Monday, December 31, 2007

Forecasts for 2008

Goodbye 2007, hello 2008. And to get us started, we have some interesting forecasts and predictions concerning world events and financial markets in the coming year.

On the more "practical" side of the fence we have the Financial Times' predictions for 2008, driven by the FT's "crack corp of pundits" who, "throw caution to the wind and risk humiliation in the pursuit of glory".

So you see, they fully realize the folly of forecasting going in. This awareness, combined with the rather straight-laced tone of their forecasts is what leads me to label this exercise as a more practical and carefully considered example of the art of crystal ball gazing.

Our second batch of forecasts comes from Saxo Bank's Outrageous Predictions for 2008.

I first stumbled upon Saxo's predictions in an english version Pravda article, and at first I thought the dire headline warnings about the direction of the US economy were a work of state-sponsored doomsaying on Russia's part.

But in fact, the predictions of significantly higher oil prices and a stumbling US stock market were the work of Denmark-based Saxo Bank, which traditionally offers its "outrageous" predictions in order to spur thought and debate.

I was very interested to read some of Saxo Bank's calls, especially in the area of commodity prices and in its mention of US politics and Presidential candidate Ron Paul. Give this one a look, because I think you will find these forecasts a worthwhile read as well.

Enjoy both sets of forecasts, and we'll see you back here in 2008. Best New Year's wishes to everyone!

Monday, December 24, 2007

Merry Christmas!


Merry Christmas and best wishes to everyone for the New Year. We'll see you after the holidays, when we'll take a look back at the events of 2007 and plunge headlong into 2008.

Until then, have a great holiday & enjoy, "A Charlie Brown Christmas".

Saturday, December 22, 2007

Update to Darfur, Congo post

A quick update to our earlier post on the relative lack of attention being paid to the war in Congo amidst the celebrity-driven campaign to save those affected by conflict in the Darfur region of Sudan.

We posed the question of how to best help the people suffering in either conflict (and in all such future instances). This weekend I'm reminded of one possible way to send direct support to people in need.

I'll let John Mauldin tell it, in an excerpt from his latest "Thoughts from the Frontline" e-letter.

"First, let's quickly turn our attention to a practical way we can help save the lives of those who are desperately suffering in Darfur and Myanmar. Over the years my readers have generously supported the work of a very special group of guys who help bring aid to places where it is the most difficult, if not dangerous, to reach.

Knightsbridge International is a small group of volunteers who go to places that are not safe but the needs for help is critical. Like the Knights of old, who ran hospitals and relief efforts, these modern day knights go to where the need is the greatest. They took food and medicine to northern Afghanistan before the troops went in (very dangerous!). They went to rebel held territory in Sri Lanka after the tsunami when no one else could get medicine and help in. Whether it's driving in to rescue nuns in Rwanda (fascinating story!), or taking solar power for clinics in Myanmar, Water Purification Units and medicine to Darfur, and a lot more, they go where other groups fear to tread. They have no political or religious agendas, just the drive to get aid to where it can do the most good."


For more info on Knightsbridge International and how you can support this group or get involved, see John's latest edition of "Thoughts from the Frontline". Thanks.

Friday, December 21, 2007

Features of the week

So many interesting news items and stories to share with you this Friday, I'm almost unsure of where to begin. Let's jump right into this latest edition of our, "Features of the week".

1. Bear Stearns takes $1.9bn writedown on mortgage assets and reports its first quarterly loss in 84 years as a public firm.

2. Merrill Lynch may get $5bn cash prop from Singapore's Temasek Holdings.

3. Putin, the Kremlin power struggle, and the $40bn fortune. Wow. (Hat tip to 321gold).

4. Can Greed Save Africa?. Great article from BusinessWeek.

5. Bill Gross joins FT's View from the Top to talk about interest rates, US recession, subprime, and investments.

6. Ron Paul talks to Maria Bartiromo in a recent BusinessWeek interview.

7. Comparison: Presidential candidates on monetary policy and USD.

8. The Art of the Deal. How the Nahmad family made billions trading art.

9. Faustian Bargain: Bloomberg special report on the credit crisis.

10. Auschwitz slave recalls concentration camp's horrors.

11. Israel's Karma Kosher conscripts seek refuge in Goa.

12. Rampant global money printing and the case for gold.

13. CPI: Sophisticated economic theory, terrible ethics.

14. Did you catch Financial Sense Newshour's annual Gold Show broadcast?

15. Latest commentary from Dr. Marc Faber: 2008 outlook.

16. Ethanol: Government vs. the Environment.

17. Russia's RTS may surge to 3,000 in 2008, banks forecast.

18. The Oil Drum's take on food price inflation.

Enjoy this week's posts? Bookmark us and tell a few friends! Thanks, and have a great weekend, everyone.

Thursday, December 20, 2007

Jim Rogers: Hog wild in China

Update: This article is now available online. See updated link to Fortune magazine.

Investor Jim Rogers appears in the latest issue of Fortune magazine to share his views on China, commodities, and emerging markets, and offers up an excerpt from his new book, A Bull in China.

Unfortunately, we can't see the article online just yet, but you can check it out at the newsstand or just wait until Fortune makes the full current issue available online (which should happen when the next issue comes out). I have read the article, so let me give you a quick little summary from memory.

Of course, Rogers is bullish as ever on the future of China and his family has recently picked up and moved from New York to Singapore in order to be closer to the action.

He offers some tips for those looking to buy shares of Chinese companies, and mentions some specific leading companies by name in an excerpt from his new book.

He is also still bullish on agricultural commodities, citing sugar and cotton as top picks, as well as his reasoning for favoring these commodities.

In contrast to yesterday's post highlighting investor James Passin and his bullish quest through the frontier markets, Rogers says that he has sold out of all his emerging market investments, except for those in China.

He feels that the emerging markets theme has become over exploited, what with "thousands of MBAs" flying around the globe looking for companies to buy. Rogers is holding on to most of his Chinese shares, but reiterates that he will be forced to sell if a bubble fully develops.

For more, check out the latest issue of Fortune or check back later on Fortune's website to view the issue online. Plus, see all of our Jim Rogers posts with a simple blog search.

Wednesday, December 19, 2007

Exploring frontier markets

In case you missed the recent FT article on investor James Passin and his trek through the frontier markets, we're including it again today with an additional update from the Seeking Alpha website.

What are "frontier markets" anyway?

Frontier markets are essentially the smaller up-and-coming emerging countries whose capital markets are are just beginning to develop, or those markets primarily consisting of smaller, illiquid companies. The small size of these markets and a relative lack of liquidity and information may serve as barriers to entry for larger investors and fund managers.

Here's an excerpt from a Feb. 2007 Bloomberg article on the subject:

Frontier markets, as defined by Standard & Poor's, are dominated by companies too small and too thinly traded to be ``investable'' for most fund managers. The acronym BRIC was coined by Jim O'Neill, chief economist at Goldman Sachs Group Inc., in November 2001. He said Brazil, Russia, India and China would join the U.S. and Japan as the biggest economies in the world by 2050, eclipsing most of today's developed nations.

Frontier markets have been valued at an 18 percent discount on average during the past decade. Stocks in Bangladesh, Bulgaria, Ivory Coast, Mauritius and Slovenia rose last month to their highest price-earnings ratios this decade.

``Everybody is so positive and bullish that, as a consequence, valuations have become very rich,'' said Patrick Scheuber, head of equities at Swisscanto in Zurich. ``We are not at the beginning of a cycle, but rather at the end of it.'' His firm, managing $1.6 billion, recently sold holdings in Vietnam.

So maybe now is not the time to rush into these markets, but maybe you would like to investigate further for future knowledge.

This is where the next article, "Get a Jump on Frontier Markets", comes in. This Seeking Alpha piece from Richard Shaw should provide a useful intro to the subject, along with some insight into possible future investment vehicles serving this area.

You may also wish to look at the Standard & Poor's website for info on the S&P/IFCG Frontier Market Index, and related emerging market indexes.

So if you're interested in this topic, have a look. These articles will provide a bit of insight for those who would like to know more about this developing segment of the investment universe.

Monday, December 17, 2007

Marketing war, disease, and genocide

Over the weekend, I spent some time reading the first few chapters of Bill Bonner and Lila Rajiva's brand new book, Mobs, Messiahs, and Markets.

This is shaping up to be a very interesting book so far, so I'll probably write a brief review when I've finished the book, but for now I want to mention something more topical.

During a chapter on war and its accompanying atrocities (with some exaggerated and others ignored), the authors discussed Belgium's colonial rampage through Africa.

They cited the Congo, where agents of Leopold II had, "treated the local blacks worse than slaves; they were rounded up, starved, beaten, and worked to death in forced labor camps. An estimated 10 million died." This is suffering and death on the scale of (or greater than) the Holocaust of the 1930s-1940s, but it is little mentioned today.

This may be due to the passage of time, or the fact that the Congo remains far removed from our location and thought to this day. In its own time, the Congo was a subject taken up by writers such as Sir Arthur Conan Doyle, Joseph Conrad, and Mark Twain, and in recent years by Thomas J. Fleming and others.

Still, very little is said today about the past suffering in the Congo. For that matter, there seems to be little attention to the ongoing strife and suffering in the Congo today, which is where the following Chicago Tribune article comes in.

The question that this article poses is this: with 4 million people killed and 800,000 displaced in the Congo over the past 10 years, why aren't more people paying attention?

From, "Congo: The invisible war".

Three years after the Bush administration officially labeled the crisis in Darfur a genocide, thus elevating it above other wars in Africa, many Congolese -- and not a few aid workers -- are asking essentially the same question as Masirika: With the Congolese death toll now 20 times higher than that of Darfur, and given that the worst killing in Darfur ended in 2004, why aren't outraged U.S. activists lighting candles in Central Park to "save" hapless Congo?

As the article points out, the crisis in the Congo has taken second stage to the genocide in Darfur. Is it because the tag word genocide has yet to be applied to the killings in Congo?

Maybe the attention deficit is due to the fact that we've yet to see our first Hollywood movie detailing the tragedy and the plight of Congo's people. All these ideas and more are mentioned in the article.

Which brings me to this point. It seems that war and disease must now be marketed with celebrity advocates in order to draw public attention. Just as the hit song or movie is propelled to the top with a positive-feedback loop of success and advertising (success breeds success), it seems the same is now true for the currently fashionable example of disease or war. Today, some genocides are better marketed than others.

But we have to ask the following question: given an unlimited amount of public attention to each global conflict, what good can we expect as a result?

Does increased foreign aid to war-torn countries help people in need, or does it actually have a negative effect for the common people by enriching tyrants and warlords while prolonging human suffering, as globetrotting investor Jim Rogers has argued?

Is there a way to ensure that the people who need help and resources are getting it, rather than having these resources surreptitiously plundered by the outlaws in control? Do sanctions work? Will foreign trade and increased international contact and involvement actually provide a positive, stabilizing effect on war-torn lands?

These are some of the questions that need to be examined if we are truly seeking to help people, instead of just boosting our own conscience and sense of altruism by donating money to the fashionable cause of the year.

Friday, December 14, 2007

Features of the week

Welcome to this week's edition of, "Features of the week". We have many interesting items in store for you today, so sit back, take a few moments, and browse away. Enjoy!

1. Doubts intensify on central bank plan to save markets.

2. Central bank plan delays day of reckoning, say fund managers.

3. Central banks keep fueling inflation, says Jim Grant (Hat tip to Controlled Greed).

4. Ron Paul is interviewed by Doug Casey's International Speculator newsletter.

5. Lebron Inc. Basketball star Lebron James has charted his own course towards building a personal business empire.

6. Nouriel Roubini feels we are experiencing the first real crisis of financial globalization and securitization.

7. Niall Ferguson: Memo to Market Dinosaurs.

8. Investor James Passin goes boldly where others have yet to tread.

9. Stratfor: China and the Arabian Penninsula as market stabilizers.

10. John Hussman on "an irrelevant Fed" (Hat tip to Dow Theory Letters).

11. Bermuda battles Caymans for offshore funds, woos hedgies.

12. Dollar rebounds against Euro. Why? Inflation expectations. I am not making this up.

13. Wall St. Journal says mortgage crisis rivals S&L meltdown.

You may recall our post on this topic from last summer, "Asset backs, subprime: shades of 1990?".

14. What do Britain's billionaires know about subprime that you don't?

15. High prices at Art Basel Miami leave even billionaires amazed.

Which reminds me of a past visit to a Beverly Hills art gallery, circa 1984.

Thanks for reading Finance Trends Matter. Enjoy your weekend, everyone.

Wednesday, December 12, 2007

Best investment websites

Just a quick reminder for anyone who hasn't viewed our list of the best investment websites.

We've recently updated the list to reflect improvements in the Yahoo! Finance service and we've made some new additions to the list. Key among these is our inclusion of FT.com's recently updated Markets Data feature.

So if you'd like to have a quick summary list of the best sites offering free market data, quotes, charts, and portfolio/watch list tools, do take a minute to visit the link and review our picks. You're sure to find some helpful investing and trading resources.

Tuesday, December 11, 2007

Fed cuts rates by quarter point

Here's the latest on the Fed rate cuts, as well as some analysis on what Fed rate cuts might mean for the US economy.

From Reuters, "Fed cuts key interest rate by quarter point":

WASHINGTON (Reuters) - The Federal Reserve cut a key interest rate by a quarter-percentage point on Tuesday to help the U.S. economy withstand tightened credit and a prolonged housing slump.

The central bank's decision takes the bellwether federal funds rate target down to 4.25 percent. While the action was widely expected, some economists had thought the Fed might offer a bolder half-point reduction in the rate, which governs overnight lending between banks.

In a related move, the Fed trimmed the discount rate it charges for direct loans to banks by a matching quarter point to 4.75 percent.

Anyone interested in reading the FOMC statement and related news should click on the article link above.

Will the Fed's actions help bail out the US economy? Nadeem Walayat takes up this topic in an article entitled, "Deep Fed Rate Cuts Mean No US Recession in 2008".

Here's a sample from that piece:

The US Fed will continue cutting interest rates during 2008, regardless of the consequences to the US dollar and inflation (which has a little further to rise going into 2008). The cuts are ensured by the worst housing market conditions since the great depression which is a harbinger of a deep recession unless emergency preventative action is taken now. Therefore the primary observable goals of the interest rate cuts are to:

a. Stabalise the US housing market

b. Unfreeze the interbank money markets and for the credit markets to start operating normally.

Nadeem goes on to note that Fed actions to date are signs of an "emergency action" and that this suggests Fed rate cuts will be deeper than most current expectations.

Bob Hoye of Institutional Advisors has noted in the past that the Fed actually follows the market, causing short-term Fed-watchers and market participants to celebrate while paving the way for short-term market rallies.

In a recent interview with HoweStreet.com, Hoye explained that while he expects further interest rate cuts by the Fed and an ensuing short-term rally, it's really an academic myth that Fed-induced rate cuts are a sign of prosperity. In fact, history actually shows that short-dated market rates of interest go up with boom periods.

So there's a little something to mull over as the media goes ga-ga over the latest Fed rate cuts. Hope you've found the added perspective on these rate moves helpful.

Monday, December 10, 2007

Time to buy financials?

Looking over the news this morning, it seems the big story in the US market is an $11.5 billion "capital injection" for subprime-beleaguered bank UBS.

The European bank will raise the money from Singapore and Middle Eastern investors by selling stakes in the company.

Financial shares, including those of UBS, reacted positively this morning to the news. Which of course, leads all to wonder: is it time to buy financials yet?

Of course the big concern looming over financial companies and their shares is exposure to subprime mortgages and the illiquidity of assets in SIVs.

And in case you still thought the subprime problem was well "contained", you obviously haven't been with us here on Earth these past few months.

As FT Alphaville and Bloomberg point out, even the bond insurers are suspect. Monoline insurer MBIA is now facing scrutiny over its AAA rating as the company faces problems over the subprime CDOs it backs. This in turn spells trouble for all the AAA ratings of the bonds it insures, which could also mean trouble for investors in municipal bonds.

And as we've seen in recent weeks, these concerns are weighing heavily over the shares of Fannie Mae and Freddie Mac. Recent losses at Freddie and Fannie has increased worry over the state of the GSEs' balance sheets.

So where's the bright spot? Ah, but that's where the value investors come in. You've heard the bear case for financials and GSEs Freddie and Fannie (for a refresher, see the link above). Now get ready for the bull case.

The bullish case for financial stocks was made by several noted value investors at a recent Value Investing Congress seminar hosted by Whitney Tilson.

Tilson highlighted some of these investment ideas in a recent FT column, starting with a buy analysis on shares of Freddie Mac.

On the long side, Rich Pzena of Pzena Investment Management shared his analysis of Freddie Mac, which he prefaced with this emphatic statement: “I’d go so far as to say that Freddie Mac is the single cheapest stock I’ve seen in my career.” (On the day before his presentation, Freddie Mac shares traded at just under $26.) Given his highly successful career, that is saying something.

Pzena’s argument is twofold: first, Freddie Mac’s earnings are likely to be much higher going forward. That is because the prices it is paying for mortgages that it will package into securities have improved markedly, thanks to mortgage sector distress.

It should be noted that not all present at the VIC were bullish on financial shares. Tilson mentions two investors who shared their short ideas. Bill Ackman of Pershing Square Capital gave a thorough presentation on likely future problems at MBIA and Ambac, while David Einhorn at Greenlight Capital was wary of future losses at Lehman Brothers.

For more on this and other insights from the VIC, see Tilson's column.

So now that you've heard the bull and bear case for several leading financial stocks, this leaves us with only one important question (as heard on Bloomberg TV this morning): "What should the Fed do tomorrow?".

I can only shake my head and smile slightly...

Sunday, December 09, 2007

Jukebox

Sunday night jams. Enjoy.

1. The Cure - The Caterpillar.

2. Sonic Youth - Silver Rocket.

3. The Jesus and Mary Chain - Never Understand.

4. Oasis - Songbird.

5. The Jam - That's Entertainment.

6. Velvet Underground - Femme Fatale.

Friday, December 07, 2007

Features of the week

Is Asia decoupling from the US economy? Will a mortgage rate freeze in the US help subprime level homeowners? Who is the next up-and-comer on the world industrial stage?

Discussion of these topics and more in our, "Features of the Week".

1. Rio chief says BHP proposal is "dead in the water".

2. The Economist on, "The end of cheap food".

3. Austrian economics vs. Bernanke economics. Define inflation, Ben.

4. Tim Condon of ING speaks with FT.com's "View from the Markets". Topics: a single Asian currency, Chinese inflation, emerging industrial powers, and Asian growth outlook.

5. After China, Vietnam will be the world's factory.

6. Many of the Middle Eastern share markets are rebounding nicely from their 2006 lows.

7. A Q&A with Jim Rogers on China and its/our future.

8. Marc Faber feels we are in a period of synchronized asset bubbles.

9. Look to private transactions to understand trends in the art market, writes Suzanne McGee.

10. A Glimpse of Pottersville. A very interesting piece on the evolution of American mortgage lending.

11. Mortgage rescue plan is, "The Mother of All Bad Ideas", says Peter Schiff.

12. Gold is cheap in real terms. With comments on gold and silver shares.

13. Istanbul's Gypsy quarter to be demolished in favor of planned "culture".

14. "Dinosaur Mummy" found with intact skin, tissue. Remarkable.

Thanks for visiting. Remember to bookmark Finance Trends Matter and share this site with a friend! Enjoy your weekend.

Wednesday, December 05, 2007

Ron Paul in the Journal

An afternoon post to include a latest bit of Ron Paul media coverage. Found in WSJ.com's most popular articles sidebar, here is an excerpt from, "How Paul Could Change Race".

Manchester, N.H. -- After shocking the Republican Party establishment with a surge in online support, Rep. Ron Paul is trying to translate his Internet revolution into real votes, particularly in New Hampshire.

The Texan's latest campaign swing through the early-primary state shows it is going to be a tough climb -- though he could have an impact on the race for the Republican presidential nomination.

"As a realist and as an experienced political person, I know that it's extremely unlikely he is going to get the nomination," says Keith Murphy, who runs an unofficial Paul campaign headquarters at his Elm Street bar. "Having said that, if he can win in any state in the nation, it's New Hampshire."

Much is made of Ron Paul's role as a Republican party "spoiler" and his vocal, but "fringe", supporters. I wish more people in the media would get their backbone in place and ask why Paul and his supporters feel the way that they do on questions of liberty and government. People might learn something about the principles America was founded on.

Check out the entire piece at the link above.

Tuesday, December 04, 2007

Dry bulk shipping boom

With the Baltic Exchange Dry Index (BDI) still up near its recent highs above the 10,000 mark, many are wondering if the shipping boom driven by Asian demand will hold.

The Financial Times recently took up this issue by highlighting the view of one shipping executive, Nobu Su, chief of Taiwan Maritime Transport, who offered that current freight shipping rates were "insane".

Here's more from FT's article, "Dry bulk bubble may have bouyancy to spare".

Nobu Su's outspoken comments about the bulk cargo market shine a spotlight on a remarkable piece of price inflation that has been little noticed outside the closed world of shipping.

On Friday, the Baltic Exchange, which collects information about shipping markets, was quoting the standard charter rate for a Capesize dry bulk carrier - the largest kind, so called because it has to sail around Cape Horn and the Cape of Good Hope rather than use the Panama or Suez Canals - at $179,527 per day.

The same rate a year ago was $69,235. The increase is pushing up sharply the costs of many users of the vital commodities that such ships carry - particularly coal and iron ore.

For some commodities, according to Mr Su, the cost of transport can be twice as much as the cost of the cargo when it was delivered to the ship.

So as you see from that last statement, transport costs for in demand commodities have become remarkably expensive.

You don't have to know your Panamax from your Capesize to be able to understand this last point. Just imagine shipping a gift package to a friend by postal service or Fed Ex, only the shipping cost is twice what you spent on the gift.

In that case, you might say "to hell with that, I'll send a card". But in China or India's case, there has been little option but to pay the required rates for much needed commodities.

Will freight costs peak in 2008 or will they retrench a bit, only to keep on rolling? This is a big point of debate, as the shorter-term future of the global economy seems to be wrapped up in this question.

One last point to mention here: notice the chart of the Baltic Dry Index (BDI) vs. the Shanghai Composite (FXI). Is there a strong correlation here?

It seems, judging from this rather short time period, that there has recently been an observable link between the two, with FXI possibly leading the BDI by a couple of months. Thoughts?

Monday, December 03, 2007

Search Finance Trends Matter

In an effort to help you better find the information you are looking for, I've installed a Google Custom Search bar to help you scour this blog for relevant posts.

You'll find the new search bar in the lower right hand sidebar, underneath our Subscribe and Bookmark widget buttons. Just type in any keyword or search term you like, and hit the search button. All relevant results will be displayed on the next page, and you will also have the option of broadening your search over the entire web.

I chose Google Custom Search, a much needed improvement to our previous site search tools, to help you better find the information you are looking for here at Finance Trends Matter. You will now be able to easily search through all our past content, and find related posts on any subject of interest.

Quick example: say you came here looking for information about hedge fund manager, John Paulson. If you came to a certain post by way of a Google search, or a direct link, you may have seen only one piece of information on the subject before deciding to leave.

But if you were to look over to the Custom Search bar and try out this query, "John Paulson", for more information, you would find an additional number of posts mentioning John Paulson, as well as links to relevant post titles. You'll find even more results here for terms like "gold", "inflation", and "Marc Faber".

So use this search feature. You'll have more information with a minimum of effort, and better search results. Hope this will help you to better navigate the site, and unlock the best content!

Do you have any ideas for further site improvements here at Finance Trends Matter? Let us know about them. Leave a comment or drop us an email (see profile for email address). Thanks.