Finance Trends Letter

Lots to share in this Friday's edition of, "Features of the week" . Let's get started! 1. International equity returns YTD . Nice table and world map courtesy of TickerSense. 2. Iceland is the best place to live , according to a UN study. 3. Bloomberg crafts a lengthy profile of hedge fund star James Simons , founder of Renaissance Technologies LLC. 4. Paulson & Co. earnings beat those of Citadel, as John Paulson tops Bloomberg's list of highly paid hedge fund managers. 5. Death of inflation is a dangerous delusion , writes John Kemp. 6. Who really pays the taxes in America? The rich, baby. 7. Financial Sense Junior Gold Mining Index review, by Frank Barbera. 8. Robert Prechter talks to Bloomberg about the markets and inflation/deflation. 9. Capitalism: Derailed, Dumbed-down, or Deceased? , asks Rob Kirby. 10. Is art a good investment? Matisse Capital reviews recent speculative returns. 11. China is not decoupling from the US , according to CLSA economist...

Leonard Read (1898-1983) on presidential election campaigns: "Not only will [an] office-seeker resort to expediency to attain office, but, once in office, his very enterprise will prove a handicap to the nation…A man who seeks and secures public office…will try to make it a bigger and more powerful office. Government should not be so expanded…Men in government, therefore, should be those who aim at making government as unnecessary as possible. Contraction, not expansion, should be the aim." Quote taken from Read's 1948 book, Pattern for Revolt . The quote and the book are both discussed in the Mises blog post, "Following Leonard Read's Pattern" . Have a look. You can also read the book online in PDF format.

Commercial property may be headed for trouble, at least as far as the bond market is concerned. Bloomberg reports that action in the derivatives market for commercial mortgage securities is reflecting increased worries of default risk and investor skepticism over the sector's strength. Excerpt from, "Deadbeat Developers signaled by Property Derivatives" . In the bond market, commercial property investors are about as creditworthy as U.S. homeowners with subprime mortgages. ``Commercial real estate is a full-blown bubble that feels very much at a bursting point,'' said Christian Stracke, an analyst in London at CreditSights Inc., a fixed-income research firm. ``There's a fairly toxic mix of factors at work.'' The cost of derivatives protecting investors from defaults on the highest-rated bonds backed by properties more than doubled in the past month, according to Markit Group Ltd. Prices suggest traders anticipate defaults rising to the highest level si...

Here's another interesting update to last August's, "Subprime: winners and losers" post. The Financial Times has reported that Lahde Capital , a Santa Monica based hedge fund, has made more than 1000% on its short positions in the US subprime loan market this year. This makes it "one of the world's best performing funds of all time". Here's more from FT : Lahde Capital, set up in Santa Monica last year by Andrew Lahde, last week passed the 1,000 per cent mark, after fees, following the latest leg of the credit market turmoil. The fall in the value of subprime-linked securities has boosted a group of funds which spotted the problems in advance. The decision to use derivatives to short, or bet against, low-quality US home loans taken by a select group of hedge funds last year appears to have become the most profitable single trade of all time, making well over $20bn in total so far this year. John Paulson’s New York-based Paulson & Co, the biggest...

What's happening with the dollar, Asian currencies, and the Gulf (GCC) currencies? How does $100 oil fit in with the falling US dollar? Will the US economy and consumer spending power through higher energy prices, or will an impending bear market in US stocks signal a weaker economy ahead? The answers to these questions are here, in our, "Features of the week" . 1. The stock market closed higher on Friday, with the DJIA rallying to 12980.88 in a holiday-shortened trading session. Holiday shoppers are out in force. But watch out for that Dow Theory sell signal , which could foreshadow a coming bear market. 2. Gulf parties over $100 oil , and wonders it what to do about its currencies. 3. Investors Khiem Do and Jim Rogers discuss the strength of Asian currencies and the recent weakness in the US dollar. 4. Gold shares may beat bullion , says investor Trevor Steel, of Baker Steel Capital Management. 5. Jim Wyckoff thinks the Countinuous Commodity Index (CCI) charts might b...

Fannie Mae and Freddie Mac shares continue to fall after posting big losses on Tuesday. Worries over the financial condition of the two lenders, both government-sponsored enterprises, deepened on Tuesday after Freddie Mac reported a third quarter loss of around $2 billion dollars. Here's the latest on Wednesday's action from Reuters . Shares of Freddie Mac (FRE.N: Quote , Profile , Research ) fell as much as 9.5 percent on Wednesday after analysts slashed their price targets on the stock, saying an unexpectedly wide third-quarter loss may make it tough for the No. 2 U.S. home funding company to inject the liquidity needed to rescue an ailing housing market. Government-sponsored enterprises Fannie Mae (FNM.N: Quote , Profile , Research ), the largest U.S. home funding company, and Freddie Mac have been hit by mounting losses as home foreclosures continue to climb and the credit crisis drains the value of mortgages they own. Our "Jive Turkey" award goes to the Wall St....

You may have noticed a theme running through some of our recent posts on noted investors John Paulson , T. Boone Pickens , and Warren Buffett . Take a look. It turns out that every one of these posts details the point at which an investor's self interest meets with government regulation. Often to the benefit (or planned benefit) of the investor/business, and at the expense of other individuals, such as yourself. Now, this theme was apparent in the recent posts on Boone Pickens' foray into the water pipeline business , and Paulson & Co.'s perceived efforts to influence bankruptcy and mortgage legislation for the benefit of their remaining subprime market positions . However, this theme was not so apparent in our post on Warren Buffett and his continued support of the estate tax . At least, it was not apparent to me until I did some extra reading shortly after making that post. It turns out that self interest is well represented in Buffett's stance on inheritance taxe...

Gold, energy, real estate bubbles, Hong Kong and US dollars, global languages, and charity. That's just some of what you'll find in today's edition of, "Features of the week" . Enjoy! 1. Seeking truth from facts . How big is China's economy, really? 2. Jim Rogers says get out of the US dollar , and rains on Bernanke's parade. 3. Gold may easily rise to $1000 , says Marc Faber. 4. Ron Paul: A seller of ideas . Great story from the Chicago Tribune. See also, Reuters' article, Ron Paul's maverick stand enlivens election . 5. Government waste? Eliminate it. The Chodorov Principle . 6. Piggybacking Buffett's investments via filings provided nice returns, based on retroactive data. 7. Rest in peace, Hong Kong dollar? 8. 10 reasons to avoid lists . Nice one, Kent. 9. Discover your talents . Nice post from The Kirk Report. 10. Beware of charitable incentive programs designed to make you feel good. 11. Speak globish? English as a global language , an...

We have a couple of recent hits for you from FT.com's "View from the Markets" series. These recent interview clips with Khiem Do, of Barings Asset Management, and Jim Rogers offer an insightful view of recent financial trends and investing themes worldwide. In the first series of clips, FT's Andrew Wood asks Khiem Do for his view on subprime issues and the big picture outlook for the Asian economies. We then hear some very interesting comments from Do on the US dollar and the strength of Asian currencies, and his outlook on the global economy in 2008. Watch: Part one , part two , part three . Jim Rogers joined FT "View" for a four-part interview in this second series of clips. As always, Rogers is happy to speak his mind on a number of subjects. Here we see Rogers talk about US monetary policy and Ben Bernanke's reign at the Fed, the possibility of a short-term US dollar rally, American politics and Ron Paul (!), investing in China and Asia, the outlook...

Warren Buffett, that enlightened king of billionaire investors, has voiced his approval for the estate tax (or "death tax" as it's commonly known) and is calling on Congress to maintain the tax, claiming its repeal would be wrong. From, "Buffett says Estate-Tax Repeal Would Benefit Richest" . Warren Buffett called on Congress to maintain the estate tax, saying that plans to repeal the levy would benefit a handful of the richest American families and widen U.S. income disparity. Buffett, the billionaire chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., told the Senate Finance Committee that advocates of repeal were ``dead wrong'' to call the levy a ``death tax.'' It would be more appropriate to call it a ``death present,'' said Buffett, 77, who is the third-richest person in the world, according to Forbes Magazine. ``A meaningful estate tax is needed to prevent our democracy from becoming a dynastic plutocracy.'' And now,...

Commodity index investment products are helping mainstream investors ride the bull market in commodities. And as Bloomberg reports, this year the indexes have outperformed the leading commodity focused hedge funds. Excerpt from, "Calpers beats Pickens as Commodity Indexes Clobber Hedge Funds" . T. Boone Pickens, the billionaire oil trader who predicted crude's rise to $100 a barrel, is lagging behind commodity-index investors for the first time since 2003. Even California Public Employees' Retirement System, the 75-year-old pension fund that ignored commodities until eight months ago, is beating Pickens. Calpers invested in the Standard & Poor's GSCI Index, up 32 percent this year, while Pickens's BP Capital fund rose 22 percent. From Dwight Anderson's Ospraie Management LLC to Global Advisors LP, commodities hedge funds failed to anticipate the 58 percent advance in oil and 31 percent gain in gold that powered indexes to their highest levels in two de...

To keep you up to date for the week ahead, a quick overview of some of the larger stories on the world stage, both political and economic. We'll take a look at the protests and clashes arising out of government-imposed "emergencies" in Pakistan and Georgia. You'll see a recent interview with James Grant, of Grant's Interest Rate Observer, on Bloomberg TV. Also, a view of the dollar and the state of national currencies in an era of global inflation. So let's get started with our first set of stories, which deal with the ongoing political confusion and turmoil in both Pakistan and Georgia. Here's the latest on both. 1. "Tycoon vows to topple Georgia's 'despot'" . GEORGIA’S richest man is to run for president to remove “the fascist regime” of Mikhail Saakashvili, leader of the tiny former Soviet republic. Badri Patarkatsishvili, the billionaire businessman who helped to finance the “rose revolution” that swept Saakashvili to power four y...

Dollars vs. euros, Ron Paul and the Fed, miracles of nature and science, and more. That's a taste of what's in store for this Friday's edition of, "Features of the week" . 1. Buy gold to side-step collapsing dollar , says Marc Faber in his latest commentary for AMEInfo. 2. Paul versus Bernanke on dollar, inflation . Bernanke is the professor and Ron Paul is the unruly "grad student" in this ABC News story. Video clip and Fed sophistry included. 3. Contrary signals on the dollar/euro? Jay-Z flashes euros and a supermodel attaches a payment in euros clause to her endorsement contract. 4. "The Credit Markets - Tragedy or Farce?" . Michael Lewitt's speech at the Bank Credit Analyst Conference centers on the opportunity within the recent credit market fallout. 5. Greenspan absolves himself . Housing, credit bubbles not his fault. 6. Why actors and models love to hang out with Hugo Chavez . 7. Excellent Fast Company cover article on mechanic Jo...

In our last post , we talked about T. Boone Pickens' plans to create a Texas water pumping district and a water transport pipeline, whose right of way will be pieced together with the help of eminent domain laws. Today, we'll focus on another hedge fund manager who may take advantage of some helpful legislation. Legislation that, if passed, could aid his short positions in the subprime market. We posted an interesting profile on John Paulson and the outperformance of the Paulson Credit Opportunity Fund back in September. For those of you who haven't seen it yet, give it a read. You'll find an excellent interview in which Paulson discusses the firm's highly rewarding subprime bets. Having successfully positioned themselves this past year on the short side of the subprime mortgage bond market, Paulson & Co. has recently announced that it has scaled back its bets against subprime backed securities. Details from Bloomberg : Paulson & Co. scaled back bets again...

Update : For info on the "Pickens Plan" for wind power and energy, see our July 9, 2008 post, "T. Boone Pickens on America's energy" . Thanks! You might have heard about T. Boone Pickens ' plan to capitalize on the South's growing water needs by transporting Ogallala Aquifer water to growing towns and urban areas via pipeline. But did you know that Pickens' planned water infrastructure will be pieced together using eminent domain laws? Bloomberg reports on the move to create a water supply district housed on eight acres of Roberts County ranchland that was deeded to Pickens' ranch manager. The land in Roberts County, a stretch of ranchland outside Amarillo, holds no oil. Instead, it is central to Pickens's plan to create an agency to condemn property and sell tax-exempt bonds in the search for one of his other favorite commodities: water. Approval of the district is all but certain when Texans vote today in state and local elections. By law,...

Over the weekend I got into an interesting late-night discussion with a friend on a variety of topics, economic and social. Rather than bore you with the details of our talk, I will instead point you to the first hour segment of last weekend's Financial Sense Newshour broadcast. Why the FSN broadcast? Well, upon hearing the program on Sunday morning I was surprised to find many of the same late-night discussion topics being covered in the FSN program by host Jim Puplava and guest Robert McHugh. Let me give you a brief run down of what you'll hear in this FSN program segment. There was talk of inflation and how it is understated through government's reporting of inflation statistics. Robert McHugh offered the view that what we are seeing in the US stock market is more of an inflation-driven bull market than one based on true prosperity. McHugh and Puplava discussed the ongoing squeeze of the average person's standard of living and the rising debt burden for individuals...

Hey everyone, hope you're ready to run down some of the week's more interesting stories and market related events. As promised, we have a lot of news to share on the energy front, plus interviews with a few well known investors and some timeless wisdom to share as well. So sit back and peruse our, "Features of the week" ! 1. WSJ MarketBeat on, "The Merrill-Citigroup Bad-News Fiesta" . 2. Now problems are starting to emerge for Goldman as well. A discussion of how banks are accounting for "level three" assets. Also, the SEC is wondering how Goldman Sachs managed to manuever so successfully out of subprime danger and deftly short the decline. Fintag wondered the same as rumors circulated earlier in October. 3. BusinessWeek claims that $800 gold is not likely to surprise anyone . Really? Because I don't recall any of these glossy media outlets predicting it, even as late as 2006 . 4. The Big Picture on "benign" inflation and added surc...

Do current oil prices reflect a speculatively fueled bubble? Or is this a market that's finally waking up to the increasingly tight supply & demand picture of recent years? I've already made my thoughts known on this issue, so I thought you might like to read some analysis from some of the contributers to The Oil Drum . This will make an interesting preview to some of the energy related items we'll have for you in tomorrow's "Features" post. Now, most of the crowd at TOD have been pounding the table on a looming peak in crude oil production and higher oil/hydrocarbon energy prices for quite some time. So if you are a first time visitor to the site, do not be surprised to find a dissmissive attitude towards the official projections of crude oil supply bandied about by the EIA, IEA, CERA, and the like. The members of TOD have little time for their overly optimistic (and often misleading) forecasts. Here then, is contributer Khebab's post, "Are We I...