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Market Week Wrap-up

– Leading global equity indices continued floating upwards this week while the inflation drumbeat just kept getting louder. In the US, the January y/y CPI figure hit +1.6%, its highest level since last spring, and some analysts were alarmed by higher food prices creeping into CPI data sooner than expected. China’s January CPI report was lower than expected at +4.9% y/y, but markets panned the figures as heavily massaged by basket revisions. In the UK, the BoE said CPI would likely continue growing at a 4-5% clip over the short term. The World Bank released a report indicating that food prices were up 15% since October 2010 and are now only 3% away from record highs hit in 2008. Commodities moves complicated the story somewhat. While silver has pushed out to 30-year highs, there were signs that inflated soft commodity prices were beginning to unwind, with cotton and grain prices both below recent highs. Crude and gold prices have been impacted by reports that Iran is sending warships through the Suez Canal and bloody protests in Bahrain (next door to Saudi Arabia), although WTI futures were well below recent highs seen in early February. The Obama Administration unveiled its $3.73T budget proposal for 2012, including an all-time high deficit of $1.65T, reflecting the tax-cut agreement reached with Republicans in December. For 2012, the administration sees the imbalance declining to $1.1T, giving the country a record four straight years of one trillion-plus deficits. Bond prices held steady after the details were released, and Congress sharpened its knives for a budget fight. The Feb Empire Manufacturing survey hit its highest level since last June, indicating that the US manufacturing expansion seen over the last several months is continuing. On Friday there was plenty of commentary out of the G20 conference, where leaders tried mightily to achieve some concrete steps in reforming the global monetary system. Fed Chairman Bernanke took a swipe at the Chinese in his policy address to the G20, warning that nations which keep currency values low create imbalances, while the PBoC’s Zhou continued to push for a higher profile for the IMF’s Special Drawing Rights (SDRs). For the week, the DJIA rose 1.0%, the Nasdaq gained 0.9% and the S&P500 was up 1.0%. – John Deere crushed earnings and revenue targets in its Q1 report and nearly doubled its guidance for FY11 equipment sales. The firm hiked its sales guidance for its key agriculture and construction units as well, and said its Q2 revenue would blow out consensus estimates. Later in the week Caterpillar released very favorable dealer metrics for the month of January, with North America machinery sales up a whopping 58% y/y in the month. – Iron ore miner Cliffs Natural Resources reported very strong Q4 profits on a big y/y gain in iron ore pricing. The company expects global steel production to continue to grow in 2011, although it warned that spot iron ore prices are unsustainably high. Reliance Steel also blew out earnings estimates, and said pricing would remain strong at least through the first quarter of 2011. – In tech, Dell’s profit was way ahead of the consensus in its Q4 report, thanks to a big improvement in margins. The company said it believes the corporate IT…

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The WSJ’s Most Controversial Article… Ever

Filed in BP, CBS, democrats, economy, euro, Gold, GOld juniors, Gold Market, o, Warren Buffett, yuan by on February 2, 2011 0 Comments
The WSJ’s Most Controversial Article… Ever

On January 9th, The Wall Street Journal ran an article that would become the most viewed, commented-on editorial in the publication’s history. The article was so controversial that the author — a Yale Law School professor — received several death threats. Thousands of enraged American readers went so far as to accuse her of advocating physical and emotional violence against children… Meet Amy Chua: a petite, 48-year-old Chinese American and the author of the WSJ firestorm piece, “Why Chinese Mothers are Superior”. Obviously, the headline caught my attention. My wife is Chinese and we have three children. But what really surprised me was the viciousness of the comments from readers. But as I perused through the comments of anger, hate, and even threats to Chua, I realized I as was actually reading comments of insecurity, fear, and envy. Think about it… Had this article been written by anybody other than a Chinese professor, it would’ve gone largely unnoticed. Bottom line: Americans fear the Chinese juggernaut. Here are just a few headlines from the past year that have caused panic among Americans and the West: Pentagon Surprised, Concerned as China Debuts High-Tech Weapons — Politics Daily Chinese ‘Carrier-Killer’ Missile Could Reshape Sea Combat — Fox News Chinese ‘carrier-killer’ missile raises concerns of Pacific power shift — Associated Press China Stealth Fighter? Photos Released Online Raise Speculations — Huffington Post China’s First Stealth Fighter Test Successful — CBS News China backs Spain to emerge from crisis: Beijing — Sydney Morning Herald Move Over Europe, China Is Pushing to Bailout the Greek Economy — Washington Post Wow: China to Bail Out Europe? — Daily Mail UK China’s Pres. Hu calls dollar’s preeminence ‘thing of the past’ — Wall Street Journal President Hu provoking the US by suggesting yuan replace dollar as reserve currency — AsiaNews.it And now Americans are fearful of the Chinese mother, as reported by Time Magazine: “Tiger Mom: Amy Chua Parenting Memoir Raises American Fears.” I hear it every day… “China is going to overtake the U.S. economy… We need to catch up before they flood our markets with electric cars, wind turbines, and …

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CNOOC’s CBM Endeavor – Analyst Blog

Filed in BP, ceo, o, silver, yuan by on December 30, 2010 0 Comments

China National Offshore Oil Corporation is heading toward an agreement to acquire 50% interest in China United Coal Bed Methane Company Limited for 1.2 billion yuan ($181.2 million).

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Sohu Begins Open Beta – Analyst Blog

Filed in BP, Gold Investing, Gold Prices, o, ubs, yuan by on December 8, 2010 0 Comments

Sohu announced that its subsidiary Changyou has begun open-beta testing of San Jie Qi Yuan, Changyou’s second 2D turn-based cartoon-style MMORPG game.

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Trade The News Weekly Market Update

– Volatile trading has been the rule during the Thanksgiving-shortened week. In weekend negotiations with the ECB and the IMF, Dublin dropped its initial reluctance to a bailout and agreed to accept funds. Having evidently learned a lesson from the painfully drawn-out Greek crisis earlier in the year, European partners are rushing to finalize details of a rescue package, which will apparently amount to €85-100B, and will include funding from the ECB, the IMF and the UK. Meanwhile, contagion from the sell-off in Irish bonds has already driven risk spreads in Portugal and Spain to record levels, as S&P exerted additional pressure by cutting Ireland’s sovereign rating two notches. On Tuesday North Korea shelled a South Korean island in one of the most dramatic attacks on the nation since the end of the Korean War. The attack sent US and European equity indices tumbling and completely sidelined the relatively strong second reading of US Q3 GDP. Key economic data in the US was also in play this week. After growing in September, existing and new home sales returned to declines in October; sky-high inventories helped push median new home prices to lows last seen in 2003, raising concerns about a double dip in housing prices. The October durables data was also cause for concern, as the nondefense capital goods figure (ex aircraft) was down 4.5%, missing nearly all estimates, though it was cushioned by an upward revision in the prior month. Hope was seen in the weekly initial jobless claims, which fell to their lowest level since July 2008, possibly portending sunnier results in the November payrolls report next week. For the week the DJIA fell 1%, the S&P500 dipped 0.9%, and the Nasdaq gained 0.7%. – It was a big week for private equity deals. An investment group struck a deal to buy software developer Novell for $6.10/share in cash, in a deal valued at $2.2B. The acquiring firm Attachmate, a provider of technology services, is owned by an investment group led by Francisco Partners, Golden Gate Capital and Thomas Bravo. Takeover chatter starting last week materialized in a private equity deal for Del Monte Foods, as a group led by KKR announced it would buy the foods company for $19.00/share. Clothier J. Crew confirmed it would be acquired by TPG and Leonard Green for $43.50/share. Blackstone lost its $602M bid to buy power producer Dynegy after failing to win shareholder support, likely forcing the company to find another buyer, sell assets or restructure. Blackstone met strong resistance from Dynegy’s two largest shareholders, Carl Icahn and hedge fund Seneca Capital. Elsewhere, German fertilizer giant K+S said it would acquire Canada’s Potash…

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Profit from Currency Wars

Profit from Currency Wars

Right now, the world is going through a massive economic re-balancing. The old idea that China will sell us stuff— while lending us the money to buy it — is unwinding. In fact Ben Bernanke has declared a currency war on China’s undervalued RMB. Good ol’ Ben says we can make the dollar cheaper than the Chinese yuan, and he aims to prove it. The Fed recently proclaimed its desire to create and buy $600 billion in U.S. Bonds. “The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August,” said Bernanke. Ben is taking this approach because it works right up until it doesn’t. It worked after the past five bubbles popped, and it looks to be working this time. When Ben floated the idea of a $600 billion cash infusion, stock prices rose and long-term interest rates fell in anticipation. I know some of you will point out that the RMB is pegged to the dollar, and therefore the dollar can’t fall… But it does cause an inflation problem in China, which is a de facto re-balance. According to Bloomberg , “Over the past five years the real-estate prices have tripled. And as property makes up a third of living costs on average, this alone means the real yuan value has doubled.” Chinese Commerce Minister Chen Deming said as much in an interview on October 26th: “Uncontrolled” issuance of dollars is “bringing China the shock of imported inflation.” Chinese poor There are some downsides to printing more dollars. For example, easy money just creates the next bubble, and currency destruction doesn’t create wealth. China has been holding down its currency for years. It now has the world’s second largest economy; but in terms of per capita income, it ranks at 102 — right behind Turkmenistan, Algeria, and El Salvador. Clearly, an artificially low currency isn’t a path to prosperity… But it does lead to a boom in all asset classes. There used to be an inverse ratio of commodities to equities. When one went up, the other went down. In the 1970s, when gold was flying, stocks were dead in the water. In the 1980s, the reverse occurred. In the mid-2000s, when Federal interest rates fell, stocks went up, gold went up, housing went up, oil, uranium, copper— everything went up… This was a direct result of easy money. Now, due to 0.25% Fed interest rates and $600 billion in QEII, almost every asset will continue to go up — with the exception of your salary and your returns on your bank account. And to top it off, the U.S. isn’t alone. The rest of the world from Europe to Brazil is increasing the global money supply. The question isn’t whether low quality growth can work, because it does. Easy money and debt have funded the past twenty-five years of U.S. growth. The question is, How do you keep up with it? The tunnel of doom When I was a kid riding in…

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Gold Standard Should be Considered Again Says World Bank President

In what can only be a nod toward the true weakness to the global economy, World Bank president Robert Zoellick said major economies should considered reinstating a form of the gold standard again. In an editorial in the Financial Times, Zoellick said countries should look at floating currencies, with gold used s a means of measuring the exchange rates. Zoellick said what he’s thinking is the

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Weekend: Panic at the Pentagon

Filed in commodities, earnings, euro, Gold Market, mongolia, yuan by on October 30, 2010 0 Comments

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. So much for the New World Order… While the United States has been happy to move its military chess pieces all about the globe, the rest of the world has decided not to play. And why would they? After all, Pax Americana has meant that great power conflict has been taken off the table… Advertisement They Just Struck Oil… Recently, a tiny Mongolian oil driller I’ve been watching hit pay dirt. Once the news hit the mainstream, the stock jumped 42% in what seemed like minutes… And this is just the beginning of what could be a HUGE run. I’m talking about the possibility of an easy 10-bagger here. So I urge you to take a look at the full details today before you miss out on even more incredible gains. In its wake, we are left with something that doesn’t quite bend to the power of brute force. Instead, it’s a whole new ball game— one in which economics is more important than megatons. A war by other means So while we don’t have to worry about Russians pouring through the Fulda Gap anymore, today’s battle lines are being drawn with currency, trade, and economic strength. In this arena, an upstart newcomer— otherwise known as China — has been playing the game to win, if not dominate. From keeping a mercantilist lid on the yuan to trashing its own environment, China has managed to build a pipeline attracting a good portion of the world’s wealth to its shores. Meanwhile, the U.S. is left to play a game of catch-…

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Asiatic Adventurism, Part III

Filed in currencies, deflation, euro, Gold, mongolia, obama, US Dollar, Yen, yuan by on October 12, 2010 0 Comments

For a quick overview of issues, consider that China has understood the art of war since Sun Tzu, back when the rest of us didn’t have fireworks or chopsticks. The Chinese do not like losing face. Shooting wars have been known to start over tariffs. China is already using gunboat diplomacy and playing a deep game. They know that a trade war is still a war while Congress was grandstanding to the voters — and Japan cowers. China has many counters to the latest puff ball protectionist gambit, an obvious one being a stiff little note from their Ambassador regretting that due to lost revenue from increased U.S. tariffs his country feels obliged to sell Treasuries according to the enclosed schedule until trading relations are stabilized at the current level…or even one more favorable to China. Start with $100 bn the first month, $200 bn the second month, and schedule $300 bn the next month, anticipating the U.S. would fold after the first sale, if not sooner. Robert Mugabe stymied DeBeers by selling diamonds at a discount, so why not discount T-bills if political and other economic advantages make that course feasible? If I were Chinese Premier Wen Jiabao, I would hold ostentatious talks with the Japanese (who are scared stiff of me) about selling U.S. paper jointly in order to protect my …

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You Heard it Here First: China’s Plan to Dethrone the Dollar Continues to Unfold

Filed in commodities, Gold Investing, Gold Prices, lead, silver, stimulus, ubs, yuan by on October 12, 2010 0 Comments

The U.S. dollar is on the way out as the world’s top reserve currency. And as Money Morning Chief Investment Strategist Keith Fitz-Gerald predicted more than a year and a half ago, the yuan could be set to replace it. The greenback has served as the world’s benchmark reserve currency since the mid-20th century, but soaring deficits and the U.S. Federal Reserve’s loose monetary policy have drained the dollar’s value. Meanwhile, emerging markets – many of which are vibrant manufacturing hubs, net creditors, and have rich caches of commodities – are more fiscally sound than the United States, which has a $1.3 trillion budget deficit. “If you look at the fundamentals of a lot of these emerging markets, they are considerably better than developed markets,” Kenneth Akintewe, a Singapore-based investment manager at Aberdeen Asset Management PLC told Bloomberg in an Oct. 11 interview . “Who wants to be holding U.S. dollars at this stage?” China, which leads the world with more than $2 trillion in currency reserves held mostly in U.S. Treasuries, is chief among the countries seeking respite from the dollar’s decline. Beijing has long bemoaned the depreciation of the dollar , stating outright that it should be replaced as the world’s main reserve currency.

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Debating the True Value of the Chinese Yuan

Filed in economy, Gold, Gold Prices, silver, yuan by on October 11, 2010 0 Comments

Well, that was a whole lot of nothing. Bigwigs from the International Monetary Fund met over the weekend in Washington to “tackle global imbalances,” as the BBC put it. Alas, the imbalances broke every tackle and sprinted to the end zone unencumbered. “In my view, it’s too early to make a decision regarding currency exchange Debating the True Value of the Chinese Yuan originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Finance Leaders Call for IMF Role in Averting Protectionist `Currency War’

Filed in currencies, Federal Reserve, gld, Gold, Gold Spot Market, lead, obama, Yen, yuan by on October 10, 2010 0 Comments

Flashback: New IMF Strategy Document Charts Launch Of “Bancor” Global Currency Sandrine Rastello and Iuri Dantas Bloomberg Oct 10, 2010 Global governments tasked the International Monetary Fund with calming the recent outbreak of tensions over currencies amid signs they are already triggering a protectionist backlash. Officials including U.S. Treasury Secretary Timothy F. Geithner and Egyptian Finance Minister Youssef Boutros-Ghali said the lender should outline how countries can expand their economies without damaging those of other nations. China is accused of keeping the yuan undervalued to boost exports, while low interest rates in the U.S. and other industrial nations are blamed for propelling capital flows into emerging markets. “The IMF has an important role to play to help ensure that progress toward rebalancing strengthens,” Geithner said in a speech at the IMF’s annual meeting yesterday in Washington. “It is ultimately the responsibility of countries to act, but the IMF must speak out effectively about challenges and marshal support for action.” Currency intervention has returned to the fore as countries from China to Brazil and Japan try to restrain their exchange rates to secure a trading edge. That has roiled currency markets as has the prospect of easier monetary policy from the Federal Reserve. The dollar fell last week to its lowest in 15 years against the yen. Full article here Having A Supply Of Healthy Foods That Last Just Makes Sense (AD)

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