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Showing posts from July, 2007

Bookmarking "Finance Trends Matter"

As you may have noticed, I've recently added social bookmarking features to the blog.

I recently added a "Bookmark" link in the Finance Trends sidebar, which allows you to bookmark Finance Trends Matter in your personal browser and to many of your favorite social bookmarking sites.

I've also added the AddThis bookmark widget in the footer of each post. Now you can save any individual post as a "favorite" or bookmark in your browser, or share them on Digg, Del.icio.us, Google Bookmarks, or any number of bookmarking services.

I hope these new features will help you organize information, enhance your visit, and allow you to share this blog and its content with others.

I'd also like to thank a couple of fellow bloggers who helped me add these features to the site. To Amanda at Blogger Buster, and Charles at The Kirk Report, thanks for your help in adding these important features! I couldn't have done it without you.

Thanks for reading, sharing, and bookmarki…

Bloomberg opinion on "subprime infection"

Bloomberg's Mark Gilbert says the tremors from the subprime debacle are being felt in all areas of the interconnected global financial markets.

The pain is being felt in an array of tradeable assets. As Gilbert puts it, "Derivatives, corporate debt, loans, and bank stocks are all getting trashed".

In today's opinion column, he offers up, "Five Signs That Subprime Infection Is Worsening".

Here's an excerpt from that piece regarding short bets on Moody's share price:

...Do Bet Against Moody's

Investors made more than 23 million bets against Moody's Corp.'s share price in the month to mid-July, according to Bloomberg data on the total amount of stock that was sold short and hasn't been repurchased yet. Those trades, known as short interest, have surged from 18 million in mid-June, and have almost quadrupled in the past four months.

Moody's shares have declined about 10 percent in the past two weeks, extending their loss for the year to al…

What lies ahead for the markets?

After last week's action in the world financial markets, it's time to take a breather and consider what lies ahead.

First, a review of some of the questions that might come to mind in the wake of our recent market events. The following are some of the concerns that seem to be planted in a great many minds.

Are we in for a major U.S. stock market correction?
Will the stock markets of emerging economies continue their outperformance of the U.S. markets, or will they overheat and begin to reverse themselves?
Have the credit markets been infected by the subprime market's contagion of fear, or are we merely seeing a temporary repricing of risk?
Have credit conditions tightened, and if so, does this spell the end for the LBO/private-equity boom?
To answer these questions, let's look to the insight of two noted financial thinkers and investors: John Mauldin, of Millennium Wave Advisors, and Marc Faber, of Marc Faber Limited.

Mauldin has written a piece called, "The Subprim…

Features of the week

We have some excellent articles and interview features for you this Friday. So sit back, relax, and enjoy our "Features of the week".

1. "Subprime Shockwaves". Bloomberg TV examines the fallout from the recent wave of subprime mortgage defaults and their effect on the U.S. housing market and the economy.

Guests include Richard Syron, CEO and Chairman of Freddie Mac, economist Robert Shiller, Pimco's Paul McCaulley, Jim Chanos of Kynikos Associates, and investors Marc Faber, Jim Rogers, and Ken Fisher (watch out for the hypnotic hand gestures).

2. Jim Rogers tells Reuters he's cautiously bullish on Chinese shares.

Despite an incipient bubble, the globe-trotting investor sees investment opportunities in companies serving China's needs in railways, education, water, renewable energy, and environmental cleanup.

3. "Blackstone Falls to Record Low in Debt Market Freeze". Shares of Blackstone Group have fallen to a new low, making the buyout firm the wors…

Credit market worries spread

We spoke yesterday about worsening conditions in the credit markets, as fears from the subprime mortgage bond market had spread to the corporate and high yield debt markets.

Today we see more evidence of a contagion of fear, as credit fears join with worries over higher oil prices and the state of the U.S. housing market. The result: a reversal to yesterday's gains in the leading U.S. stock indexes, as U.S. stocks declined sharply in morning trading.

The fallout in stocks was not limited to U.S. markets. European and Asian shares also suffered from fears of a slowdown in the takeover market due to higher borrowing costs. More on that from Reuters:U.S. stocks tumbled on Thursday on signs of further deterioration in the U.S. housing market, a jump in oil prices and a worsening climate for financing corporate takeovers.

The broad Standard & Poor's 500 stock index fell 2 percent at one point, and the steep decline led the New York Stock Exchange to impose trading curbs which rest…

Debt is a four-letter word

Have you seen the headlines this morning?

Things are cooling off big time in the debt markets, and the drop off in demand for high-risk debt is getting pretty intense.

Some of the most prominent stories on Bloomberg are those detailing the turn in the credit markets, as investors decide they are no longer willing to take on risk in corporate bonds and high-yield debt.

Here's a quick wrap-up of what's going on in the credit markets.

"KKR Fails to Sell $10 Billion of Boots Loans".

"Chrysler, Facing Resistance, Abandons Loan Sale Plan".

An excerpt from the Chrysler piece:

Chrysler abandoned plans to sell $12 billion of loans to complete its purchase by Cerberus Capital Management LP after investors balked at purchasing the high-yield, high-risk debt, according to investors who were briefed on the decision.

The unit of DaimlerChrysler AG scrapped the sale of loans linked to its automotive business after failing to find demand, said the investors, who declined to be nam…

Market risk and derivatives: interview

Catching up with some of the latest Financial Sense Newshour broadcasts, I'm currently listening to an interview with Richard Bookstaber, author of the new book on financial markets and derivatives risk, A Demon of Our Own Design.

The premise of Bookstaber's book, as he tells FSN host Jim Puplava, is that some of the more notable crashes in recent financial history were driven not by economic events, but rather by the growing use of complex financial instruments known as derivatives.

According to Bookstaber, whose career was spent creating and studying derivatives and risk management models, markets have become increasingly crisis prone with the increase of financial engineering.

While he feels that derivatives serve a legitimate purpose, he also believes that their widespread use creates greater complexity and an increased likelihood of unforeseen effects, such as the portfolio insurance cascade of the 1987 stock market crash, and the 1998 blowup of Long Term Capital Management …

Features of the week

Record M&A activity, lessons on investing, thoughts on the commodity "super cycle", $80 oil, and more. That's what we have for you today in our "Features of the week". Read on!

1. Brent crude within sight of record. London's benchmark crude oil contract nears $78, "less than a dollar shy of its record $78.65" of last August.

2. Thoughts on the "commodity super cycle" and inflation. Steve Saville, via Safehaven.

3. How to Leave Iraq. Time Magazine calls for an "orderly withdrawal" of U.S. troops from Iraq.

4. Mergers, mergers everywhere. With $2.7 trillion in deals done in the first half of 2007, worldwide M&A activity is set to hit a new record this year.

5. Jim Grant speaks with Bloomberg about the credit markets, subprime, and his investment outlook. An excellent interview. Hat tip to John at Controlled Greed for this one.

6. Miami's condo glut is pushing Florida to the brink of recession.

7. "There has never been a…

So many blogs...

So many blogs, so little time. Today we look at a very interesting post from the Financial Philosopher entitled, "Financial Blogs: Overcoming the Poverty of Attention". The theme: finding quality and efficiency in a sea of new reading material.

You may remember that the Financial Philosopher's previous post about financial blogs centered on the question of whether these new information sources were helping to make the markets more efficient.

Now, Kent (the Philosopher) takes the opposite side of this argument by proposing that, "the same proliferation of blogs may be creating a distracting "over-abundance'" of information".

In other words, we may be drowning in too much information. If we try to process too much news and information, we find that we can't remember or absorb much of anything at all.

Therefore, it's important to limit our intake of information and focus on the information sources we find most valuable and unique. How does the Ph…

Mid-week wrap up

Oil prices near $80, the Dow flirts with the 14,000 mark (but retreats), and worries over the state of the credit markets grow as subprime problems continue to leak out of the "containment" box.

Let's do a quick overview to see where we stand at this Wednesday market close.

Here's news from Bloomberg following today's close:

The U.S. stock market suffered its worst day in a week after Intel Corp.'s earnings and the prospect of banks' growing loan losses prompted concern profit forecasts will be reduced in the weeks ahead.

Intel sparked the biggest tumble in semiconductor shares in almost five months after saying increased competition forced it to cut computer chip prices. Citigroup Inc. and JPMorgan Chase & Co. led 86 of 92 financial firms in the Standard & Poor's 500 Index lower following Bear Stearns Cos.' disclosure that investors in two hedge funds were wiped out by bad bets on subprime mortgages.

The S&P 500 lost 3.2, or 0.2 per…

Paul van Eeden interviews

Hard asset investors (and speculators), today's your day. We have two interviews with investor and newsletter writer Paul van Eeden for you; both highlight his uniquely considered views on a number of issues.

First, an audio interview with Paul van Eeden courtesy of Minesite's Commodity Watch Radio.

Here, van Eeden explains his investment philosophy and his methods of operation in resource sector speculations. Paul's seasoned view of the risks and opportunities in resource and mining shares will be useful to anyone interested or involved in these sectors.

In the second interview, a HoweStreet video clip filmed during the June 2007 Vancouver World Gold and PGM Conference, Paul covers the topics of commodities, base metals, investing in mining shares, and monetary inflation.

While there are a lot of interesting points made here, the bulk of the interview centers around van Eeden's view of the base metals market and why prices have been largely driven (in Paul's opini…

Ron Paul visits Google

We've got video of Ron Paul's recent visit to Google at its Mountain View campus, courtesy of YouTube and Jeremy Hermanns' blog.

If you want to know what's going on in America in 2007, have a look at this video. The Google staff came out in force to hear Presidential candidate Ron Paul deliver his message of liberty, limited government, and free markets.

Representative Paul answers a litany of questions from Google exec Elliot Schrage and audience members on a very wide range of issues, and it makes for a very interesting and candid discussion.

And, brace yourself for this, you will actually see a candidate speaking honestly here. Paul is willing to take stances on issues that might otherwise have alienated a segment of his audience, had he not been so forthright and eloquent while elaborating on his positions.

All in all, a great discussion and an excellent introduction to Ron Paul's libertarian and constitutional values. Watch it, bookmark it, and pass it around.

Features of the week

Welcome to our "Features of the week", where we pull together some of the most interesting articles, news, and interview features around and present them to you in a single, convenient post. There's some great stuff ahead, so grab a chair and enjoy.

1. Recruiting brains: Back in the early 1990s, Bill Gates surprised Forbes publisher Rich Karlgaard when he told him that Microsoft's chief competitor was Goldman Sachs. Why Goldman?

Gates explained that Microsoft was in the "IQ business" and needed the best brains available to continue its development and success. Therefore, the company had to compete with top-tier investment firms in an effort to attract the best available young minds.

This trend is becoming even more apparent in recent years, and Bloomberg chronicles it in, "Goldman Meets Match In Googleplex When Recruiting Graduates".

2. Too much leverage? FT's Gillian Tett wonders if we've learned our lesson from LTCM.

3. Presidential candidate…

Subprime shakeout: questions loom

As the subprime mortgage shakeout continues to ripple through the markets, FT Alphaville looks at two different elements of this story: the macroeconomic perspective, and the contagion effects made possible by financial innovation.

As was pointed out in these pixels on Wednesday, there are two elements to the subprime mortgage shakeout in the US.

The first, macroeconomic, concerns the extent to which the woes in the subprime sector of the mortgage market spill over into the broader US housing market, and spark a slowdown in overall consumer spending.

The second is a question regarding financial innovation, which has created transmission mechanisms across the wider credit markets, whereby problems can leap between seemingly unrelated markets such as US mortgages and European leveraged loans, which are funding the current buy-out boom.

As Paul J Davies wrote here yesterday: “if contagion between markets is fueled by such mechanisms then the sell-off in credit could be the harbinger for a mu…

Global money supply, and M3 data

Since we've been talking a bit about inflation and money supply growth lately (actually for some time now), I thought It might be useful to provide an easy to save reference link to some money supply data resources.

It's been somewhat difficult to gauge certain forms of money supply growth lately for a variety of reasons. Back in February of 2006, while discussing the outrage over the Fed's decision to stop reporting M3 money supply figures, I mentioned that this latest move away from accountability and transparency might create an added incentive for private economists and investors to reconfigure and publish the money supply data on their own.

Thankfully, this proved to be the case as outlets such as Nowandfutures.com and John Williams' ShadowStats.com started to provide their own reconstructed M3 figures.

There are even some sites which will tell you how to calculate M3 data(with very close approximation) for yourself.

Now the only problem we have is finding global mone…

Hyperinflation and the bond markets

Here's one for all you economic philosophers and "bond market vigilante"-types. The question I'm currently turning over in my mind is this: can the U.S. experience hyperinflation, or will the possibility of such an extreme inflationary spiral be held in check by the bond markets?

The current thinking on the possibility of the United States experiencing hyperinflation seems to be split between those who say it can (and likely will at some point in the future), and those who feel it cannot, for precisely the reason stated above.

I spent part of the weekend reading some of Richard Russell's recent remarks, and part of his June 20 newsletter dealt with this very topic.

Russell is of the opinion that, as far as hyperinflation goes, "it can't happen here" because of the size and depth of our present-day bond market and money markets.

He also feels that if inflation were to really heat up, the bond market would "start to crumble" and things would gen…

Features of the week

Hello, everyone, and welcome to our "Features of the week". Let's jump right in and get started.

1. "Crisis, what energy crisis?". Our friends at The Oil Drum: Europe have put together an impressive post that looks to spur debate about our energy future.

Over fifty links to Oil Drum articles over the past year are included. Topics include ethanol and biomass, solar and wind, and uranium and nuclear power. Plus, reviews of important net energy metrics and sustainable living topics. You might want to bookmark this link for reference.

2. Interviews with Jim Rogers and Marc Faber on CNBC World and Bloomberg.

3. Art dealer sells a Raphael painting for 100,000 times his purchase price.

4. Rare objects have become increasingly sought after as the world's rich have turned their attention to tangible investments and rare art.

Bloomberg tracks this trend in the recent article, "Oil Millionaires Chase Dwindling Supply of Islamic Treasures".

5. Despite widespread be…

Golddiggers of 2007

Who wants to marry a billionaire? That's the question posed by two separate articles which aim to share lessons on how to marry rich. Today, we share those lessons with you.

Appalled? Intrigued? Then read on for more, as we survey the possibilities for materially motivated matrimony in 2007.

First off, an article from the Financial Times Weekend Magazine, dated October 8, 2005.

In, "For richer, not poorer", Edi Smockum surveys the scene for eligible billionaires and finds a few palatable options among available men, but notes that the high-living millionaires of bygone cinema days seem few and far between.

In the interests of updating this piece I will mention that one of the prospects, Australian James Packer, is off the table, having recently wedded model Erica Baxter. Sorry, girls.

And so we move on to our next piece, the very recent, "Money-struck: How to meet and marry a billionaire".

The main theme here is the importance of moving in the same social circles and…

Jim Rogers and Marc Faber on CNBC

Market's closed, kids, at least in the US.

Everyone over to Bear Mountain Bull's house for iced tea and clips from a CNBC discussion with investors Jim Rogers and Marc Faber. I'll bring the Milano cookies...

We've also got a Bloomberg interview clip with Marc Faber for you. It seems CNBC World and Bloomberg are both revisiting the Asian financial crisis ten years later, and both channels have chosen the Thailand-based Faber as a source of insight into past and present financial and economic conditions.

Plus, Jim Rogers in a recent Bloomberg TV appearance. The discussion centers around water, agricultural commodities, emerging markets, and the rising stature of women worldwide.

Be sure to check out both sets of clips.

Happy Independence Day!

Bond market update & outlook

According to Bloomberg News, the current turmoil in the debt markets arising out of the recent subprime and CDO mess is benefiting Treasury bond prices.

In fact, their recent article on Bear Stearns' effect on the treasury market even goes so far as to say that Treasury investors should be thanking Bear Stearns for "smothering the bear market" in bonds.

Here's why:

Traders who cut their holdings of U.S. government debt just a few weeks ago as retail sales increased and job growth accelerated are now snapping up Treasuries. Demand is being fueled by speculation that losses at hedge funds owning subprime mortgage bonds such as those managed by New York-based Bear Stearns and London-based Cambridge Place Investment Management LLP will spread and slow the economy.

The article goes on to detail past instances in which panic among investors and speculators has led to a "flight to quality". These periods of panic and risk reassessment are usually brought on by the sud…

Not another subprime post?!

We've devoted a fair amount of coverage to the ongoing fallout in the subprime mortgage and CDO markets in recent weeks.

For those of you who just can't get enough of this financial car crash (or for those who would simply like to learn more), we offer the following subprime roundup. It's the latest take on what's happening in subprime, with a view to the possible knock-on effects in the debt market.

We'll also take a look back to April, when people like Scott Simon of Pimco were offering their view on why they were staying conservative with their asset-backed bond investments.

Plus, you'll see an interesting Bloomberg video panel in which Simon and others debate the extent of last spring's subprime problems.

First off, here's a recent take on what lies ahead for the subprime and debt markets, courtesy of John Mauldin and friends. The following is an excerpt from, "$250 Billion in Subprime Losses?".

It is hard to know where to start when trying…