NDX 8 26 2010

U.S. Next Bear Stearns?

Trennert sees two possible explanations.

“First, you want the deficit to look as low as possible now, so you keep your interest expenses low,” Trennert said.

“The other reason is more frightening. Marginal buyers of debt, in particular the Chinese, have shown they don’t want to lend long-term. They want the leverage that comes with having Uncle Sam go back to them every week or two.”

That means the deficit could represent a national security issue, Trennert says. “I don’t want to be overly conspiratorial, but certainly you’re conceding some sovereignty when you fund yourself this way.”

Video Report 8 22 10

Gold is looking much better than Silver. I like silver a lot but technically I don't see it going higher... Looks like it is weakening and perhaps even on the verge of breaking major support. Would love that so that I can buy more!

China dumped record US Treasuries

China cut its holdings of Treasury notes and bonds by the most ever, raising speculation a plunge in U.S. yields that sent two-year rates to a record low has made government securities unattractive.

The Asian nation’s holdings of long-term Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government report showed yesterday. Total Chinese investment in U.S. debt declined 2.8 percent to $843.7 billion, the least in a year, following a 3.6 percent slide in May.

China, America’s largest creditor, is cutting back after scrapping its currency peg in June, giving it less reason to buy dollars and invest them in Treasuries. China is also turning more bullish on Europe and Japan, purchasing bonds of both nations. The shift comes as President Barack Obama increases U.S. debt to record levels, counting on overseas investors to buy, as he borrows to sustain the U.S. economic expansion.- Source

Foreigners Dump US Securities

Foreigners were net sellers of U.S. securities in June for the first time in five months, but increased their purchases of long-term instruments such as U.S. government debt, the Treasury Department said on Monday.

Overseas investors sold a net $6.7 billion of U.S. securities in June, including short-term instruments such as Treasury bills. They were net buyers to the tune of $17.1 billion in May, according to the latest Treasury calculations. - Source

On Mini Vacay!

Will be back next week... :)

U.S. Is Bankrupt

Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.

What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.

Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.- Bloomberg

Oil going higher?

I mentioned on the Video Report 2 weeks ago that crude was looking good. It has then since run up a few Dollars. Was reading this report and found it interesting

I received another scratchy, crackling cell phone call from my drilling buddy in the Texas natural gas fields today. You could almost choke from the dust on the line.

He told me that the BP Gulf disaster was turning the fundamental assumptions of the oil industry upside down, and that sharply higher oil prices were in the cards, probably $100/barrel by year end.

Major oil companies with deep pockets at risk were rushing to offload their existing offshore leases and partnerships in producing wells to avoid BP’s potential $30 billion hickey. - Source - Apologize for the inappropriate language.

Skype files for IPO

Skype, which expects to trade on Nasdaq, has drawn a large number of customers with free computer-to-computer services while a small percentage of its customers use Skype to make calls to traditional phones at discounted rates.

Atlantic Equities analyst Chris Watts said Skype's owners may see an IPO filing as a way to publicize the company in the hope that a strategic investor buys it outright.
Watts said that while Skype's growth has been impressive, investors eyeing publicly traded shares would be cautious about its prospects for revenue growth.

"That's the strongest point they have but it's also their problem," Watts said. "It's a very, very difficult business to value. The issue for most people is going to be: yes, they've got a very substantial subscriber base but a lot of their subscribers just aren't generating a lot of revenue." - Source

Freddie needs $1.8 bil from taxpayers

Mortgage finance giant Freddie Mac (FMCC.OB) on Monday said it would need another $1.8 billion in aid from taxpayers, bringing its total request since it was taken over by the government two years ago to more than $64 billion. - Source

Food Shortage = Higher Prices

The world faces an inflationary time bomb as shortages of food threaten to push prices to fresh all-time highs.

A variety of freakish weather conditions across the world has sent the price of staples including wheat, pork, rice, orange juice, coffee, cocoa and tea to fresh highs in recent weeks. Yesterday's decision by the Russian government to ban the export of wheat to protect home consumers saw grain prices jump 8 per cent on the day, on what was already a two-year high. Meanwhile, the burgeoning demand for foodstuffs and raw material growth in the resurgent economies of China and India has also driven oil, copper and other industrial commodities higher.- Source

Future Transportation in China

China has overtaken the United States as the world's biggest producer of greenhouse gases and biggest energy consumer.

But the country is also thinking in big and bold ways when it comes to how it will reduce pollution and a new plan to build a "straddling bus" is among the most space-age schemes yet.

In an effort to go green and relieve congestion without widening roads, the Shenzhen Huashi Future Parking Equipment company is developing a "3D Express Coach" ("three-dimensional fast bus").

The innovation will allow cars less than 2 meters high to travel underneath the upper level of the vehicle, which will be carrying passengers (PHOTOS).
According to China Hush, the 6-meter-wide 3D Express Coach will be powered by a combination of electricity and solar energy, and will be able to travel up to 60 kilometers per hour carrying some 1200 to 1400 passengers.

The first 115 miles of track is set for construction in Beijing's Mentougou district starting in late 2010. The Chairman of the Huashi Future Parking Equipment company boasts it will take only a year and 500 million yuan (around $73 million) to build the futuristic transportation system.  - Source

Successor to Warren Buffett

Twenty-one years ago, Li Lu was a student leader of the Tiananmen Square protests. Now a hedge-fund manager, he is in line to become a successor to Warren Buffett at Berkshire Hathaway Inc.

Mr. Li, 44 years old, has emerged as a leading candidate to run a chunk of Berkshire's $100 billion portfolio, stemming from a close friendship with Charlie Munger, Berkshire's 86-year-old vice chairman. In an interview, Mr. Munger revealed that Mr. Li was likely to become one of the top Berkshire investment officials. "In my mind, it's a foregone conclusion," Mr. Munger said.

The job of filling Mr. Buffett's shoes is among the most high-profile succession stories in modern corporate history. Mr. Buffett, who will turn 80 in a month, says he has no current plans to step down and will likely split his job after he leaves the company into separate CEO and investing functions. Mr. Li's emergence as a contender to oversee Berkshire investments is the first time a name has been identified to fill the investment part of Mr. Buffett's legendary role.

The development illustrates that Berkshire is moving toward putting in place—possibly sooner than investors anticipated—certain aspects of its succession plan. - Source

China Slowest in 17 Months

China’s manufacturing grew at the slowest pace in 17 months in July as the government clamped down on property speculation and investment in energy-intensive and polluting factories.

The Purchasing Managers’ Index fell to 51.2 from 52.1 in June, the Federation of Logistics and Purchasing said on its website yesterday. A reading above 50 shows an expansion. A separate China PMI is due to be released today by HSBC Holdings Plc and Markit Economics.

A deeper Chinese slowdown could weaken a global recovery already constrained by the debt burdens and unemployment of advanced economies. While growth is cooling, China’s full-year expansion may be as much as 9.5 percent, up from 9.1 percent in 2009, State Council researcher Zhang Liqun said yesterday. - Source

VR 7 30 2010

 

Things mentioned. Silver (SLV), Gold (GLD), INDU, NDX, US Dollar and Light Crude (WTIC).

Sorry for the crackling. I traced it to the mic. Will get a better one for next week!