment outlook going forward. Marc says asset prices have been going up due to easy money policies worldwide. He also feels that any further liquidity expansion from the U.S. will result in a continued increase in asset prices against a backdrop of continuing dollar weakness. As Faber points out, the S&P 500 has marched higher this year (up 13 percent in dollar terms), but is up only 2 percent in terms of Euros. In other words, "the strength in the S&P has been offset by dollar weakness". He sees relative value in the stock markets of Asia, giving specific mention to Thailand (where the currency has strengthened against the dollar) and underperformer Japan. While Faber says he is currently taking advantage of the opportunity to sell assets, he feels that anyone who remains bullish should focus on Asian equity markets.

A couple of interesting recent developments in the derivatives market. Here's the scoop. Yesterday, the Financial Times reported on a new credit derivatives platform that would allow market participants to obtain prices for derivatives contracts more quickly and efficiently. From, "New process for credit derivatives" : A new process for trading portfolios of credit derivatives via electronic auction has been tested by banks and a leading hedge fund in recent days – a development that could provide another important cog in the infrastructure for this fast-growing market. The new system, dubbed Q-Wixx, allows investors, such as hedge funds, to execute dozens of trades in credit derivatives with different dealers in a matter of minutes rather than relying on bilateral trading deals, which tend to take several hours. The article goes on to say that the platform could be extended to include other products in the future. A companion piece, "Q-Wixx" shrinks the world...

From Bloomberg.com: video of Jim Rogers addressing a London audience on the topic of China's future growth and rise to power. Also, Jim gives his outlook on the dollar, stocks and bonds, and commodities. Quote from Rogers at the opening of this video clip: "The single best word of advice I can give you is to teach your children and grandchildren Chinese (Mandarin). It's going to be the most important language in their lifetime" . Wow. Be sure to watch this clip.

For anyone who missed the recent CNBC special on Warren Buffett and would like to check it out, you'll be pleased to know that it's been added to YouTube. You may now watch and drink in his celebrated glory. I would describe the coverage as fawning, but that seems to be par for the course at this point. So enjoy! Warren Buffett: The Billionaire Next Door . Thanks to VC Confidential for the heads up on that one, missed it the first time around. Update : I would also recommend the Charlie Rose special, "Warren Buffett: The Man" , which can be seen at Google Video and is excellent. Also in this series, "Warren Buffett: The Business" , and "Warren Buffett: The Gift" . Enjoy.

Readers, you've probably seen many recent articles outlining the global shift towards urban development and settlement. Well, here's one more for you that's worth checking out. Worthwhile because it examines the problems of our modern cities at a time when planners are envisioning the next wave of of mega and "hyper" cities. Allister Doyle reports for Reuters : With the world poised to enter an urban age when more people will live in cities than in the countryside, Josiah Tobiko sees no need to move from his cow dung-covered hut in rural Kenya. "You can choose city life with televisions and mobile phones but I prefer living here," said Tobiko, a Maasai teacher who lives in a settlement of 125 cattle and goat herders with no electricity or piped water at the foot of Mount Kilimanjaro. Tobiko, 35, moved into a new one-storey home this year -- made of tree branches tied with sisal and coated with about six inches (15 cms) of cow dung and mud. Here in Ambose...

Rock and roll, kids. Towers of London - "How Rude She Was" . Rockaway - "Somebody's Watching Me" . The Cure - "In Between Days" . Wire - "Heartbeat" . My Chemical Romance - "Honey, This Mirror Isn't Big Enough For the Two Of Us" .

So says Bill Fleckenstein of Fleckenstein Capital and "Contrarian Chronicles" fame. What's eating Bill anyway? Can't he just like, "go with the flow, man", relax and enjoy the ride? It seems that Fleckenstein recently had an opportunity to unwind and get away from all the day-to-day noise of the market, thereby granting him a little added perspecitve on the shape of things to come. Did he come back refreshed, relaxed, and ready to get with the program? Hell, no! In fact, Fleckenstein is even more convinced that the mania mindset is firmly entrenched among the speculating public and has spread out among a number of different areas. It is truly remarkable how reminiscent the current mindset is of the 1998-2000 stock mania, when every week would see hundreds of upward price-target revisions. Having said that, in my opinion the current psychology amongst so-called professionals is even loonier. In the previous mania, the bulk of the madness was concentrated in ...

I must have missed this article the first time they put it up at Dealbreaker.com , but I certainly got a kick out of it yesterday when they reposted it. Reporter Bess Levin is forced to make the morning commute into Greenwich, CT on assignment. Was there a story waiting to be uncovered or is this just penance for a greater crime? One morning, a few weeks back (let's say 4), I inadvertently placed a scotch on the rocks meant for DealBreaker publisher Elizabeth Spiers on DealBreaker editor John Carney's desk. John, who takes his scotch neat, flew off the handle and decided that the only punishment harsh enough, and befitting the crime, would be to send me on assignment to...CONNECTICUT. "The Metro-North train leaves Grand Central Station at SEVEN-THIRTY A.M. Make sure you're there early," he said, his voice booming. And what did we learn from this little adventure commute? See, "Pardon Me, But Might I Suggest Greenwich?" to get the whole scoop.

Bloomberg reports that last month's stock sales by corporate executives exceeded purchases by the widest margin since 1987. Executives including Microsoft Corp.'s Bill Gates, Google Inc.'s Eric Schmidt and Kohl's Corp.'s William Kellogg in aggregate sold $63.18 of shares for every $1 they bought in November, an analysis by Bloomberg of data from the Washington Service showed. That's the highest since at least January 1987. Insider selling and buying are no longer the straightforward indicators they were once taken for. You now have company spokesmen putting a PR slant on the buying/selling action of important officers and executives. Sales of shares by a company officer could be chalked up to "diversification" or something as innocuous as funding for a charitable trust. Conversely, buying patterns of company shares can no longer be seen as a straightforward bet on a rise in the company stock. Oftentimes, the buying activity of company officers will b...

We've talked before about the environmental impact associated with biofuel production, an issue that tends to get glossed over in the rush to promote "renewable" energy sources. An article that appeared in today's Wall St. Journal, "Alternative-energy boom roils Asian environments" , examines the drawbacks of unsustainable palm oil production. An excerpt: Investors are pouring billions of dollars into "renewable" energy sources such as ethanol, biodiesel and solar power that promise to reduce the world's reliance on petroleum. But exploiting these alternatives may produce unintended environmental and economic consequences -- fallout that could offset many of the expected benefits. Here on the island of Borneo, a thick haze often encloses this city of 500,000 people. The cause: forest fires that have blazed across the island, some of which were set to clear land to produce palm oil -- a key ingredient in biodiesel, a clean-burning diesel fuel a...

I wanted to include an important article from csmonitor.com, entitled "Putin's Russia: better and worse" . Here's an excerpt: Hearing Yevgeny Butovsky and Antonina Vallik describe the state of their nation, one would think they live in two different countries. In fact, they share a home. "We are eating our future, and we are being too quiet about it," complains Mr. Butovsky, a successful private farm manager increasingly concerned by the autocratic political system built since President Vladimir Putin was elected in 2000. But for his homemaker wife, Ms. Vallik, those years have yielded a rise in living standards that has enabled her to widen the scope of her passion - taking in homeless pets. "Any regime is OK for me," she says. They're not the only ones having this discussion. The debate is rising in Russia, and around the world, over what kind of a state Putin has built, whether it's bearable for its population, and if it is safe to inves...

Good reading for a Sunday night. Here are some items you might enjoy. F rom December 1 Financial Times article on Oakland A's GM Billy Beane , the number-crunching baseball manager who served as the focus of Michael Lewis' book, Moneyball . Billy Beane is an unlikely speaker at an investment conference. The general manager of baseball’s Oakland Athletics looks, and speaks, like the professional athlete he once was – he is 6ft 4in tall, is still in excellent physical shape, boasts a healthy tan and speaks in relaxed tones. But at T. Rowe Price’s annual investment symposium in Baltimore last month, he took top billing over an array of investment analysts and historians, and kept his audience – mostly of fund managers and their clients – rapt with attention. Beane’s great contribution to baseball – he is quick to admit – has been to apply to it techniques that were first honed by investors on Wall Street. Now, to his evident enjoyment, Wall Street is interested by the lessons it c...

Lots of good info to share in this post, thought I'd roll it all up in one place, so here goes. (1) Solar power. If you're keeping an eye on the energy space, you may have heard a lot about the polysilicon shortage that's recently hit makers of solar panel equipment. If not, this passage from the FT article sums it up nicely: Polysilicon, used to make silicon chips and photovoltaic (solar) cells, is in short supply because of the voracious demand of the booming semi-conductor industry and the rapidly expanding solar sector. The latter has grown rapidly through large-scale government-backed solar programmes in Germany and Japan, and solar equipment now consumes about half the polysilicon produced. Having limited knowledge of the solar world, I had to wonder if there was a ready to launch alternative to the conventional, polysilicon-dependant photovoltaic equipment. I also had to ask myself if maybe it was the subsidized, "large-scale government-backed solar programmes...