by Addison Wiggin & Ian Mathias
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Where’s the best place in the world to do business? And the worst? Answers below…
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The “extremely favorable terms” provided by yesterday’s market action
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Gold at 27-year highs, Oil spikes to record $83…advice on the latest commodity boom
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Another euro record…but is the euro truly strong, or the dollar just weak?
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Pepsi “out-Chineses” Coke…details of the soda maker’s shameless ploy
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Plus…Chris Mayer on the latest Indian infrastructure boom: “U.S. is a road map of what India could be”
Singapore is the “easiest” place in the world to conduct business,
says a Doing Business 2008 report released this week. The report considered items such as employing workers, getting credit, licensing and taxes when compiling the list.
“Countries that have improved their performance in the rankings in past years have seen a parallel increase in equities performance,” says our international man of investing Christopher Hancock. “Egypt improved more than any other country — rising to 126 from 165 last year. China overtook Russia among the fastest middle-income countries, rising 10 places, to 83.”
Our buddy Hugo Chavez is getting high marks this year, too. Venezuela fell from 164 to 172, the survey’s worst performing country. The World Bank reports that Venezuela is on track to pass the Democratic Republic of the Congo as the worst place in the world to conduct business next year. Bravo, mi hermano.
The U.S. ranked third in the survey, ahead of Hong Kong, even. But…we’ve got a different set of problems spewing out of the housing and mortgage markets.
Sales of new homes, we learned yesterday, grinded to their slowest pace in seven years last month.
The Census Bureau says new home sales dropped 8.3% in August, to an annual rate of 795,000. At this pace, it will take over eight months to clear the current inventory glut.
The median sale price for the entire country fell 7.5% — the largest drop in percentage terms since 1970. McMansions around the country — those cardboard boxes priced over $500,000 — fared the worst last month. Only 6,000 of such homes were sold in August countrywide. That’s half the amount sold in August 2006.
Second-quarter GDP was revised down to 3.8%, from 4%,
yesterday. The Commerce Department is still trying to dig in and determine how deep the subprime rot goes.
Another sign of the times…The Department of Transportation approved six new nonstop flights from the U.S. to China earlier this week.
Each of the U.S. so-called “legacy carriers” was granted the right to fly one additional nonstop to the Far East. Atlanta, San Fran, Chicago, Newark, Detroit and Philadelphia will all begin offering these flights as soon as possible…most in time for the Beijing Olympics.
“Yesterday, the U.S. stock market provided some extremely favorable terms to any investor who wished to lighten up on equities,”
writes Eric Fry in this morning’s Rude Awakening. “The Dow Jones industrial average closed at 13,913, 1% below its all-time high.
“The current conditions in the credit markets bear a much closer resemblance to crisis than to normalcy. But the stock market’s resurgence casts a rose-colored hue upon all things financial. How bad could things be if the stock market is close to a record high?”
Very bad, if you ask Eric and his contributors in today’s Rude. Click here to read more.
The dollar lost ground on 15 of the 16 actively traded currencies last night.
The greenback furthered its record low against the euro, trading less than a tenth of a cent below $1.42. The pound is well into the $2.02 range, and the yen is back up to 114.
Gold pushed ahead with conviction overnight.
Bypassing $739 for immediate delivery, gold set another new 27-year high. While prices are still well short of the record $850, never has gold showed more longevity at high prices than now. It has remained above the $700 mark for over three weeks. As we write this morning, gold is up another $12, to $744 for immediate delivery.
Oil spiked overnight, too, to a record high of $83.
Provided the black goo doesn’t crash in price today, September will mark the biggest month-over-month rise in oil prices in three years.
“Crude oil rallied to fresh contract highs today on concerns of disruption from the strife in Nigeria, as well as support derived from a weak dollar,” report our clandestine trading advisers of the Secret Order of Jurojin. “Growing world demand is also a major factor in the high price of crude. With the rapid ascent of this market, it is only prudent to take some money off the table.”
“With the U.S. dollar continuing to be drilled into the abyss, commodity markets are gaining momentum,”
continues this morning’s Jurojin dispatch. “As the dollar trends lower, U.S. commodity products are on a fire sale to the rest of the world. Couple this with tight supplies and rising worldwide demand and you’ve got a sector that’s ready to explode. Grain markets are responding in a big way, hitting new highs. Also, energies and metals, which are dollar-denominated assets, have enjoyed the benefits of the dollar’s demise
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“The Senate has given final approval to an $850 billion increase in the public debt,”
reports DR blog
-master Dave Gonigam. This hike marks the fifth since President Bush took office and will allow for a national debt of $9.8 trillion.
“Please allow a moment for that to sink in,” urges Dave. “The fifth such adjustment under President Bush… The man has been in office less than seven years. And in that time, the national debt has exploded by 65%. By what earthly standard is this man considered a ‘conservative?’”
The Commander in Chief
“The clowns in Washington,”
our friend Jim Rogers agrees, “have signaled to the world they don’t care about the U.S. dollar.”
In an interview with Bloomberg, Rogers predicted another 15-year run in commodity prices. Rogers’ Quantum fund returned 4,200% between 1971-1980, and Rogers “retired” after working for about 10 years. He expects the environment we’re in today to return similar gains in commodities as back then.
“The dollar is the worst currency in the world,” our friend Rick Rule said in his opening remarks at Vancouver in July, “except for all the other ones.”
As we pointed out on Wednesday, the euro has been rising steadily against the dollar for three weeks. But truthfully, we think that’s on dollar weakness, not euro strength.
This morning, we see a small chink in the euro’s armor: “a single eurozone monetary policy intrinsically unstable,” report our friends at Stratfor.com. German Chancellor Angela Merkel and French President Nicolas Sarkozy continue to butt heads over policy decisions to an extent that our international watchdogs seem a bit concerned.
“Sarkozy’s current attempts at liberalizing economic reforms in France are running headfirst into an EU monetary policy that mostly reflects German interests,” the global strategists explain. “Sarkozy is calling for the ECB to focus more on the economic growth goals of eurozone nations…Primarily, he wants the ECB to lower interest rates, which would weaken the euro and increase inflation but increase French exports by making them cheaper on the world market.”
Germany, representing a third of the European economy, is naturally inclined to do the opposite. “Germany — a nation with few natural resources and a large population — perpetually will have to be an innovative and financially disciplined economy…Germany will want less government interference in the economy, lower inflation, a stronger currency and higher interest rates, since it is more dependent on import provisions because it has a larger population and a less productive agriculture sector than France.”
Thus…tension between the two euro powerhouses. Merkel said this week that Germany will fight any attempts to “challenge the central bank’s independence.” We’re not sure what that even means…but we’re all for a good scuffle. Stay tuned…
In China, Pepsi has abandoned its trademark blue can in favor of commie-red.
Pepsi claims to be giving a nod to the national color in honor of the upcoming Olympic games, but a growing mass of skeptics is calling this a brand identity shell game.
“It would also appear that Coke has been ‘out-Chinesed’ by its top Western competitor,” writes Keith Fitz-Gerald in today’s Money Morning, “since Pepsi has seen how a number of products were marketed with a ‘wrapper’ that mimicked a highly successful Western counterpart.”
“After all, we’re talking about the land of ‘Hondga’ Motorcycles, ‘Redberry’ communication devices and countless other brands that approximate their Western counterparts through imitation that’s not identical, but which is a little too close for comfort.”
We’ll let you be the judge…the new Pepsi can, next to Coke’s current China model:
Shameless…
“Red? Great idea,” said Kelly Brooks, earning bonus points as a spokesman for Coca-Cola. “Why didn’t we think of that?”
“India is in the early innings of a massive road-building campaign,”
Chris Mayer writes this morning, preparing for our Indian exploratory excursion
in two weeks. “In 2009, India will finish a big part of that plan. The so-called Golden Quadrilateral is a network of highways. It’s more than 3,600 miles long. It runs through 13 states. It connects India’s four largest cities. In short, its impact on India’s economy will be huge.”
India has more miles of road than any country on Earth — save the United States. There is still a lot more in the pipeline. So far, it’s only completed 4,000 miles of a planned 11,000. The New York Times recently opined: “The effort echoes the United States’ construction of its national highway system in the 1920s and 1950s.”
“Yes, it does,” says Chris. “The U.S. is a road map of what India could be. And surely, investors will have ways to profit.” We aim to be right on the front lines. We’ll keep you posted from India…and beyond.
“I fully and greatly appreciated your comments about the GM contract,”
wrote a reader, “and sent it to many of my friends so they could have a good ironic laugh also. The comments toward you are typical for all of the UAW workers that I know and read about. They are incapable of understanding that they are actually in the upper middle class, that they are uneducated and that they in no way deserve to make the level of pay that they do, let alone all of the benefits.
“As a college graduate, well on my way to a master’s degree, it drives me insane to see the ridiculous attitudes and spending habits of those who have not learned how to manage their money, because they make way too much of the same. A friend of mine who has three cars, a 2,100-square-foot house and more toys than the average 3-year-old constantly complains that he does not have enough money to make ends meet. Furthermore, he thought about becoming an engineer, if he could get through college, but decided against it due to the fact that he would have to take a huge pay cut (I actually think he could not hack the intellectual work as well as the pay cut — I should know, he has been my friend for 34 years).
“The UAW has created a class of people with too much wealth and no distinction and continues to feed this beast…. This country is losing ground because we cannot see that we need educated individuals to advance, and robots to do the grunt work. Grow up, United Auto Workers, and get a clue of your real worth, and if this makes you angry, go grab a Bud (or 12) and throw a round of curse words my way.”
“Stay away from GM stock ?”
exclaims another. “No way!
Every time it climbs into the mid $30s, I sell it short or buy puts or both. It always goes back down and gives me a little windfall.”
Regards,
Addison Wiggin,
The 5 Min. Forecast