Monday, July 07, 2008

Monday's notes

Market news and items of interest to start off the week.

1. OPEC president blames ethanol, weak dollar for oil price rise.

So as far as I can tell, according to OPEC officials and US politicians, everything except supply and demand fundamentals is behind the rise in oil prices.

2. Oil's rapid rise stirs talk of $200 a barrel this year -WSJ.

Excerpt from the Wall St. Journal:

"U.S. benchmark crude prices leapt 3.6% last week, closing before the Independence Day holiday at a record $145.29 a barrel. Roughly halfway through the year, oil prices have soared 50% since Jan. 1 and have doubled since the same time last year. (See related article.)

Few oil watchers are now ready to bet that oil will hit $200 a barrel by New Year's Eve. But nearly all are wary of predicting how and when oil's upward stampede will be reversed."

3. Countdown to $200 oil: $140 oil and speculation - The Oil Drum.

A very good piece from The Oil Drum that breaks down the factors behind oil price increases. Highly recommended as an antidote to the usual nonsense put forth on this issue by much of the media.

4. TIPS flunk inflation test as fuel, food overtake CPI - Bloomberg.

So it seems professional investment managers are finally waking up to this one. When you have an "inflation protected security" that is tracking inflation as defined by the government's own measure of price increases, bet you're going to get short changed. It's the whole fox and the henhouse thing.

Here's more from Bloomberg:

"Treasury Inflation Protected Securities aren't living up to their name for bond investors who say they can't trust the way the U.S. government calculates the rising cost of consumer goods.

Morgan Stanley, the second-biggest securities firm, and FTN Financial, a unit of Tennessee's largest bank, are telling clients to pare holdings of TIPS, whose principal amount rises with the Labor Department's consumer price index. Morgan Stanley says derivatives tied to inflation expectations are a better bet, while FTN recommends corporate and agency bonds because the index doesn't reflect the actual rate of U.S. inflation."

Investment managers quoted in the article say the CPI is underestimating inflation and that TIPS have not paid off, despite rising inflation.

5. My $650,100 lunch with Warren Buffett - Guy Spier.

As Chinese investor Zhao Danyang ups the auction price of a lunch with Buffett to a new record of $2.1 million, last year's charity auction winners Mohnish Pabrai and Guy Spier (who paid the then astounding sum of $650,100 for their lunch date) recount their recent lunch date with Warren.

6. Bubble lessons for a deflated Beijing - FT.

Edward Chancellor draws on history to provide lessons for authorities in Beijing, who hope to quell local investors' fear and anger over the recent Shanghai stock market drop.

7. Lost scenes from Fritz Lang's Metropolis shown - BBC.

"Lost scenes from the classic sci-fi film Metropolis have been shown for the first time in decades. The long-lost original cut of Fritz Lang's 1927 silent film was discovered in the archives of the Museum of Cinema in Buenos Aires earlier this year.

The museum's Paula Felix-Didier said it was the only copy of the complete film. Metropolis depicts a 21st Century society divided between a class of underworld workers and the "thinkers" above who control them.

Soon after its initial release at the height of Germany's Weimar Republic, distributors cut Lang's three-and-a-half-hour masterpiece into the shorter version since viewed by millions worldwide. But a private collector carried an original print to Argentina in 1928, where it has stayed, Felix-Didier said."

An exciting find, for sure. Hope to see this version soon, I don't think I've ever watched the movie from start to finish (and that robot is amazing).

That's all for Monday. Be sure to join us tomorrow for more.