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Showing posts from June, 2008

Marc Faber on CNBC

We're going to start off this week with a recent clip of Marc Faber on CNBC (Thanks to reader Domenico for the heads up on this video).

You'll hear everything straight from Marc for yourself, but let me just briefly outlilne some of the main points he made to CNBC in this interview from last week.

1. Investors should stop listening to the Fed. They are misleading the people with claims of strong dollar policies and their worry over inflation. Their actions have shown the opposite to be true (the Fed is not really concerned about inflation), and ordinary Americans have suffered from the central bank's inflationary policies.

Also, Marc notes again that the Fed is trying to pump the financial system full of liquidity, while the private sector is trying to tighten lending standards and credit conditions. For now, the private sector is winning.

2. The Federal Reserve should have let investment banks fail. As Marc says, "If I'm a bad businessman, who's going to help m…

Jukebox

Jukebox video hits for your weekend enjoyment. Rock n' roll.
1. Motley Crue - Live Wire.

2. Sex Pistols - God Save the Queen.

3. Def Leppard - High n' Dry (Saturday Night).

4. The Runaways - Saturday Night Special.

5. The Ramones - Rock n' Roll High School.

6. The Replacements - Bastards of Young.

Features of the week

Enjoy our Friday "Features".

1. The Dow sank 358 points on Thursday, closing at its lowest level in almost two years.

2. Oil surges above $140; is $150 oil around the corner?

3. Drilling for oil in Beverly Hills.

4. Global oil supply worries fuel debate in Saudi Arabia.

5. Gold moves up to $920 an ounce on dollar weakness, risk aversion.

6. Video: Warren Buffett concerned about stagflation.

7. Uranium prices could rebound due to increased demand.

8. Jim Rogers and Van Eck Global have formed the Rogers Van Eck Hard Assets Producer Index, a comprehensive global commodities share index (Hat tip: Abnormal Returns).

9. "Danseuse", the Severini painting highlighted in Wednesday's art market update, ends up fetching £15.04 million, twice its pre-sale estimate.

10. Four years of home price gains wiped out. Case-Shiller home price index is down 15.3% in the past year, shows declines in all 20 cities tracked.

11. Public surveillance grows in America's emerging police state.

12.…

Sector broadening in the art market

The global art boom continues, as wealthy buyers from around the world continue to purchase rare and expensive works of contemporary, impressionist, and modern art.

But according to recent reports in the Financial Times and The Economist, buyers now seem favor works by lesser known artists in the impressionist and modern art movements.

According to the FT, newly rich buyers will be seeking out bright, bold paintings from German expressionists and Italian futurist painters.

""Two years ago, top lots in the impressionist and modern art sales were familiar brands: the Monets, Picassos and Van Goghs. More recently, bolder, brasher artworks by lesser-known artists have been netting record prices and, this summer, German expressionists and Italian futurists will be among the most sought-after catches.

Despite a popular perception that contemporary art sales account for the top prices, the impressionist and modern auctions, which broadly sell art from 1870-1945, are where the seriou…

Politicians' oil argument is flawed

Due to the sheer amount of misinformation and flat out nonsense being broadcasted on the subjects of oil and commodity prices and the supposed price manipulation by speculators, it's important to seek out information from more truthful or knowledgeable sources, rather than relying on the suppositions of ignorant politicians and media demagogues.

With that in mind, I wanted to share a very fine article with you from today's (June 24) Financial Times. Hopefully, it will help to dispel some of the "evil speculator" myths that are still floating around.

In, "Politicians' oil argument is flawed", John Dizard writes of his surprise over politicians' continued willingness to make dogged attacks on commodity speculators, as traders and index investors are blamed for fueling recent price rises of oil and agricultural commodities.

Here, Dizard responds to those who argue that investment demand for commodities (expressed through investor purchases of long positio…

Stock market overview

Looking at the US stock market this week, we seem to find ourselves at an inflection point. Will the leading averages turn down and break through their previous lows, or does the market have enough strength to consolidate and head higher?

With the recent downturn in the Dow Jones Industrial Average (following its May rally highs), we are now headed right back down to the previous March low.

Meanwhile, the Dow Jones Transportion Average has been incredibly strong coming off its January lows, setting a record high of 5,492.45 earlier this month.

Unfortunately, that move was unconfirmed by the Industrials, which continued to slump from its May high. The DJIA remains well below its record high of 14,164.53, reached back in October.

Back in May, noting the confusion over the status of the latest upmove in the Dow Averages, we wondered if this was, in fact, a rally with serious muscle.

So far, the Dow Transports have managed to hold out impressively, but the coinciding downward move in the I…

Features of the week

What's driving events in this crazy world of ours this week? Join us as we follow the money trail in this Friday's, "Features of the week".

1. Let's expand domestic spying, and grant telecoms immunity.

2. Midwest floods ruin crops; higher food prices to come.

3. John Paulson is bearish on UK property, and sees $1.3 trillion in losses for financial companies in the credit crisis.

4. Lieberman makes risky bet in speculation ban bid.

See also: Tighter trading laws may be boon to foreign exchanges.

5. Wilbur Ross speaks to Bloomberg about MBIA and Ambac, and says they are unlikely to regain their AAA ratings.

6. Your tax bill: how McCain, Obama differ.

7. Troubled Waters: Barron's 2008 Midyear Roundtable.

8. What recession? Shoplifting to make ends meet.

9. The Confidence Man. NY Mag profiles hedge fund manager David Einhorn, he of short Lehman Brothers fame (Hat tip to The Kirk Report).

10. Death of America's suburbs is greatly exaggerated.

11. Timeline: Bill Gates at …

Oil vs. Nasdaq: the "bubble" view

As crude oil worked its way back towards the $140 mark last week, the recently favored view of oil as a "speculative bubble" was on full display in the media.

On June 13, a week after crude oil prices made a record move to $139.12 a barrel, Bloomberg covered the bubble view with a story entitled, "Oil Rally Topped Dot-Com Craze in Speculator's Mania". Investors Michael Masters and George Soros were there offering their views of prices in the crude oil market:

``I don't know if you can classify it as a bubble or not,'' said Masters. ``But there is no question that investor demand is having an effect on price. Very little of it has to do with physical supply and demand of crude oil.'' Masters testified at a Senate hearing in May on the role of speculators in commodities markets.

Gains in oil are the result of a ``bubble'' caused by speculation from index funds and a tight balance between supply and demand, Soros said in testimony before …

Jim Slater: Return To Go

Yesterday, in our discussion on entrepreneurship, we posted a link to entrepreneur Luke Johnson's recommended reading list.

While glancing at the list again, I was interested to see a book called, "Return To Go", an autobiography by British investor Jim Slater.

I actually happened to be reading about James Slater the night before. Although he is a very famous investor in his native England (and was later known to US investors through his writing and his popularization of the PEG ratio), I had never heard of him until I stumbled upon his Investopedia "Greatest Investors" profile.

Apparently, Slater obtained his knowledge of the markets while bedridden from illness and searching for an alternate source of income.

After his investment banking career went south and he found himself in debt to the tune of a million pounds, Slater used his business and investing acumen to claw his way back to prosperity, doing private investment deals and establishing himself as a popu…

What's so terrible about making money?

Luke Johnson offers a brief and eloquent defense of entrepreneurial capitalism in this recent FT piece entitled, "What's so terrible about making money?".

Here's an excerpt:

"One thing that has always baffled me is why certain people hate capitalism so much. They really are missing something.

Ever since I was 18 and co-founded a business by accident, I knew that being an entrepreneur was the most fun you could have with your clothes on - it is the greatest adventure modern life has to offer. And if you're lucky and astute, you might even get rich in the process. Why is that so terrible? Yet all too often capitalism is blamed for many of the ills of modern life, from global warming to poverty.

I remain convinced that many intelligent, ambitious individuals would adopt a self-employed way of life if they could strip away all the cultural bias and realise that building a venture can be a creative, even an heroic, endeavour. In truth, becoming an entrepreneur is a …

Features of the week

Enjoy this Friday's edition of, "Features".

1. Guantanamo detainees have rights, court rules.

2. Refinery oil premiums cast doubt on role of speculators.

3. Real interest rates are negative in most Asian nations.

4. Marc Faber feels most asset classes are currently overvalued.

5. Andrew Smith, of Aberdeen Property Investors, discusses the UK property market with FT's "View from the Markets".

6. Inflation soars in the US, India, Chile, Bulgaria, Egypt, Phillippines, Russia, and across Asia.

See also, "Emerging markets face inflation meltdown".

7. Ron Paul ends his US presidential campaign, and says he will focus his energy on building up the libertarian voice in the GOP.

8. Is there a short term fix for high gas prices?

9. Ed Lampert puts money on housing rebound.

10. International investors are hedging against a rise in the dollar.

11. The man who beat the SEC: Phil Goldstein. (Hat tip to Dave in NY)

12. Barron's editor Gene Epstein on gold, the Fed, and…

Gene Epstein on Gold, the Fed, and Money

EconTalk recently interviewed Barron's economic editor, Gene Epstein, for a podcast entitled, "Gene Epstein on Gold, the Fed, and Money".

In this interview, Epstein argues in favor of a gold standard money system and privately issued currency. He feels this sound money system would lead to greater price stability and help reduce the impact of economic recessions.

If you are a Barron's reader, you're probably familiar with Epstein's column and style. From what I have read in his columns and book reviews, I'd say Epstein has a writing style and philosophy that is mainstream enough to suit most Barron's readers, while also exhibiting some influence of the lesser-known Austrian School of economics.

Given Epstein's Austrian leanings, it should be no surprise to hear his position in favor of the gold standard and privately issued money. In fact, Epstein recently pointed to Alan Greenspan's past defense of the gold standard as a strong argument for a…

Oil: inflation meets tight supply

Gazprom's prediction of $250 oil came right on time for today's post topic: the factors behind behind steadily rising oil prices.

Last month, as oil moved up to $120 a barrel, we offered a wrap-up (with help from Jim Rogers, Bill Powers, and Matthew Simmons) of some of the factors fueling the nine-year uptrend in oil prices.

Now that volatility in the crude oil market is increasing, with large daily price moves quickly becoming the norm, many traders and market watchers are wondering if we've reached a top in oil prices.

Still, others wonder if prices can continue to surge higher on the growing realization that world oil production may in fact be peaking.

Which brings us to our latest update of the oil discussion. Is the current oil price a reflection of increased speculation, inflation, a weak dollar, or a function of supply and demand?

Paul van Eeden recently addressed these points in a recent BNN tv appearance and in an article entitled, "Sue OPEC".

According t…

Monday's notes

Some recent stories and business features of note for your Monday reading:

1. Lehman Brothers reports its first loss as a public company and outlines its plan to raise up to $6 billion in common and preferred stock.

2. As prices surge, Argentines cry foul over the official figures - FT.

"As food and fuel costs rise relentlessly, popular and official perceptions of inflation are diverging in many countries. But economists believe Argentines may have more reason than most to doubt the accuracy of their government's calculations. This could spell trouble for a country with a history of economic crises - especially at a time when a three-month-long conflict with farmers is shaking consumer and investor confidence.

When Mr Fern├índez acknowledged recently that Indec, the statistics agency, "wasn't measuring consumers' reality", many Argentines could not have agreed more. Yet while the government has been reporting what many economists and consumers feel are suspiciou…

Features of the week

The financials seem to be the prevailing theme in this Friday's, "Features of the week". But Lehman, BKX, and Ambac aren't the only items we have in store for you; there's lots more to see and hear.

Read on!

1. Lehman Brothers may raise $5 billion in capital in an effort to de-lever the balance sheet. The bank had been seen as a sale target earlier in the week.

For more, see: "Making sense of David Einhorn vs. Lehman Brothers", and, Jim Cramer's Blogging Stocks piece, "Einhorn gutted Lehman, and that's OK".

2. US unemployment rises at fastest rate since 1986.

3. Morgan Stanley, Merrill, Lehman ratings cut by S&P.

4. Some were taking this week's breakdown in the bank index (BKX) as an ominous sign; will there be an upcoming bounce for the banking sector?

5. MBIA and Ambac lose their S&P AAA ratings, affecting over $1 trillion in debt securities guaranteed by the companies.

6. IEA says world needs $45,000bn energy revolution.

7. It…

The future of energy

We looked back at the rise of Middle Eastern oil and imagined what lies ahead for the oil industry in Monday's post, "Oil: history and future".

Today, we'll extend the conversation beyond oil and take a quick look into our energy future.

What will the future of our energy use look like? Will oil and hydrocarbon energy continue to be plentiful, or will we require increased efficiencies and output from alternative energy sources to meet our energy needs?

If you've been keeping up with the changes in the global energy picture, you know that we are currently in a situation of shrinking oil supply and rising global demand. In fact, as energy investor and oil-man T. Boone Pickens has pointed out, global demand for oil currently exceeds available global supplies.

And you know what happens when the demand for a much-needed commodity is greater than its supply, right? The price goes up! Which is why Boone puts no stock in the current notion of an "oil bubble" dri…

Oil: history and future

We have two rather unique articles on the subject of oil to share with you today. If you have any interest in the past and future of the oil and energy industries, I think you'll find these articles very worthwhile.

Our first piece is a brief historical background on the rise of the Middle Eastern oil industry. Taken from Sunday's edition of the Chicago Tribune, this article was written by Tom Hundley and is entitled, "A find rich in history".

Here's an excerpt:

"When the price of oil roared to record highs last week, it was duly noted. But another milestone passed almost unremarked: Monday was the 100th anniversary of the discovery of oil in the Middle East.

Britons William Knox D'Arcy and George Reynolds are not exactly household names in America, but it was D'Arcy's money and gambler's nerve, and Reynolds' hardheaded persistence that brought in the first gusher in what is today Iran. The discovery would change the world.

Over the next c…