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Showing posts from October, 2007

Happy Halloween!

It's Halloween. So kick back and watch the time-honored Peanuts Halloween special, "It's the Great Pumpkin, Charlie Brown". Enjoy.

Volatility in the commodities market

Update (9/3/08): the latest news on the Ospraie Fund closure.

Found an interesting story over at Bloomberg.com which details the high levels of volatility in the commodities markets.

What's remarkable about this piece is that they've managed to interweave the subject with an inner look at the workings of Dwight Anderson's Ospraie Fund. According to Bloomberg, Ospraie Management LLC is the world's biggest commodity-focused hedge fund, with $7 billion under management.

Most of the commentary on Ospraie and Anderson's vision seems to be pieced together from indirect sources and relayed quotes (from the likes of Marc Rich), but it is still surprising to see the players behind this prominent hedge fund placed in center focus. Lots of background info on the fund and Dwight Anderson's career are found here.

Which leads me to the following question: are hedgies slowly warming to the media spotlight? Or is it just that reporters are piecing together more info on their dea…

Features of the week

Oil at record (nominal) highs, Warren Buffett on Chinese stocks, Citigroup accounting, and an interactive view of the recent credit market squeeze.

All this and more in today's edition of our, "Features of the week".

1. The $360bn question. Do we really need a superfund?

2. The credit squeeze explained. An FT.com interactive graphic, narrated by Gillian Tett.

3. Argentine bonds devasted by rigged government data suspicion.

Welcome to the world of hidden inflation and false government statistics.

4. Remembering Black Monday: A Q&A with Robert Prechter. As always, Prechter has some interesting thoughts on how mood influences market movements.

5. "Hey Warren, what's your view on...". Warren Buffett talks Chinese stocks and investing philosophy in this audio clip from a news conference in Dalian, China.

6. Marc Faber sits down with Bloomberg TV for a lengthy and informative interview.

7. Jim Rogers tells Bloomberg viewers that he's serious about getting out…

Goodbye dollar, hello inflation

The dollar is no longer the world's reserve currency. This is the statement you heard twice in one day if you were checking out the news on Bloomberg over the past 24 hours.

First, we heard it from economist Clifford Bennett of Sonray Capital, who said the Euro was the world's new reserve currency and that this idea was now universally recognized.

Next we heard it from investor Jim Rogers, who has been bearish on the dollar and the state of the US economy/fiscal outlook for quite some time.

What's notable about Rogers' latest call on the dollar is that he's once again backed his convictions with his actions; yesterday, Rogers announced that he is shifting his personal assets out of the dollar and into the Chinese renminbi.

Here's an excerpt from, "Jim Rogers Shifts Assets Out of Dollars to Buy Yuan".

"Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Res…

Quote of the day

"Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it." - Learned Hand, famed American jurist (1872-1961).

Billings Learned Hand was considered one of the "most influential American judges never to have served on the Supreme Court of the United States" (Wikipedia). In his later years, he was also a good friend and neighbor of author J.D. Salinger, a fellow resident of Cornish, New Hampshire.

The things you learn by reading Wikipedia...

Monday - news in review

Taking it all in, a brief review of the day's news.

The Dow, S&P 500, and Nasdaq are all up slightly on the day, so far. Nasdaq faring the best with a 1 percent gain at midday.

Asian markets have not fared so well this Monday. Major indexes across Asia were down 2-3 percent on the day, continuing the losses that began late last week.

The Nikkei, Hang Seng, Shanghai Composite, Kospi, and Straights Times indexes have all taken a haircut of more than 2 percent on the day, with the Hang Seng falling 3.7 percent.

Bloomberg reports that commodities are falling on worries over economic growth. There is current weakness in copper, oil, gold, corn, and wheat as the UBS-Bloomberg's CMCI Index of 26 commodities has declined 1.2 percent on the day.

Still, for many of these individual commodities, the declines seem to represent more of a retreat and consolidation after reaching recent multi-year and record highs. The same is true of the CMCI index, which "touched a record high of 1…

John Mauldin on "SIV Garbage"

In Friday's "Features" post, we included some links to commentary on the widely followed SIV "superfund" scheme. Today, we'll include some more useful background information on this issue, and some added commentary and analysis.

First off, what is the "superfund"? What is its stated purpose? How did the fund get capitalized, and why is it deemed necessary in the first place?

The "superconduit", or superfund, as it has come to be known, is a plan, enacted by the banks and endorsed by the US Treasury, to build a support fund to buy the assets of troubled structured investment vehicles, or SIVs.

Assets held by SIVs tend to be a mix of asset-backed commercial paper, short-term debt typically backed by the assets held by the issuing vehicles. The assets backing this paper tend to be mortgages, credit card receivables, student loans, and corporate loans.

The plan has already drawn a barrage of criticism, causing Treasury Secretary Henry Paulson…

Features of the week

Inflation, furor over oil prices, '87 crash reminiscences, and a lot more. That's what we have in store for you in this week's edition of, "Features of the week".

1. From the Economist, "How the Fed made the subprime mess worse".

2. A crude oil super-spike. We're seeing a lot of drivel this week about a crude oil price bubble as prices have shot well past the $80 mark towards the $90 level.

As of today, some "experts" are even appearing on TV to decry the speculative price move and declare oil prices to be "not appropriate". That settles it; close the markets, we now have an expert to set prices for us at the "appropriate" level!

Sorry to repeat this information so quickly, but for anyone who would like to revisit the fundamentals that have been driving the crude oil and energy markets for the past several years, please see our recent post, "The path to $80 oil".

3. "When Crash Means 'Buy'". …

Dying of Money

This is something I wanted to post ahead of tomorrow's "Features of the week" update. If you're interested in understanding the true nature of inflation and how it originates, read on.

Over the past few weeks, Jim Puplava and the rest of the Financial Sense Newshour team have devoted an hour long segment of their program to a discussion of the causes and effects of inflation.

In a multi-part program segment called "Dying of Money" (a nod to the Jens O. Parsson book of the same title), Jim and his co-host, John Loeffler, take a look at the current global inflation and try to put things into perspective by examining the historical patterns of past inflationary eras.

What is the cause of inflation? Throughout history, we've seen that inflation has been brought about as a result of undisciplined money creation. No matter what excuse or rationalization lies behind the running of the money printing press, experience shows us that the results are almost always…

Market data, quotes & charts

In an attempt to add some value to last week's rant over changes to Yahoo Finance, I've decided to compile a brief list of alternative sites offering free finance and investing content and market data.

Now, let me preface this by saying that I'm not exactly sure what most people are currently using for the latest in market data. You could be onto something that we haven't seen or heard of yet, in which case, tell us about it!

If you are currently relying on broker supplied data or a subscription market data service for your investing data needs, you probably won't need the quotes and charts offered by the free investing websites.

On the other hand, you may find some useful feature or service at one of the free sites that is not offered by your regular data service. Be sure to take a look; some of the websites here have some rather unique tools and attractions that you may find useful.

Without further ado, here's our list of the best free investment websites.

1. Ya…

Monday - Global view

Let's start off this week's updates with a look at some of the more important news on the global scene. Here are a few of the big items we noticed over the weekend. These stories will have continuing importance as we head into the week and the months ahead.

1. China puts together new leadership team. FT highlights the changes with an interactive chart of the Politburo members.

2. Sovereign funds warning. People are increasingly worried over the impact that these national investment funds might have on world markets in the future.

3. Burma seizes top democracy activist. The military government is looking to stamp out the opposition.

4. Thai King hospitalized. Stability of the country is called in to question ahead of December elections.

5. Yuan, Rupee rise at record pace in fight on inflation. China and India are now trying to strengthen their currencies in an attempt to reduce the cost of importing much needed commodities. Will this signal a meaningful pause in the "competiti…

Features of the week

Hey gang, hope you're ready for this latest edition of, "Features of the week".

We've got a lot of links and information to wrap up for you, but we're going to do it in a nice, compressed package. All you need in one easy place. So grab a chair, kick back, and enjoy.

1. Fitch, S&P cut Beazer deeper into junk territory. If the ratings agencies are on the case, you know the situation must be bad.

See also, Moody's cuts 3 homebuilders to junk.

2. Och-Ziff eyes $1 billion IPO. Yep, going public is now the option for large US hedge fund and private equity businesses. Note that Fortress and Blackstone share prices have rebounded a bit recently.

3. Oil hits record $84 on supply concerns. Wait, I thought the whole Iraq liberation was supposed to result in a freeflowing gusher of oil revenues and $25 a barrel oil. At least that's what they told us at the time - ad nauseum.

4. Timing of genocide resolution questioned. Why are they having this political debate? May…

What's up with Yahoo Finance?

Has anybody tried using the Yahoo! Finance site lately? It flat out sucks.

I used to visit the site all the time, as it was a convenient location for basic stock market info and quotes.

Yes, the fundamental information in the stock profiles was notoriously unreliable, but it was a good place to go for quotes, company news, and creating and storing personalized stock watch lists.

I started visiting the site less frequently a couple years ago, so I was only mildly disturbed by the site's increased suckiness and its change-for-the-sake-of-change site redesigns. I figured that as long as my Watch Lists (now renamed, "My Portfolios") and other basic market data were there, I'd use those features and ignore the rest.

The problem is that the whole site is now totally unappealing to many of the original users (myself included, obviously), as it's been transformed from a dominant user portal for stock market information into a ghetto of cutesy personal finance claptrap.

Appa…

Commodities for every portfolio

If you didn't catch the latest edition of the Financial Sense Newshour, you might want to go back and check out last weekend's interview with Emanuel Balarie, author of the new book, Commodities for Every Portfolio: How You Can Profit from the Long Term Commodity Boom.

Now, as you can tell from the title, the book seems to be basing its advice around the implicit notion that the current commodity boom is, in fact, a long-term, secular move.

While this idea now seems to represent the prevailing wisdom, I don't think you necessarily have to believe this thesis to benefit from the author's discussion of this topic.

There are plenty of options now available for the investment manager or individual investor who would like to have some exposure to commodities, and author Balarie does a fine job of summarizing these strategies for the listeners.

If you have any interest in this topic at all, I think you'll find this a worthwhile interview. Enjoy!

Advisor turnover roils investors

Article from todays Wall St. Journal on choosing a financial planner. Plus, what to do in the event that your current financial planner retires or sells his business to a larger company.

From , "Advisor turnover roils investors".

When Jerry Roberts got news that his longtime financial planner was retiring and selling his practice to a larger company, "it was very unnerving."

"I very carefully chose my original planner," a sole practitioner in the Robertses' hometown of Indianapolis. "I was cognizant of his investment philosophy, his range of capabilities, and his past experience. I didn't know anything about the new firm coming on," says Mr. Roberts, a 64-year-old retired bank officer.

Like the Robertses, a growing number of people who have spent years building a relationship with a trusted financial adviser are having to start over again with someone new. Planners are getting older -- the average age is 55, and nearly a third are over 60 -…

Market notes 10/8/07

Reading through recent remarks in Richard Russell's Dow Theory Letters over the weekend, I saw that the strength in the leading averages is still evident.

The S&P 500 and the Dow Industrials are still working higher from their August lows, and in fact both the Dow and S&P 500 have made record highs in recent days.

Today's action seems to be worrying investors (see Bloomberg link above on option market signalling a stumble), but so far the uptrend in the major averages is intact.

Russell noted that the bullish percentage of shares on NYSE and the S&P are above 60%, and that the BP for the Dow was recently above 86%. He notes that there is nothing bearish about those statistics; if anything they've improved in recent weeks. Got Diamonds (DIA)? Russell and DTL subscribers are watching the action in the DJIA closely.

By the way, if you'd like more of Russell's view of the market, check out his newsletter. He has a very loyal following, and I'm one of hi…

Homebuilders in desperation

If you've been keeping an eye on the news in the U.S. at all these past few months, you know that the situation in housing has continued to deteriorate, despite the much too early bottom calling from industry spokespeople, vapid "economists", and the media's talking heads.

We've reached the "bust" portion of this particular boom-bust cycle, and with each passing week there are new stories to fill in the picture of the real estate market's decline.

Which is where this next story comes in. From Bloomberg, "Homebuilders Liquidate Assets in Desperation Sales".

D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.

``It's desperation time and some companies may not make it,'' said Alex Barron, an industry analyst at Agency Trading Group Inc. in Wayzata, Minnesota. ``…

Features of the week

We have some articles and web features of special interest in our latest edition of "Features of the week". Kick back, read, watch, and enjoy.

1. Expectations for further Fed eases and a rally in U.S. Treasuries.

2. Talk of return to normality in credit markets is premature, says Willem Sels.

3. Cash becomes king in post-crunch buyouts.

4. Greed and fear in Asia's emerging bubble. CLSA's Christopher Wood makes some interesting predictions regarding the impacts that Fed easing will have on Asian markets and on US infrastructure spending.

5. Credit squeeze: what's next? Q&A with Mohamed El-Erian at FT.com.

6. Oil sands leave Alberta a cratered mess, and more in The Oil Drum's Energy and Environment Round Up (October 4th edition).

7. Wall St. Journal explains why London has become an international enclave for billionaires, many of them foreign-born. (Hat tip to Paul at Infectious Greed).

8. Sell half to drink half. FT Wealth on investing in wine.

9. The Secrets of 5…

Ron Paul raises $5 million

The Wall St. Journal reports that Ron Paul has raised over $5 million this quarter in the quest for his 2008 presidential bid.

WASHINGTON -- Rep. Ron Paul disclosed more than $5 million in third-quarter fund raising for his insurgent Republican presidential bid, the only Republican in the field so far to report increased donations.

While the Texas lawmaker remains a second-tier candidate in a party field dominated by the likes of Rudy Giuliani and Mitt Romney, his grass-roots campaign continues to build steam, thanks to thousands of small donors over the Internet.

Campaign spokesman Jesse Benton estimates that as much as 80% of the campaign's donations are received online. In the final week of the third quarter, Dr. Paul, a licensed obstetrician, raised $1.2 million in Internet donations alone. The $5 million haul more than doubles his $2.4 million showing in the second quarter.

Note that much of the campaign money has come from small donors from his grass-roots following, and that &q…

How to pick a junior gold stock

Hot on the heels of the "Three rules for buying resource stocks" post, we bring you some more of Rick Rule's insight into resource sector speculation, courtesy of the Daily Reckoning Australia.

In this post, we'll take a look at Rick Rule's guidelines for choosing a junior gold mining stock.

But first, why would anyone want to "invest" in a junior mining company?

For a bit of background on that, please see Jim Puplava's 2002 article, "The Perfect Option". This piece was written in the early days of the current gold and gold mining share bull market; as you can see, Jim's been quite right so far.

Now back to Rick Rule's guidelines. As you'll see, Rick offers up his rules of gold mining speculation as a means of sifting out not just the undesirable companies, but also the unprepared speculators and investors.

In Rick's view, it takes someone who is willing to work for the results to come up with winning results in this area of…

Three rules for buying resource stocks

As promised, we are following up our recent "Profiting from the reflation" post with some more expert commentary on investing in the resource sectors.

We talked about some of the fundamentals behind higher oil prices and energy investing in, "The path to $80 oil". Today, let's slide on over to the Daily Reckoning site for an overview of resource investing and speculation, and a little help from noted resource investor, Rick Rule.

Here's a taste of Rick's investment philosophy:

“The resource business is not a cyclical industry. It is an extremely cyclical business. More cyclical than you can imagine,” says our old friend, Rick Rule.

“In natural resources you only have two choices,” he continues. “You can be a contrarian or you can be a victim. And yet, many people still buy resource companies after they have been run-up. They still sell them when they get disgusted after they have fallen down. That is no way to make money.”

For more of Rick's wisdom, r…

Caution on commodities

I read an interesting piece by John Authers over the weekend, in which the Financial Times columnist urged investors to familiarize themselves with the basics of the commodity markets before jumping in.

Since the start of this decade, performance in a wide range of individual commodities has been hot, prompting many new investors and funds to jump on the resource bull market bandwagon.

Authers reminds prospective investors that there are factors which distinguish the commodities market from other investments long familiar to most professional investors (equities, bonds), and that each individual commodity bears its own unique fundamentals and behavioral patterns.

Take it, John:

The first rule of journalism, some say, is: "Never be afraid to admit ignorance."

In that spirit, I will admit that I took over this column without the faintest idea why aluminium prices might behave differently from nickel, or why corn prices diverge from wheat. I am not embarrassed by this. The world…