Oil Facts Vs. Fiction.

Recently, the Organization of Petroleum Exporting Countries cut its forecastfor growth in demand in the third and fourth quarters of 2005 by 600,000barrels per day...the International Energy Agency lowered its fourth-quarterdemand for OPEC oil by 700,000 barrels per day...and Morgan Stanley economistshave flat out called oil a "bubble."Sounds bearish for oil prices, right?
Not so fast
. What we can observe happening in the oil markets is actually very bullish for oil prices.For example, bookings of supertankers for oil exports from the Middle Eastsoared to the highest monthly level this year in July - and shipping costs doubled along the way, according to Bloomberg. Oil production in Norway -usually the No. 3 global exporter, behind Saudi Arabia and Russia - has hit an11-year-low...and China's oil-thirsty economy is humming along at 9.5% growth,shrugging off any and all efforts to slow it down.These don't sound like the ingredients for lower demand or too much supply forme.What's more, speaking of OPEC, the Saudis also recently told the world'sleading industrial powers that OPEC will not be able to meet Western oil demand in 10-15 years. This was the first time - ever - that OPEC has made such anannouncement.
Over the last three years, China has accounted for over a third of the global increase in oil demand. As GDP increases, so does a country's oil use. And Chinese President Hu Jintao says China aims to quadruple its GDP, to $4trillion, by 2020.Already, China's and India's economies are roaring, and their energy use is ramping up, as their citizens are making the switch from bicycles to scootersto cars. Last year, more than 1 million cars were sold in India. Car salesthere are roaring along at a 20% growth, and sales are expected to surge foranother 10 years. Meanwhile, China is seeing auto sales grow by 16% a year,with 2.79 million cars and light trucks sold in the first half of this yearalone. Newly mobile consumers in both countries will need oil and gas - andlots of it.

Global Energy Hunt.....

China, which runs a major drilling operation in Sudan. China's National Petroleum Corp. is going to invest $1 billion in a new refinery and pipeline there. Elsewhere in "Ugly Parts of Africa," another Chinese oil company recently made a $350 refinery deal with Algeria. Angola is receiving zero-interest loans from China in return for guaranteed oil sales. In Gabon, China recently inked a deal to rehabilitate old oil fields.
China's oil thirst doesn't stop in Africa. It has other deals lined up in Cuba, Venezuela, Kazakhstan, Iran, Turkmenistan and more.
India is no slouch, either. Indian company OVL is building a $1.2 billion refinery in Port Sudan and a 460-mile pipeline to Khartoum. Another firm, the autological Indian Oil Company is going to develop wells in Libya.
India has also signed an agreement with Bangladesh for a $1-billion pipeline to transport natural gas from Myanmar to Western India (Myanamar is on the shit list of human rights groups)...agreed to a $40-billion deal with Tehran to get supplied with liquefied natural gas (LPG) annually for the next 25 years ... signed another deal with Ecuador to drill for oil and gas ... committed $2.1 billion in investments in Russia's Sakhalin Island, which potentially contains as much oil as Alaska's North Slope.
Some of these deals couldn't be pursued by U.S. oil companies because of political constraints ... others just show India and China's intensive pursuit of energy world-wide. That's why I couldn't understand why so many Americans got outraged over the proposed Chinese deal to buy Unocal. Unocal is small potatoes compared to the rest of the global resources these nations are locking up in long-term deals.
And so, China and India are off and running, while Uncle Sam snoozes at the starting gate.

The global supply/demand balance is skin-tight. In fact, spare capacity is only 1%. Meanwhile, global demand is rising by 2.5% a year while existing, old reliable sources of oil are draining dry ... and new ones aren't being found!
Total Reserves in the Americas and Europe will be exhausted in the next 25 years, according to expert estimates. And new, much-heralded technology isn't extending our reserves - it's just helping us drain existing reserves faster!
The race for global resource is on. The $18.5 billion bid from China's state-owned oil company CNOOC to buy American oil and gas company Unocal is just the latest development in a race for global resources. And it's a race that energy-hungry China and India seem to be winning while Washington stands idly by!
America will become more - not less - dependent on Middle East oil as time goes by. Making matters worse, the Middle East is a geopolitical volcano, and it could make it blow up in our faces any minute.
America doesn't have an effective energy policy. In fact, it's worse than you probably realize. There are few provisions in the most recent energy legislation to support the development of alternative fuels and nothing done to increase fuel efficiency of cars and trucks. This means we'll end up MORE dependent on Middle Eastern oil - putting more profits in the hands of regimes that fund terrorists.

The Coming Liquid Natural Gas BOOM!

Around the United States, there are plans to build another 43 new LNG import facilities. In fact, the United States is already on track to be the biggest LNG consumer in the world by the end of 2010.
Exxon Mobil Corp. just put the finishing touches on plans to build 28 new LNG tankers and supertankers...ConocoPhillips just bought into a huge new LNG terminal project in Freeport, Texas...Shell Oil Co. has its hands in new LNG import facilities all over the globe....Sempra Energy is spending $1.8 billion building two LNG terminals and pipelines in Baja California and Louisiana.
LNG takes up less room to store than regular natural gas. You can squeeze 600 cubic feet of the gas into just one cubic foot of the liquid
You can ship LNG more easily, especially by tanker. Which is key as North America's natural gas supplies fall. Demand for natural gas is set to soar by 30% over the next 10 years
LNG is a lot safer to transport and store, too. With over 33,000 LNG tanker voyages...covering 60 million miles and 45 years of LNG shipping...there hasn't been a single major accident with LNG. Not one
If there is an LNG spill on open seas, there's no cleanup involved. The supercooled liquid warms up, turns back into gas and dissipates in the air.
Natural gas prices might seem high. But compared to oil, the world is swimming in natural gas. But because raw natural gas is so hard to transport, much of it is just burned off or 'stranded' at the source. As much as 2,500 trillion cubic feet of natural gas per year gets wasted this way. Using new liquid natural gas technology to store and transport that 'stranded' gas would be like finding an extra 1.7 billion barrels of oil per year!
But even more important for power-starved countries, liquid natural gas gives gas-fueled power plants yet another cheap way to churn out cheap electricity. Just to keep pace, the electricity industry should burn twice as much natural gas by 2025. The International Energy Agency says energy companies are ready to invest $250 billion in the future of LNG.
Just in the United States alone, LNG demand looks like it will TRIPLE over the rest of this decade. Alan Greenspan calls LNG an essential "safety valve" for the power crunch ahead. And the White House is ready to throw huge money behind the LNG industry.
LNG will be one of the most important - and most profitable - energy sources in the century ahead. Buying in now is like buying into the future of petroleum when the first Ford Model T rolled off the assembly line!
Global LNG trade is already growing about twice as fast as world oil trade. Your opportunity to make money investing in the right LNG companies over the next 24 months is huge.
China will burn as much oil as America within 20 years. But its production is nearly flat. And it'll burn through its reserves in as little as 14 years! It's already importing 60% of what it needs.
That's double China's imports from five years ago. And nearly 40% more than just this time last year. Chinese oil demand is growing seven times faster than oil demand in the United States. Now, it's made deals with just about every oil producer in the world. Including a few of America's biggest enemies.

The coming HYDROGEN Economy?

George Bush and the automotive and energy industries all believe the 'hydrogen economy' is the secret key to breaking the iron grip OPEC has on the American economy.
The "hydrogen economy" runs on hydrogen-loaded fuel cells.
It's not hard to convert cars, trucks, ships and planes so they burn hydrogen in different forms. And hydrogen burns twice as efficiently as gasoline. Just 30 grams of hydrogen atoms hold as much energy as 100,000 gallons of gasoline. And a couple of pounds of pure water hold as much energy as 10 million gallons of gasoline!
The trick has been unlocking it. And cheaply. That's what researchers inside company and government labs are just now beginning to do. And this is huge.
The best and cheapest way to make and unlock hydrogen is a kind of high-temperature electrolysis. The most logical place to do this is inside a nuclear reactor. And the best-suited kind of reactor, for a few reasons, is the pebble-bed modular reactor - the PBMR - that we just talked about. The hydrogen is a bonus to electricity production.
From each reactor, you could get about 4.5 pounds of hydrogen per second. Used in fuel cells, that's enough to replace more than 800,000 gallons of gasoline per day! Of course, the world already uses a heck of a lot of gasoline. To get enough energy to satisfy expected global demand over the NEXT 20 years, says Dr. Steve Herring, of the Idaho National Engineering and Environmental Laboratory, we need 4,000 NEW reactors!
Over the last 20 years, nuclear power was responsible for 90% of all reductions in CO2 emissions in the United States. Which is why James Lovelock, one of the scientists who discovered global warming, is urging world leaders to switch to nuclear power.
But we still worry about radioactive waste.
What most people don't realize is that 95% of the spent fuel from a reactor is recycled into new uranium for more reactors...4% is plutonium that can also be mixed with thorium and burned...and it's only the rest, about 1%, that needs to be stored.
And even there, there's an opportunity for you to get rich.
For instance, the same company that cleaned up Ground Zero and the Pentagon after Sept. 11 has discovered a whole new way to trap nuclear waste.
It's called "geomelting." It's a technique that traps waste in massive glass blocks. The blocks are harder than concrete, impenetrable and perfectly sealed for up to 1 million years. Some are calling this the holy grail of the nuclear-power industry!

Alternative Energy Primer and Investment Opportunity

Over 95% of the demand for coal over the next three decades will come from the electricity market. And China and India will be responsible for 70% of that new demand.
That's great news for the United States. And for China, Australia and Canada, where you'll find most of the world's untapped coal reserves. There's enough coal just in the known reserves to burn - at current rates - for another 300 years.
And all of it is miles away from the volatile Middle East.
In North America alone, we've got 254 billion tons of proven coal reserves - more than 25% of the world total (compare that to Saudi Arabia, with 24% of the world's oil).
So Chinese and U.S. companies are both making huge leaps with clean-coal technology. It's coal, but reprocessed in different ways to burn clean. With so much coal in the ground...every breakthrough in clean-coal technology could be worth billions to energy investors.
One of the ways to burn coal cleanly that's getting a lot of attention is called coal liquefaction, or liquid coal. The coal gets crushed into tiny particles, mixed with hydrogen and certain liquids and comes out as synthetic oil that burns much cleaner than regular coal.
In 2004 alone, U.S. nuclear power plants had a record 92.1% capacity of full use. Compare that to just 66% in 1990. Nuclear power provides more than 20% of America's electrical power.
Maybe you didn't know it, but the United States has 104 nuclear power plants operating at almost full capacity. Around the clock. That's more nuclear power generated than by any other country in the world!
Its use is up ninefold in the United States since 1973. And it's more commonly used for running a power turbine than natural gas, hydroelectric dams, oil, wind power or solar energy! In fact, nuclear power is already the second most common way to get electricity in the United States, more common than any other method except by burning coal!
Our electricity demand is so huge that the 104 plants still feed only 20% of our power demands. France is more famously dependent. It gets over 77% of its electrical juice from nuclear power. But France and the United States aren't alone. Over the last four decades, nuclear power has been the fastest-growing major source of electricity in the world.
Not too long ago, it looked like we'd reached the end of the nuclear age. Suddenly, it's starting all over again. But nuclear power today is nothing like it was back in the days of Chernobyl or Three Mile Island. Energy needs are nothing like they were then, either. Power-hungry countries like China, India and the United States are ready to up the ante.
Between China and India alone, the world could see at least 500 new nuclear reactors. Even in the United States, we're talking about increasing our nuclear output by 50% over the next 20 years.
From 1996-2001, most uranium companies actually got out of the business. Some mines were closed. Others were never started. You can imagine what happened as demand for uranium started back up.
By 2001, uranium was selling for $7.50 per pound But now, uranium skyrocketed to over $20 a pound! Remember, in 1983, uranium cost $40 a pound. That's more like $79 a pound today, after inflation. Uranium would have to shoot up another 295% to get to its real historical high.
Here's something else...
Nuclear power is many times more efficient than other kinds of energy. You can measure different kinds of fuel costs by measuring how much heat the fuel puts out, measured in British thermal units. One million Btu of coal costs about $1.25. One million Btu of natural gas, about $3.50. And 1 million Btu of oil costs about $5.70. Even if a pound of uranium cost $400, it would cost about 1.1 cents per 1 million Btu.
That's with current technology.
But there's a new kind of nuclear power plant technology just around the corner that's up to 100 times more efficient...is much safer...and could make even $1,000-a-pound uranium cost just 0.03 cents per kilowatt hour.
That's like getting a gallon of gasoline for half a cent.
Thorium is radioactive, like uranium and plutonium. It's what creates a lot of the heat in the Earth's core. Here's what's interesting: There are six times more thorium reserves in the world than there are uranium reserves...with more untapped energy than all the world's oil, coal, natural gas and uranium combined! Thorium has a high melting point, perfect for use in reactors. It's also safer. And all of today's reactors could run on thorium. Plus, you can use it combined with uranium. Not only to stretch out the world's uranium supply...
But also because the thorium-uranium mix burns more efficiently...and creates even less plutonium waste. And that leftover plutonium is the kind that won't work in bombs.

Coal, Nuclear Power, and Natural Gas are the plays to watch Posted by Picasa

China and North America will lead the investment in Electricity. An Investment opportunity exists..... Posted by Picasa

16 Trillion Worldwide Energy Investment required until 2030! Posted by Picasa


Potential Silver Bull Market Bigger then Gold appreciation??


There is five times as much gold in the world as silver, but that does not begin to tell the true story. The price of gold is 55 times more expensive than silver. Jim, I want you to take the price of gold and multiply it by the number of ounces in inventory. $265 per ounce times 1.6 billion ounces. That comes to $425 billion. There is a gold inventory in the world of $425 billion.

Do the same equation for silver. $4.70 per ounce times 300 million ounces. That equals about $1.4 billion total world silver inventories. We have $425 billion worth of gold in the world (probably much more) versus $1.4 billion worth of silver (probably much less). The real Gold/Silver Ratio is not 55 it’s 300. Let me state it this way - there is 300 times more gold than silver in the world on a straight dollar comparison. In other words, the value of all the gold in the world is priced more than 300 times all the silver. This is one of the reasons that I insist that the price of silver is wrong. One of your main responsibilities is to sell value to your customers. You can’t provide a better value than to get them into silver.

Facts like this are what you must convey to your clients. Gold, along with silver, has been manipulated and artificially depressed in price. Gold will rise in price. It may, in time, double or triple in price. But it is very unlikely, in my opinion, to see the ten and twenty fold run that silver will experience. It’s no easy task to get an item valued at $425 billion to jump to $4 or $8 trillion. Getting an item worth $1.4 billion to jump to $14 or $28 billion is relatively, no big deal, especially one in a chronic shortage. My biggest concern about gold’s price movement is that if gold starts to run, the world governments still control sufficient quantities that can be released to contain the price. In silver, no entity could contain a real surge in physical demand.


Don't Worry About China??

If you take what is reported about the output of China, you get a range of estimates, but generally the gross domestic product of China in the year 2004 is estimated to be substantially less than $2 trillion. That would roughly make it one-sixth the size of the United States economy. Yet China has nearly five times the population of the United States. That means the per capita G.D.P. of China is about one-thirtieth the per capita G.D.P. of the United States, estimated to be about $40,000 at present, in rough terms.

Consider the most optimistic C.I.A. data about China in 2004. It says China has a purchasing power parity G.D.P. of (very) approximately $8 trillion, compared with roughly $12 trillion for the United States. Again, this is for a nation with nearly five times our population. Even when using this most astoundingly optimistic estimate - I would almost say a preposterous estimate - China has a per capita G.D.P. of about $6,000, or about 15 percent of America's and well below that of any nation in Western Europe, or of Japan, Israel, Taiwan and many other countries.

But suppose that these trends continued for 25 more years. Chinese per capita G.D.P. would be about $65,000 in 2040, and American per capita G.D.P. would be about $84,000. Again, this assumes that we use the most optimistic possible estimates of current Chinese G.D.P.

Google, Univision Boost Spanish-Language Ad Inventory

Google has struck a multiyear deal with Univision Online that will provide AdWords advertisers with more Spanish-language inventory on both search and content pages of the Univision.com website, ClickZ reports (via MediaBuyerPlanner). The ad deal is a revenue-sharing agreement between Google and Univision Online, the most-trafficked Spanish-language site, reports AdAge. Univision Online had been using Yahoo Search Marketing to provide search results on the site.
The Google-Univision deal is yet another indication of the
fast development of Hispanic advertising - and the growing influence of Hispanic consumers, who tend to prefer Spanish-language media. Moreover, according to recent research, U.S. Hispanics are more avid shoppers and internet users than the U.S. general population.


Banks Offering Mortgages to Illegal Entrants

All immigrants need is an individual taxpayer identification number issued by the Internal Revenue Service, a steady income for at least two years and a good credit rating.
Dozens of immigrants in metro Phoenix already have been approved for these loans, often for up to $150,000. Their biggest challenge is finding affordable houses in a market where the median home value is teetering on $250,000.

The availability of these mortgages illustrates the growing interest by companies to tap into the immigrant market, said Derene Allen, a senior vice president at Santiago Solutions Group's office in San Francisco.
Despite the furor over illegal immigration, companies can't ignore the potential of growing loyal, lifelong customers, she said.
Banks have no obligation to check immigration status, said David Barr, spokesman for the Federal Deposit Insurance Corp. in Washington, D.C. "Why assume this person is not here legally?" he said.
Financial institutions started to tap into the undocumented-immigrant market a few years ago by opening checking and savings accounts using a popular Mexican identification card known as the matrĂ­cula consular. A few community banks have gone a step further in offering loans and mortgages.

India - The Next Big Player

Bombay SENSEX Five year chart...

India is in China's position of 1980. It has a mind-boggling bureaucracy, poor infrastructure and a culture antithetical to rapid development. At the same time, it has the basic materials that China built on. As the Sino-U.S. relationship deteriorates, India can be a counterweight to China -- not in a military sense, but in an economic sense. If the United States has an economic alternative to China for investment, Washington develops leverage in its talks with Beijing on a host of issues. China, after all, still courts investment -- even as the Chinese buy anything that isn't Chinese.

If you had any doubts about the booming employment scene in India, here’s a global reality check. As per Manpower’s Global Employment Outlook Survey, India topped the list of all 23 countries, including other developing economies like China and Mexico, in employer’s expectations for additional recruitment for the forthcoming quarter. The quarterly survey, which captures employer’s intentions to increase or decrease the number of employees in their workforce during the quarter, revealed that while Indian employers have the most optimistic expectations, those in Switzerland reported the weakest hiring expectation.

Rates effect On Real Estate Debate.

As long as interest rates stay low, say the pundits, there is no risk to the
housing market; people will continue to borrow, spend and flip. The only reason
the housing market hasn't collapsed already, as James Grant explained, is that
borrowers can't default; their lenders won't let them. Every time they have
trouble making payments, there is a new offer to refinance on easier
terms...and even 'take out' a little more equity. Thus, the real estate bubble
is expected to continue to expand until interest rates rise.
Not so, said Peter Warburton, author of "Debt and Delusion," yesterday. "There
is something big coming," he prophesized. "It is the destruction of the economy
at low rates. This is going to be the big surprise, that the economy will go
into a prolonged slump even at very low nominal interest rates."
As people borrow more and more money, carrying the weight of debt wears them
out. Low rates permit more borrowing...but each additional unit of debt - like
another beach house or another mistress - must be serviced. Eventually, you are
unable to keep at it.
Total debt is around $36 trillion - about 300% of GDP.
"Usually, the upper limit of debt is about three times GDP," Warburton
explained. "But there are always special circumstances. It's impossible to say
when the end will come." The weight of interest on the debt we can estimate
ourselves. At 5% interest, the carrying cost would be $1.8 trillion per year -
more than 10% of GDP. The end must be coming soon...
Taleb did not bring it up, but emotions are mean reverting. Otherwise, there
would be no use for the modifiers "over" or "under." Yes, you can count on
people to overdo it. But not always in the same way. Today, they over-react to
terrorism and greed. Tomorrow, they will shrug their shoulders at
subway bombers...and run from stocks and houses as though they were about to
blow up.

CAFTA, another NAFTA comes to Congress

CAFTA begins by ensuring that free trade is fair trade. I mean -- you know, I traveled the country quite extensively in the recent past and said, I'm a free trader. But I reminded people in our country I'm also for fair trade. It's one thing to advocate free trade; I believe the government has a role to make sure that trade is fair for all of us. In other words, we want people treating us the way we treat them.

It turns out that exports from Central America into the United States face almost no tariffs. Now, I don't see how a member of Congress can go back to his or her district and say this is a good deal for America, when our exports to Central America face hefty tariffs. In other words, if you're for free trade you ought to be insisting that the trade be fair. And the only thing that makes the trade fair to me, seems like, is to say to our friends in Central America, just treat us the way we treat you.

And that's what CAFTA does -- it eliminates tariffs on our goods and services going into Central America. In other words, they treat us the way we treat them. It levels the playing field, which makes this a good deal for America's farmers and small business owners and manufacturers.

Walmart in CHINA

Wal-Mart (NYSE:WMT - news), like rivals Carrefour S.A. (CARR.PA) and Metro A.G. (MEOG.DE), has been building stores in Asia's largest retail market after Japan at a rapid clip, taking advantage of growing incomes and a gradually liberalizing retail industry.

Lawrence Lee, regional operations director for eastern China, also told Reuters later that the Arkansas-based U.S. giant expected to post double-digit revenue growth in the country in 2005, though he declined to give specifics.

5 Tips for a better JOB from Jack Welch

"These signals apply to jobs at every level of an organization," Welch writes. "You can be right out of school, a middle manager trying to move up, or a senior executive looking for a top pick."

In "Winning," Welch has created a list of the most important signals to be aware of and how to read them:


Take it as a good sign if: You like the people a lot - you can relate to them, and you genuinely enjoy their company. In fact, they even think and act like you do.

Be concerned if: You feel like you'll need to put on a persona at work. After a visit to the company, you find yourself saying things like, "I don't need to be friends with the people I work with."


Take it as a good sign if: The job gives you the opportunity to grow as a person and a professional, and you get the feeling you will learn things there that you didn't even know you needed to learn.

Be concerned if: You're being hired as an expert, and upon arrival, you will most likely be the smartest person in the room.


Take it as a good sign if: The job gives you a credential you can take with you, and is in a business and industry with a future.

Be concerned if: The industry has peaked or has awful economics, and the company itself, for any number of reasons, will do little to expand your career options.


Take it as a good sign if: You are taking the job for yourself, or you know whom you are taking it for, and feel at peace with the bargain.

Be concerned if: You are taking the job for any number of other constituents, such as a spouse who wants you to travel less or the sixth-grade teacher who said you would never amount to anything.

Work content

Take it as a good sign if: The "stuff" of the job turns your crank - you love the work, it feels fun and meaningful to you, and even touches something primal in your soul.

Be concerned if: The job feels like a job. In taking it, you say things like, "This is just until something better comes along," or "You can't beat the money."

Alpha, Beta and Investing.....

To explain how alpha works, we need to start with beta. As you'll recall from our Risky Business series, beta is a volatility measure that quantifies the movements of a security relative to those of a benchmark index. In other words, given the movements of the benchmark, it tells you how much you can expect a fund to move. For example, let's consider a fund that has a beta of 1.1 in comparison with the S&P 500. If the index were to return 30% for the year, you would expect the fund to return 33%. (30% x 1.1 = 33%.) However, mutual funds don't necessarily produce the returns predicted by their beta values. That's where alpha comes in.

Trader tidbits from O

There is really only one thing that can save you from yourself and that is your commitment to following your trading plan. If you force yourself to limit the amount of capital at risk to 2% on any trade, you have gone a long ways towards protecting yourself. However, there is more that you can do. If you are a day trader, you need to think in terms of a maximum intraday draw down. I believe that 4% is a pretty good rule of thumb.

If you are trading the longer term setups, you need some additional structure regarding the maximum number of positions you will hold at any one time. The longer you have been trading, the more you can likely manage. Four to ten positions is a good rule of thumb.

Additionally, you need to give some thought to position sizing. If you are trading longer term setups, don’t allow yourself to take a huge position in one stock or market. Spread it around a bit. A rule of thumb is to limit any one position to between 10% - 25% of your trading account.

Is Gold still GOLDEN?

I would suggest from a newly launched ETF, that yes, GOLD will trend higher. Investors seeking exposure and hedge funds hungry for alternatives will surely use this instrument to speculate on the markets. IAU on the AMEX

More Profits from Utility Sector?

Today's natural gas prices make the rise in oil prices
look like chump change.
Today's natural gas prices are like
paying the equivalent of $9.21 for
a gallon of gas.

Chart of XLU ETF

Watch this ETF for signs of a National Top in US Real Estate

Have a look here


Smart ETFs," a cross between actively and passively managed portfolios. Instead of merely tracking a popular stock index, these new funds replicate PowerShares' proprietary "Intellidexes," which are designed to beat the benchmarks of traditional index ETFs and are updated once a quarter.

The PowerShares strategy seems to be working. Since its May 1, 2003 debut the company's Dynamic Market Portfolio (PWC) has gained 63%, vs. 34% for the S&P 500 index. Its Dynamic OTC Portfolio (PWO), launched the same day, has since climbed 68%, vs. 48% for the Nasdaq Composite.

The eight different industry ETFs focus on different industries. Each holds 30 stocks. They're intelligent vs. other benchmark indexes. Other indexes — say biotechnology — will look at biotechnology companies and say, let's just get anyone in biotech of any size...The indexes that PowerShares is based on seek to use intelligence to identify certain stocks, instead of incorporating everyone into the index. We identify stocks with the greatest investment merit.

Heathcare Equity Sector Play?

The demand for health car is about to explode. 
To understand why, you need only consider two
simple factors: The first wave of America's
76 million baby boomers are about to turn 60 years old.

The fact is, because health care expenses rise
with age, the demand for drugs, tests and related
expenses is going to explode dramatically.

How high? As much as six times!

And it's all because people 45 to 64 are nearly
six times more likely to suffer from high blood
pressure, heart disease and other age-related
illnesses than those between 18 and 45.

Exposure to this arena comes from ETF's
like IYH on the AMEX

Selling Your Home in a Cooling Market

Ironically, homeowners who ask more for their homes tend to get less in the end. According to Liebman, studies show that if you price your home properly it will sell faster and at a higher price than if the home was priced aggressively. "Overpricing leads to low bids," Liebman says. "Proper pricing leads to high bids."

Curb Appeal

First impressions are everything. The last thing you want is to turn off a potential buyer before he or she walks in the door. So make sure the house is painted, and call a landscaper to get your lawn in tip top shape. "If your grass isn't green, make it green," Liebman says. "If you have weeds, get rid of them. If the shrubs are overgrown, cut them." Even small, inexpensive potted flowers can make your home seem more inviting.


Some renovations are worth an investment. An extra bathroom makes a home more saleable, says Jim Cory, senior editor at Remodeling Magazine. A few cans of paint and new carpeting could also provide a handsome return. An outdated eight-room home in South Philadelphia, for example, might go for roughly $130,000, says Cory. Pull the shag carpeting and wood paneling — a project that costs roughly $15,000 — and that same home could list for $180,000.

Additional Tips

There's some basic advice that's worth repeating. Keep your home as clean and as pristine as possible. This means cleaning out your closets and getting rid of excess clutter and furniture. You want your home to look as spacious as possible. The Corcoran Group's Liebman even suggests fresh flowers. "Baking cookies could be a bit silly and obvious," she says.

The Way to Invest in Oil

John Mauldin on China.

"The basket is likely to be heavily dominated by the USD. Using China's trade weights, normalized, a five currency basket would have the following weights: USD (27%), JPY [Japan](31%), HKD (Hong Kong] (24%), EUR (15%), and GBP [Great Britain](4%). The hard dollar pegs (USD and HKD) account for close to 50% of the basket. If you consider the JPY as a soft USD peg, the weight on the dollar could be as high as 80%. This means USD/RMB will still be very 'docile', with the index being 'sticky' relative to the USD." (Morgan Stanley)

Right now we don't know what the basket will actually look like. It is doubtful that China will announce the make-up of the basket. Clever currency traders will soon be running a regression analysis that will give us a reasonable idea. Of course, it will be very risky to trade on that, because the Chinese could change the makeup of the basket at any time. My bet is they will do so from time to time just to cause a lot of pain to hedge funds so as to discourage speculation.

What those clever Chinese have really done is take some of the wind out of the sails of the protectionist camp. This new currency regime is essentially the same as that of Singapore. You don't see anyone in the protectionist camp ranting about the unfair currency manipulation of Singapore. The Chinese will be able to, quite correctly, point out that if we have no problems with Singapore then we should therefore have no problems with them.

In practice, what I think the Chinese will do is to slowly allow the yuan to appreciate. By slowly, I mean 2-3-4-5 years and by 5-10-15%. This is going to be like watching paint dry. It will not be the stuff that great speculations are made of. And since local Asian currencies are really pegging themselves to the Chinese yuan, it will mean slower appreciation in most of those currencies as well.

"The issue of surplus capacity has become very worrying for policy makers in Beijing also, because there is no pricing power and, therefore, there will be an impact on the financial sector. Every company will need a piece of the same pie. Prices will fall even more. Companies will need more loans to survive and so on. The deflation story, so frightening to Greenspan, will grow into a live problem in China. Even with rising demand, prices continue to fall because of this chronic surplus capacity. There is a risk of a large knock-on impact on the financial sector, less on the big banks, but more focused on the local and regional banks and money co-operatives, of which there are about 120 of the former and 30,000 of the latter category.


1. Businesses that only focus on creating capacity without regard to profitability will not receive local government support

2. The new focus must be on return on capital investment

3. Businesses must go up the value added scale. This means introducing new technology, more expenditure on R&D, taking out more patents etc., and

4. You are encouraged to go further inland if you want to expand. Funding for expansion in Ningbo is now very tight and land licenses difficult and expensive to obtain.

"The last point is very important. It is the cornerstone of new government policy, which will be seen when the new 5-Year Plan is brought out either late this year or early in 2006.

"Urbanization of coastal cities will be slowed sharply. Costs have become too expensive and how to manage the migration of workers is a difficult issue. Instead, new development of industry will be encouraged to go into the rural sectors, where transport systems have improved, where land costs are a fraction of that in the coastal cities and where wages are one-third or less."


So, is the whole world all going to be buying Chinese goods? Should we just pack it all in? In a word, no. "Moreover, China is no longer being considered the first choice for new investment by manufacturing companies in Taiwan or S Korea; the first choice is now being given to other countries in Asia, such as India, Vietnam and now Malaysia....For instance, only on Friday, Flextronics, the world's leading contract electronics maker, announced that it would expand its Malaysian manufacturing facilities to counter rising costs in China. Peter Tan, the company's Asian President, said 'Its pretty clear that in China there is only one way that costs will go, and that is up, given the fact that China is so dependent on the rest of the world for its energy needs...There are a lot of odds being stacked up against our existing presence in China'."

At some point we are told, foreigners will get tired to buying US assets. And I agree, that is true. But it could be a lot longer than most of those with a bearish mindset think. We have $44 trillion (or so) in assets in the US. This total asset base grows every year by several times more than the trade deficit. So while the trade deficit as a percentage of GDP is staggeringly high, as a percentage of assets it is modest.

This game will go on as long as Asia decides to take our dollars. It is pretty much that simple. There are simply too many dollars and yen and yuan and baht and pesos and euro, and too few opportunities. That money has to find a home. And, for better or worse, the current home of choice is the US.

The hope of each of these governments and central banks is that if they go slowly enough their own country will build its own consumer engine and they can wean themselves off their dependency upon the US consumer who pays in electronic dollars. They hope to grow their own economies to the point that investment dollars stay in their own country rather than looking for safety and growth in the US.


China Cuts Currency Link to U.S. Dollar

After months of lobbying by its trading partners, China on Thursday cut its currency's link to the U.S. dollar and raised its value by about 2 percent in a move that could make Chinese exports more expensive and make foreign assets cheaper for China to buy.

The government's increase of the state-set exchange rate of the yuan could give a respite to foreign companies that are trying to compete with an avalanche of low-cost Chinese goods.

But Chinese companies also could get a break as prices of imported oil and other raw materials fall. And a stronger currency could prompt more takeover bids by China like those launched recently for U.S. oil company Unocal Corp. and appliance maker Maytag Corp.

But by dropping the U.S. dollar link and switching to a more flexible system based on a basket of foreign currencies, the Chinese have opened the door to a further, gradual rise in the yuan's value.

The government announced the change to an exchange rate of 8.11 yuan to the dollar in a surprise announcement on state television's evening news. That raised the value of one yuan by about one-quarter of one U.S. cent to 12.33 cents.

The effect on U.S. financial markets was immediate: The dollar fell against other major currencies and yields on U.S. Treasury securities rose. If that rise in interest rates is sustained, it could make it more expensive for U.S. consumers to finance purchases of new cars, homes and other big-ticket items. A stronger yuan could also encourage domestic spending, making China's economic growth less dependent on exports

China's decision to base the yuan's value on a basket of foreign currencies such as the euro or Japanese yen could see the yuan rise in value as the dollar weakens against those currencies, dragged down by mounting U.S. budget and trade deficits.

Beginning Friday, the yuan will be limited to moving within a 0.3 percent band each day against a collection of as-of-yet unnamed foreign currencies, the government said. But the officially announced price at the end of each day will become the midpoint of trading for the next day, which could let the yuan edge up incrementally.

Malaysia also announced Thursday it was dropping its own policy tying its currency, the ringgit, to the U.S. dollar and would adopt a currency basket arrangement similar to China's.

Hong Kong said it would keep its currency peg to the U.S. dollar, making it the only Asian economy left with such a link.

Web and Online Advertising is HOT again

Several things are going on that are a clue to the next phase of the internet. YHOO earnings were good among other things after the bell. Also:

New York, NY, 7/13/2005 - NEW YORK, NY, July 13, 2005 – DoubleClick Inc. (NASDAQ: DCLK), the leading provider of data and technology solutions for marketers, advertising agencies and web publishers, announced today that the acquisition of DoubleClick by Click Holding Corp. has been completed. Click Holding Corp. is a subsidiary of private equity investment funds affiliated with Hellman & Friedman LLC and JMI Equity. DoubleClick stockholders approved the merger agreement governing the transaction at DoubleClick’s annual stockholders meeting held on July 12, 2005.

News Corp. on Monday said it would buy Intermix Media Inc., owner of the popular MySpace.com social networking site, for $580 million in a move to expand the media conglomerate's Internet offerings.

The deal comes after News Corp., home to the Fox television network, Fox News and 20th Century Fox film studios, announced on Friday the creation of an Internet division to hold the company's sports, news and entertainment sites.

News Corp. will pay $12 a share, a 12 percent premium over Intermix's closing price on the American Stock Exchange on Friday. Intermix shares rose 9.5 percent to $11.74 in Monday trading.



Corp.'s getting hooked on the buying power of 11 million undocumented immigrants

The economic impact could be significant. While most analysts peg the number of illegal immigrants at 10 million to 11 million, a recent study by Bear Stearns Asset Management (BSC ) concluded that data on housing permits, school enrollment, and foreign remittances suggests there could be as many as 20 million. Either way, experts agree that the undocumented, a majority of whom are Hispanic, are one of the nation's largest sources of population growth. They add 700,000 new consumers to the economy every year, more even than the 600,000 or so legal immigrants, according to Pew's new study. What's more, 84% of illegals are 18-to-44-year-olds, in their prime spending years, vs. 60% of legal residents. Corporate sales and profits will get a shot in the arm if more of them move out of the cash economy, put their money in banks, and take out credit cards, car loans, and home mortgages. U.S. gross national product could get a boost, too, since consumers with credit can spend more than those limited to cash. MORE

Real Estate Bubble Indicator

Here are a few links to see how real estate in your area compares to the bubble indicator...

Los Angeles, CA, June 2005
Los Angeles is the “poster child” for how a lack of adequate new housing near employment centers can adversely affect an economy.

Los Angeles still has fewer jobs today than it did in 1990. That’s right, 15 years with zero net added jobs. During the 1990s, Los Angeles lost jobs, built only 111,000 homes, and added more than 650,000 people. That’s right too, only one housing unit for every 5.1 people who moved in. The result has been a pretty miserable deterioration of a great area.

That being said, some great things are finally happening. Downtown Los Angeles is slowly revitalizing. The Playa Vista community is adding thousands of new homes after more than 20 years of entitlement battles, and Lennar will soon be bringing to market the next phase of Newhall Ranch, which will include more than 10,000 housing units. Some of the largest home builders in the country have formed urban infill divisions to build homes for an area greatly in need of it. Still, there is not enough volume for many builders to support operations, so they have stretched their geographic territories to Bakersfield to get enough sales.

Orange County, CA July 2004

With only 6,436 single-family permits and less than 3,000 multifamily permits issued in the last year, Orange County builders are constructing 63% fewer housing units than they did in the late 1980s. Clearly, this new lack of supply has contributed to the phenomenal home price appreciation that has occurred. Since the end of 1996, home prices have appreciated 160% to a median detached resale home price of $572,000. Orange County is the most expensive metropolitan housing market in the country.

While the 14 Giants who build in Orange County are not building too many homes, the percentage of the company balance sheet devoted to Orange County is fairly significant. Land prices frequently exceed $3 million per acre, and most builders have started urban infill divisions to pursue small opportunities throughout the county.

While lack of supply has driven prices to astronomical levels, low supply does not assure builders that price appreciation will continue, or that current pricing can even be maintained. Almost all of the builders have established strategies for a price decline, and many have ventured into more affordable areas in adjacent counties to soften the blow of a price decline in Orange County. With growth of 14,900 jobs per year, and an unemployment rate of only 3.2%, immediate price declines do not seem imminent. However, with 72% of the median household income needed to purchase the median-priced home, which is a comparable level to 1989, builders wonder just how much more expensive housing can get. Our advice: Monitor housing market conditions, especially days on the resale market, carefully, and keep your cash balances high.

Riverside – San Bernardino CA, October 2004
The Riverside – San Bernardino market, which has successfully promoted itself as California’s “Inland Empire,” has a booming construction market that will soon have more homes constructed than Los Angeles, Orange and San Diego counties combined. It is the 4th largest construction market in the country.

In the last 12 months, Inland Empire builders have pulled 48,491 total permits in comparison to 50,519 permits issued in the three coastal counties. Almost 16 million people live in the three coastal counties, in comparison to only 3.6 million people in the Inland Empire.

With 15 of the 20 largest U.S. builders in the Inland Empire, including at least five (K. Hovnanian, DR Horton, Lennar, KB Home and Pulte) exceeding 1,000 sales per year, the Inland Empire is an important housing market. With the median detached resale home price up more than $75,000 in the last year, to $292,900, a significant portion of the large builders’ current profits also come from this market.

Our staff identified more than 250,000 units expected to receive entitlements in the next five years, so we don’t see foresee any slowdown in supply. More importantly, with decreasing competition in the coastal markets, we don’t see any decrease in demand either. The market is not immune from getting overpriced, but there is little question that the long-term demand is solid


Our IDEA of Democracy for the world?

Although no one can be sure, a reasonable estimate would be that over seventy million Americans derive their sustenance from salaries and wages directly paid by government, or as dependents of someone paid by government. In addition, millions more receive government monies as welfare checks and transfer payments for which they provide no services.

In the 1998 Congressional elections, only forty-two million Americans voted. This was far less than the number of people who benefited from government checks.

This permanent, non-democratic bureaucracy is the elite force that decides what government wants. The bureaucrats’ authority to write rules and selectively enforce a vast, unknowable mass of regulations and interpretations is the veiled authoritarian force that controls American lives.

Information of any kind can be disinformation

Read this interesting Article. Don't believe everything you hear.

US Tax system affects investments

Because the income tax is regressive, taxing income rather than wealth, the gap between rich and poor in the United States is widening. Because an increasing large segment of the electorate is either on the government payroll, or exempt from income taxes, or otherwise beneficiaries of tax money, the Snare of Democracy continues to discourage entrepreneurs, drying up the supply of equities and widening the gap between rich and poor. Eventually — although perhaps not for years — this trend must have political consequences, unless countervailing forces intervene.

Tax the spenders as a form of flat tax has been proposed in the past.

In 1860, about two-thirds of Americans were self-employed, mostly on family farms. By 1948, self-employment had fallen to 18.5%. By 1994, only 8.7% of Americans were their own boss. Whereas the United States was founded as a nation of proprietors (owning property was a qualification for voting), after two hundred years, America had become a nation of employees.

So much for the self-employed trend

The mind of a Porfitable Trader

The Efficient Market Hypothesis is an example of the pseudo-scientific mumbo-jumbo that has come to dominate capital markets in the last half of the 20th century. It is in the same category as the Common Stock Legend and the Fallacies of the Nobel Gods. Changes in the sociology of the market come slowly; but when they occur, they are extremely important in Capital Flow Analysis. The Efficient Market Hypothesis and the Common Stock Legend were instrumental in supporting the expansion of the Great Bubble of the 1990s.

In flow of funds analysis, we do not need mathematics that go beyond the capacity of a ten dollar hand-calculator. It is more useful to read books on history, sociology, culture, and on the technical aspects of securities and market institutions, than to bother with learning stochastic calculus. When analyzing flow of funds accounts, we do not need advanced mathematics. In fact, Benjamin Graham's remarks in "The Intelligent Investor'"are relevant for practitioners of Capital Flow Analysis:

Minority-Owned Business Face Difficult Challenges to Succeed in Global Business Environment

The report, The New Agenda for Minority Business Development, sponsored by the Ewing Marion Kauffman Foundation, Kansas City, Missouri, argues that minority businesses are not maintaining pace with the larger U.S. business community and that a change of "mindset" is required to ensure sustained growth. The study further states that it is necessary for minority businesses to work with corporations as well as government agencies to better adjust and take advantage of the changing global marketplace.

"Encouraging minorities to start new businesses will still be a priority. But a second and equally important objective is to ensure that existing minority businesses are taking the necessary steps to achieve substantive growth," said Carl J. Schramm, President and CEO of the Kauffman Foundation. "This issue has never been more relevant or important than it is today."

Minorities currently represent approximately 28 percent of the U.S. population and own 15 percent of all U.S. businesses. Though the ownership figures may seem low at first glance, they represent significant progress. Between 1982 and 1997, for example, the number of minority-owned firms increased at a rate of 8.5 percent per year - three times that of U.S. business overall, according to the Census Bureau. Revenues from minority-owned firms increased at an annual rate of 10 percent per year.

Key to closing the gap, and positioning minority businesses for dramatic growth, say the researchers, is the urgent need for minority-owned businesses - working with their supporters - to pursue more opportunities in growth industries and to employ more innovative growth strategies such as strategic alliances and partnerships, mergers & acquisitions, increased use of capital markets and quicker response to trends in supply chain management.




BTW, this source:

Jeffrey Skilling, a top graduate at Harvard Business School, had succeeded as a partner of McKinsey before becoming CEO at Enron. David Campbell, a principal in McKinsey’s Dallas office, and Ron Hulme, a director in the firm’s Houston office that worked on the Enron account, wrote in "The McKinsey Quarterly, 2001":

Enron has built a reputation as one of the world’s most innovative companies by attacking and atomizing traditional industry structures – first in natural gas and later in such diverse businesses as electric power, Internet bandwidth, and pulp and paper. In each case, Enron focused on the business sliver of intermediation, while avoiding the incumbency problems created by a large asset base and vertical integration. Enron no longer produces oil and gas in the United States, no longer owns an electric utility, and has never held a large investment in telecom networks. Yet it is a leading value creator in each of these industries.

This article appeared only months before Enron entered into what was, at the time, the largest bankruptcy in American history. Asset-lite, as suggested by McKinsey executives, meant “avoiding the incumbency problems created by a large asset base and vertical integration”. However, as Enron was soon to demonstrate, those who benefited from this apparent efficiency were not the company’s employees, suppliers, creditors, or long-term investors, but rather its managers. Enron became an archetypical example of the dead falls that line the asset-lite trail.

Poetic Musings on the Housing market

"Wealth creation,' is the prevailing euphemistic American interpretation," writes Dr. Kurt Richebächer. "According to reports, American households are amassing wealth in this way as never before, vastly outpacing their soaring debt growth. For us it is scandalous that policymakers and economists can propagate this nonsense without a single voice of protest... This unmistakably qualifies as 'house-prince inflation' not as 'wealth creation.'"

The bank of Alan Greenspan lends money below the inflation rate...which sets in motion a boom in real estate.

Our houses go up in price so, mistaking it for an increase in value, we take some of it to spend. The additional spending creates the impression of healthy, growing economy - which gives us confidence to borrow more. Our houses rise again...we borrow more again...and again...and again...until the imperial nation owes a total of $36.2 trillion...with an annual debt service
bill of about $1.8 trillion.

We do not earn enough money to pay the $1.8 trillion, so we borrow it too! And now our debts rise on their own...until...finally, the "fin" of the bubble arrives. Will it end in a whimper or a bang? We don't know. But we have no doubt that it will end.

Until then, we continue to enjoy this delicious delusion....

The US Equity Market is VERY calm

We have not had the VIX readings this low since Clinton's Presidency and the dawn of the internet Revolution...

John Mauldin's Midyear Thoughts

the economy is in relatively good shape and from their speeches they believe that the good times continue. Headline unemployment is down to 5%. The US government deficit is coming down as tax receipts are way, way up. (Now if Congress could only show a little discipline and stop spending!) Corporate profits, both as a percentage of GDP and on an absolute basis, are at an all- time high. Corporations have significant cash reserves.

First, it is not altogether clear that raising short-term rates will have any real effect on long-term rates, and thus on mortgage rates. It certainly hasn't had much of an effect so far. As I noted last January, I don't think the Fed wants to create an inverted yield curve by purposely raising short-term rates above the 10-year note.

And there are questions about the real strength of the economy. Unemployment may not be as good as it sounds. The current low U.S. unemployment rate probably understates the true level of joblessness by 1 to 3 percentage points, says Katharine Bradbury, the senior economist at the Boston Federal Reserve. Millions of potential workers who dropped out of the labor force during the recession four years ago have not returned as expected and are thus not counted in the official unemployment statistics. (http://www.bos.frb.org/economic/ppb/2005/ppb052.pdf)

There are many observers who think the economy will soften in the latter half of this year. I agree. But please note that soften is not a recession. But raising rates while the economy is in the process of softening can help bring about a recession. And a recession today (or an economy only growing 1-2%) with inflation so low would almost certainly bring back the deflationary scares of 2002. The 10-year note could drop to 3% and mortgages would go to 4%. What such a scenario would mean is open for debate, because I can argue at least three scenarios forcefully, and another 2-3 that might be of interest. It would create a lot of uncertainty. Markets HATE uncertainty.

Then one area I really missed it my annual forecast was on the euro. I thought it would continue to rise, as I repeatedly said since early 2002 (one of my better timed calls - every now and then I get lucky). I did issue a mid-course correction to in April, not too far from the top, as things changed and I thus I changed my view on the euro. I am now getting bearish on the British pound as well, though for different reasons. Count me a selective US dollar bear. I would make my dollar bearish long term currency plays on the Asian currencies which float against the dollar.

For all the reasons I have written about over the past months, I am still bearish on the euro. Until they sort out the issue of just exactly what is Europe and how it should be run, there is just too much pressure on the currency.Further, all those central banks which bought the euro in 2004 as a way to diversify probably now wish they hadn't.

As for gold, I expect it to rise in dollar terms over time, but nothing like we have seen the past few years. Oil needs to correct. The longer it doesn't, the more it will drop when it does. I am still a long term bull on energy, but enough is enough. I would like to see a healthy correction and then on to the next bull leg.


Potential New US Fed Chair Speaks?

Ben Bernanke, in his first speech as the new Chairman of the White House,assured the public that the Bush administration is closely monitoring the housing market.

"The administration will continue to monitor developments in the housing market. However, our best defenses against potential problems in the housing markets are vigilant lenders and banking regulators, together with perspective and good sense on the part of the borrowers."

Bernanke, who could fill Greenspan's shoes as Fed Chairman when the time comes, is having way too much faith in borrowers. Good sense is not something that neither the lender, nor the subprime borrowers involved in this "frothy" market have in abundance.

"We don't want to stifle financial innovation," said Steve Fritts, associate director for risk management policy at the Federal Deposit Insurance Corporation. "We have the most vibrant housing and housing-finance market in the world, and there is a lot of innovation. Normally, we think that if consumers have a lot of choice, that's a good thing."

Douglas Duncan, chief economist at the Mortgage Bakers Association agrees that this may be the end of the road in the mortgage affordability cycle. He says,"While I don't think they are at the point of giving out free toasters to get customers, loan creativity appears to be at maximum level."

Housing BOOM Correction WHEN??

There is a huge debate about when the bubble in Real Estate will be over. It will TAKE a certain catalyst to make that happen. BUT all else being equal, the cost of money will do it. Money is cheap so everything else is rising, specifically the dollar. 8% Thirty Year mortgages is the argument... However i take it with a grain of salt as i feel that the next 5 years will reveal a great portion of homeowners using hybrid loans to do their financing. Over $2.5 trillion in "paper money"... the so-called wealth that has been created since 2001 by the rise in housing prices..

How important is 8%?

According to Greg McBride, a CFA at Bankrate.com, "Most economists and housing experts repeatedly cite 8% as the mortgage rate tipping point, one that could trigger a widespread drop in home prices. Rates are currently near 6%."

There's no getting around it, when interest rates rise... your buying power falls. And lowered buying power always leads to falling housing prices.

The Danger of "Reverse Leverage"

Imagine you buy a $400,000 home and put $20,000 down. If the value of your home rises 10%, you'll make $40,000 on a $20,000 investment...a triple!

But what if your house falls by 10%?

You then have a $380,000 mortgage on a $360,000 house. You've lost your entire $20,000 down payment... and you're another $20,000 in the hole.

One of the biggest concerns about the housing market is that new home construction is hitting record highs at the same time that new home sales have dropped close to 20-month lows. This means there is an oversupply of new homes and not enough people buying.

In January 2005, the inventory-to-sales ratio for new homes increased to 4.7 months... the highest level since 2000. The last time rising interest rates collided with a real estate oversupply was 1990. That year, the price of an average home fell around 10%... and the price of upscale homes declined by 40% to 50%.

HOW TO PROTECT YOURSELF. well You could sell, or you could find a REIT index and short it! Check with your broker. TAKE A LOOK AT THIS CHART. My analysis says we're headed for a stagnation of rates for a bit...

Chinaconomy Update

***US Says Yuan Revaluation Imminent… Not So Fast, Say Chinese: Chinese president Hu Jintao is set to visit Washington in September, which must mean China is about to finally revalue its yuan currency, right?

Wrong. A report in today's Financial Times says that certain members of the Bush administration were so convinced that China would adjust the yuan in August in anticipation on Jintao's visit, they managed to persuade several key US senators to postpone a vote on a bill that would impose a whopping 27.5% tariff on Chinese imports until a decision is reached.

China has fixed its currency at 8.3 yuan to the US dollar since 1998 - a level that many around the world say is artificially low and creates unfair trade imbalances. The US trade gap with China swelled from US$14.7 billion in April to US$15.8 billion in May. Since China's economy is booming and its goods remain so cheap, the US government wants China to revalue the yuan upward by about 10%.

As it stands, the current yuan-dollar peg is leading to an incredible explosion in China. June's trade surplus galloped to US$9.6 billion, racing past estimates that called for US$8 billion. That's over five times bigger than the US$1.8 billion surplus posted in June 2004. The total surplus for the first half of 2005 was US$39.6 billion, versus a deficit of US$6.8 billion over the same period in 2004.

According to a forecast in International Business Daily, "China could post a record trade surplus of more than US$70 billion this year, versus US$32 billion in 2004." And, though a revaluation of the yuan is sure to happen - perhaps sooner rather than later - the fact is that the 3% to 6% expected adjustment is not going to be enough to hurt China very much.

Apparently, China is considering a "Singapore-style" revaluation, where the yuan is pegged to a basket of world currencies. But the names of those currencies would not be made public.

And in contrast to the US government's optimistic view that a currency revaluation is coming any day now, China echoed a familiar refrain: "There is no timetable."

Update from EU and the Stronger Dollar

According to press reports, Jacques Chirac is preparing to sell the French government's controlling stake in France's three main motorway operators with the intent of raising US$13.4 billion. That money is desperately needed to keep France's public debt from breaking through the Eurozone target of 3% of gross domestic product yet again.

It's not the only thing up for sale. France and Germany, strapped for cash and short on economic growth, are about to let go of considerable blocks of assets. Utilities. Real estate. Even the remaining shares in what used to be the government-owned postal services.

In and of itself, we're big fans of privatization. But in this case, it's tough not to swallow hard at the realization that the governments of the EU's core economies are selling off what could be revenue-generating assets because of existing (and in all probability dynamically expanding) financial obligations - and their apparent inability to revive their ailing and export-dependent economies.

One can't help but wonder: When will they start selling off their gold reserves?

***With oil still uncomfortably close to US$60 a barrel and the euro's purchase power down 11% against the dollar this year, the European Central Bank is seeing enough inflationary shadows in the mist to justify staying in bed. Chances for a cut in European interest rates are falling with every cent the euro sheds against the dollar - at least as far as the lending aspect is concerned.

Because the interest rates offered to depositors are about to be slashed by the private baking sector in Euroland. Several direct banking institutions are about to lower interest rates. ING Diba, the German subsidiary of the Dutch ING, just reduced rates from 2.50 % to 2.25%. (To compare: US subsidiary ING Direct just raise its rate to 3%.)

CC-Bank reduced its rate of 2.6% to 2.3%, GE Money Bank went from 2.75% to 2.50%, while DHB Bank already reduced rates from 2.75% to 2.5% on July 1.

Of course, as the chances for an increasing macro-cyclical dollar valuation are rising, dollar-denominated deposits yielding even 2.5% to 3% (with at least a short-term chance of rising rates) are becoming more attractive to yield-hungry investors.

I wouldn't be surprised to see capital inflows into US equities and financial institutions to pick up considerably over the next three months.

Remote Viewing for Investment Insight?

Predictions for America

Intuitive Sean David Morton returned to the show, in what he said was his 50th appearance on Coast to Coast, now dating back 14 years. The four greatest natural dangers to the US between now and 2015 are the Yellowstone caldera, Mt. Rainier, the San Andreas Fault and the New Madrid Fault, he declared. We've already seen some precursor incidents to what could lead to some massively destructive events, he warned.

The United States, he noted, has recently moved into a new 30-year astrological period, that of "Pisces," which accentuates trends related to water, cleansing, tsunamis, intuition, empathy and mysteries. He does not see Pres. George W. Bush finishing his current term. Also, efforts have begun to move the US capital to Denver, which will be the one of the final battlegrounds in a war with China, he estimates to occur around 2018.

Here are some of the tips and financial information that Morton presented:
  • Gold will go up to 525 by January 2006. The Swiss Helvetica gold coin is a good buy.
  • After the EU Constitution is finally approved, the Euro may rise as high as $2.00, making it a smart investment now.
  • The U.S. will instigate a 2-tiered money system, where those with offshore accounts will be given "redbacks," and there will be a separate US-only currency.
  • The Bilderberg group has OK'd the rise of oil barrel prices to $150 by sometime next year.
  • Good stock picks for right now: Caterpillar Tractor, Texas Instruments, XM Satellite, Pixar, Walmart, NutraCea (NTRZ BB which doubled the next day) and Palatin Pharmaceuticals.(PTN also popped)
  • Reading Blogs Can make you RICH??

    OK, this is not a reco on this particular service, nor do i use it, but i suppose its worth investigating further. Please use your own diligence and refer to a professional when considering an investment.

    Although regarded by many as a passing fad...blogs have become an incredibly accurate (and 100% legal) source of 'inside information.'

    Look at how the BLOG TRAFFIC increases on the bottom chart. And notice how the STOCK PRICE bolts upward as the blog traffic increases.

    This is exactly what happens as the blogs catch hold of a story. The more blog activity, the more people rush to buy the stock. And when a stock has a small market cap, the price goes through the roof!

    Blogs have been around for about eight years. But until recently, they weren't very useful for investment purposes.


    Because there was simply too much information to monitor.

    But in the last couple years, a new technology has made it possible to follow everything that is happening in the blogging world.

    The new technology is called RSS.

    RSS (Really Simple Syndication) is a lightweight XML format designed for sharing headlines and other Web content. Think of it as a distributable 'What's New' for your site.

    'RSS feeds' allows news sites and blogs to let people know that new information is available on their site.



    The US worries about the Southern border and the minute-man expose infiltration. What they should be worrying about is CHINA.

    "It's pervasive," Mr. Szady said. "It's a massive presence, 150,000 students, 300,000 delegations in the New York area. That's not counting the rest of the United States, probably 700,000 visitors a year. They're very good at exchanges and business deals, and they're persistent."

    Chinese intelligence and business spies will go after a certain technology, and they eventually get what they want, even after being thwarted, he said.
    Paul D. Moore, a former FBI intelligence specialist on China, said the Chinese use a variety of methods to get small pieces of information through numerous collectors, mostly from open, public sources.
    The three main Chinese government units that run intelligence operations are the Ministry of State Security, the military intelligence department of the People's Liberation Army and a small group known as the Liaison Office of the General Political Department of the Chinese army, said Mr. Moore, now with the private Centre for Counterintelligence Studies.

    "The model that China has for its intelligence, in general, is to collect a small amount of information from a large amount of people," Mr. Moore said during a conference of security specialists held by the National Security Institute, a Massachusetts-based consulting firm.