PetroChina Doubles, Citi Spills the Beans, Gisele Ditches the Dollar, How to Beat the S&P, and More!

by Addison Wiggin & Ian Mathias

  • PetroChina overtakes Exxon Mobil as world’s biggest company… market cap doubles overnight!
  • Citigroup’s $11 billion confession… Dan Amoss on why this probably won’t be the last
  • Dollar at new all-time lows… why euro bulls should still proceed with caution
  • Gold punches through $800, but what about silver? Look for this breakout signal…
  • Chris Hancock on a surefire way to beat the S&P 500
  • Remember, remember the Fifth of November… Ron Paul’s nod to the Gunpowder Plot

PetroChina is now the world’s biggest company. The state-owned oil giant raised just short of $9 billion for its IPO in Shanghai. As Chinese markets closed this morning, shares of PetroChina nearly tripled in their first day of trading. Coupled with shares trading in Hong Kong and New York, Shanghai buying sprees vaulted the net worth of this company to… sit down for this…

Over $1 trillion.

That is DOUBLE the market cap of Exxon Mobil, the world’s second largest company. When trading closed on Friday, PetroChina was worth $456 billion, not too far behind Exxon’s $488 billion. But… throw in a few million foaming Chinese investors… poof! A trillion bucks.

How does it fare in the earnings category? Dare we ask? PetroChina isn’t even in the top 50 of global companies.

Citigroup laid an egg over the weekend. CEO Chuck Prince announced the country’s biggest bank would have to write down $8-11 billion in addition to the $5.9 billion reported in early October. Thus, Citi’s subprime tab more than doubles, to the tune of up to $17 billion… in the past month alone. Citi’s $6.5 billion write-down helped the bank shed some 57% in third-quarter profits… seems as though the fourth quarter is off to a bit of a rough start.

If Citi tops Merrill Lynch’s recent $8.4 billion write-down, it will set the new subprime record and get a nice set of steak knives. Along with Prince’s surprising disclosure came his own not-so-surprising resignation. Former Treasury Secretary Robert Rubin has been asked to leave his cushy job as the chairman of Citi’s executive committee to help repair the damage done by subprime exposure.

Good luck.

“Investment banks are probably a lot weaker than they are advertising,” Dan Amoss tells us.

“I think it’s downright miraculous that Merrill Lynch was able to slash its CDO and subprime exposure by $20 billion in one quarter — from $40.9 billion at the end of June to $20.9 billion at the end of September — when the market for these securities is frozen. Sure, the investment bank wrote off $8.4 billion worth of these securities, but this was only based on estimated or ‘mark to model’ values. I doubt they could find anyone willing to bid a penny for these toxic securities.

“Was anyone really on the other side of this trade? It turns out that Merrill is rumored to have used repurchase agreements to get these securities off its balance sheet. If so, they could come crashing back with a vengeance.”

Look for more financial sector bloodshed… even from those who have already “come clean.”

After Friday’s exceptionally “positive” jobs report, the dollar simply continued its decline. The addition of 166,000 jobs — 100% more than expected — had no effect on currency trade and the oppressive dollar bearishness across the world.

The dollar index hit another all-time low on Friday, 76.22. Since then, the index has “rallied” to 76.24. The index’s rise can be almost entirely attributed to the euro. After hitting an all time high of $1.452 last week, the euro was sold down over the weekend to $1.44.

“Things could get a little sticky for the euro in the short term,” advises our currency counselor Chuck Butler. “Normally, when a currency bumps a psychological number like 1.45 a few times and falls back, traders in that currency will grow tired of looking for it to eclipse the figure and move onto another currency.

“If that happens to the euro, I doubt that the ‘move to another currency’ lasts very long… With the European Central Bank meeting this week, the downside risk to the euro is strong.”

Gisele Bundchen wants euros. What she wants, she probably gets, we imagine.

The world’s richest supermodel insisted on euros for her latest Dolce & Gabbana deal

Gisele apparently “wants to remain the world’s richest model,” says Bloomberg this morning, “and is insisting that she be paid in almost any currency but the U.S. dollar.”

“Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means.”

Gold took another trip through the roof over the weekend, soaring as high as $806 before retreating just a few dollars this morning.

Yet “silver still remains below the $14.85 high it achieved last year,” observes James Turk. “Silver needs to break above $14.85 to confirm that both precious metals have resumed their major uptrend. Therefore, it is reasonable to ask will silver finally confirm?

Silver is sitting just below overhead resistance at the top of its current pennant.

“We know what questions to ask, but we’ll have to wait a few more days for the answer,” concludes James. We’ll watch that $14.85 mark for you… and won’t be too surprised when silver begins its new rally.

“How much money are you really making if your portfolio ‘beats’ the market?” Chris Hancock asked his Free Market Investor subscribers this morning.

“When the annualized returns (in local currency) of the world’s 23 most developed markets are stacked up against one another, beating the S&P looks about as impressive as the Pittsburgh Steelers beating the Pittsburgh Panthers.”

“So the next time your broker assures you he can beat the S&P, you may want to listen. It shouldn’t be that hard. The trick: Buy just about any other developed market index but the S&P.”

If you’d like Chris’ help in finding the world’s best investments, click here… the FMI portfolio is up 39% this year.

Since Sept. 11, the United States “has experienced a 17% decline in overseas travel,” claims a report from Discover America, a tourism advocacy campaign. The decline has cost the U.S. $94 billion in lost tourist spending, $16 billion in lost tax revenue and 200,000 jobs.

According to the AFP and 2006’s Pew Global Attitudes report, foreigners just don’t like us anymore: Last year, 39% of the French viewed the U.S. in a positive light, said the report. In 2000, 62% felt the same way. In the U.K., 56% of Britons had good vibes about the U.S. in 2006… down remarkably from 2000’s score of 83%.

“Looking to 2010, the Department of Commerce is projecting an increase in those numbers, but only of 1% over the course of 10 years,” notes Geoff Freeman, an exec with Discover America. “If I ran a business that had 1% growth in 10 years, I’d be fired.”

“Damn ye, First Amendment,” writes Whiskey & Gunpowder’s Greg Grillot. “The independent international journalist group Reporters Sans Frontieres recently released its rankings of countries by press freedom. Unfortunately, the U.S. slipped down nine places, to tie for 53rd with the esteemed company of Botswana, Tonga and Croatia. I wonder if it has to do with the all-important and spooky war on terror and the imprisonment without charges of journalists in jolly Gitmo and some dark site in Iraq.

“This slide is nothing new — America has steadily slipped from the 17th spot since 2002, the first year of ranking. The good news, though, is that Israel and El Salvador have finally pulled ahead of America in the rankings.”

At least you can find unimpinged press freedom here and at Whiskey & Gunpowder.

“Death of Detroit? Hey, think bigger,” a reader writes, responding to our coverage of massive auto industry layoffs
last week. “If those leaders posing as state legislators, county commissioners and city council members don’t fix Michigan’s structural budget problems (aka retirement legacy costs) at all levels, the lights may not go out, but they will dim considerably.

“The car companies at least are leading the way in order to survive. GM, in particular, has the best head start. Will the state follow? Don’t bet on it. Who’s willing to take on the unions and ask for givebacks?”

“I just recently attended the October Canton Fair in Guangzhou, China,” writes a reader with a firsthand account. “This is the world biannual shopping event where representatives of wholesalers, importers and chain stores from around the world come to see what ‘Made in China’ has to offer them to sell back home one year from now. Just walking the aisles for five days offers a glimpse of next year’s retail picture.

“While there, I heard that last year’s records declared over 40,000 attendees showed up, while this year less than 10,000 did so. Saw very few Americans there, but a noticeable number of Mandarin-speaking Russians and buyers from the Middle East. Past shows would have required you to push your way through the aisles sideways. This year, you could have used many of them for bowling alleys. And if what I saw is any indication, Christmas 2008’s main themes will be, hmm, let’s just say I hope you like black.”

The 5 Responds:
We can only surmise that the drop in attendance at this year’s fair is the result of scary media stories about poisonous children’s toys and tainted foodstuffs coming out of China. Such is the way with bubbles, too. A little bad press and the jig is up.


Addison Wiggin
The 5 Min. Forecast

P.S. Today is Guy Fawkes Day in England. The holiday commemorates the foiled Gunpowder Plot after which our own Whiskey & Gunpowder
newsletter is partially named. “On Nov. 5, 1605, Guy Fawkes and a bunch of angry Catholics tried to blow up Parliament,” writes Ian by way of an explanation for the uninitiated. “Had it gone off, it would have been the most devastating and dramatic assassination of all time… it would have basically nixed the entire British government of the day.”

The British celebrate the day by burning Guy Fawkes in effigy. In the U.S., some folks are trying a little different tack… they’re hoping to use the occasion to raise money for the Ron Paul presidential campaign.

P.S.S. By 12:01 a.m. this evening… rather, tomorrow morning… all the apps will be in. If you want to catch Jonathan Kolber’s revolutionary look into Transformational Technologies and how they’re going to shape the markets of tomorrow — at half price, mind you — you have less than 12 hours to respond. Don’t miss out.

The Last Mile Revolution has begun and it’s half off.

PetroChina becomes world’s top-valued company
Citigroup Names Rubin as Chairman and Plans More Write-Downs
‘Unwelcoming’ USA losing tourists
Canadian dollar ends above US$1.07 after jobs data


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