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...