This is the first major instance of what will eventually and inevitably become a theme of U.S. and global financial malaise for years to come. Wholesale liquidation of key U.S. paper assets by foreign central banks will appear piecemeal at first perhaps, but as more countries follow suit, others will jump on the bandwagon very quickly in my opinion. No one will want to be the last one standing holding our debt. This is a major development, and should be considered in conjunction with the very real possibility that Russia ... with its large holdings of dollar assets, may out of financial desperation seek to form a coalition of the willing to move in lockstep away from the dollar. [more]
Want to try something interesting? Read this article by Evans-Pritchard, and substitute the U.S. every time he mentions Russia... and substitute the horrific numbers with ones many times larger. If you really analyze with an open mind why the S&P saw fit to downgrade Russia's economy while ignoring the fact that their every concern applies in the U.S. as well... you may start to apporeciate the gravity of the situation for the U.S. economy. S&P has already demonstrated its complete worthlessness in failing to ascertain the risks of more than $1 quadrillion in derivative instruments around the world, so we have no reason to trust either their competency nor their impartiality going forward. The ratings agencies were key players in the present crisis, and the AAA rating of U.S. bonds given recent outlays and our deepening deficit is a joke. [more]
When I need a pick-me-up, I make my own coffee. :) This morning, though, I felt an odd sense of comfort when I saw the 2-year chart for Starbux. My portfolio may be down in the dumps, and the market may feel as though all reason and rationailty has run for the exits behind the sprinting hedge fund managers, but the market at least has it right with respect to Starbucks. The days of people being able to justify obscenely expensive coffee purchases several times per day to meet their caffeine quota are quite simply gone. People will have to adapt in ways they never thought possible... and in this case it's clear they already are ... and have been. [more]
Bernanke himself has said that Milton Friedman and Ana Schwartz's book on the Great Depression is the definitive account of how that crisis turned into a depression. I don't know about you, but that fact that Ms. Schwartz disapproves of these socialist measures makes the folly of their actions all the more obvious. [more]
Please enjoy my latest look at Yamana Gold, including a comparitive quantitative analysis using a very helpful valuation metric for comparing miners. [more]
This is an excellent article for anyone hoping to understand what sorts of global financial structures might arise from the present crisis. [more]
From the Treasury website: [more]
As recently noted in the case of the steel industry, the market for aluminum is not looking as though it will be near the front of the pack as the commodity sector eventually mounts its inevitable recovery. In fact, the near-term fundamentals for aluminum have carved an abrupt about-face from bullish to very bearish in just a few months' time. Keep in mind, however, the extend to which this reversal of furtune has already been priced into the stocks, and you may yet perceive some value / limited downside risk in the sector. Still... I would recommend some serious caution in aluminum over the coming months, while keeping a close eye on these bellwhether industries whether you own them or not. [more]
Echoes of 2004 and 2000??? :) [more]
Nucor crushed earnings for the 3rd quarter, with a 93% increase over Q307... but that's not what caught my eye... or ear rather. :) [more]
Could be a dramatic week, folks... hold onto your Foolish jester caps. [more]
Did you Fools see those earnings from Peabody?? Earnings up over 1,000%.. are you kidding me? EBITDA margin of 32%! Reports spot prices remain near thehighs and in some cases double the 2007 prices! Revised guidance upward with a strong long-tern outlook for the industry. Coal stocks are going to go to the moon if more miners come out with numbers like this. [more]
It's amazing what a few weeks can do. Before the crisis spiraled out of control into the trillions, you never could have seen a commentary like this one in the mainstream media. The following article is from the Financial Post: [more]
I find it interesting that the September graphic includes only refined copper stock... no finished products nor other categories... suggesting that this was a very conscious effort to re-stock national supply to some degree.
Please see full size image below... sorry! :)
New evidence is starting to emerge that China is stalling for the near-term, but I see decoupling as ultimately inevitable, and continue to believe that China and other economies that were in a position of strength before the crisis unfolded will lead the way out of the crisis. When paper fails, hard assets are the place to be. I'm not saying steel and aluminum are necessarily the best places to be within the hard assets space, but as belwhethers they are crucial barometers of economic strength or weakness. I see near-term declines in prices for iron ore and coking coal when they are re-negotiated next year, and some continued weakness in copper prices, steel, and aluminum.... which is why I advocate a focus on precious metals for the time being. One can always shift pm gains back to base metals and related finished products once the China growth engine starts rumbling again. [more]
I could hardly believe my own eyes as I sifted through the sources I researched for this article. I knew the total outlays from the Federal Reserve and the Treasury combined had to be approaching the $2 trillion mark, but that turns out to have been hugely conservative! Incredibly, our government and its private partner (the Fed) have tossed nearly twice that amount at this crisis, and still our credit markets are locked up like a Gitmo abductee. [more]
With the announcement of its latest facility to pump liquidity into the markets, the Fed this time did not specify the size of the facility nor any limits thereon. Therefore, for Fools like me trying to keep a rolling tab on the total outlays for this crisis to date, we can only estimate using the reported size of the daily market for this category of debt: $100 billion. [more]
The ratio today is 78:1.
Compare charts of spot prices with charts of coal miners. There is a disconnect based upon expectations for a correction in coal that have not materialized. Given that, and the fact that the miners are paid according to annual supply contracts that were priced in April at all-time highs... I see coal stocks as an absolute steal here.
Pretty Scary rhetoric floating around these days... [more]
Given the $34 decline in the price of gold today as continued troubles in Euroland propelled the USDX above the psychologically significant 80-mark, I could hardly have chosen a more dramatic day to publish the attached article on gold. [more]
This deals a significant blow to fairness and transparency in our financial system at the time when we need it more than any other time in our history! [more]
I read through the 110-page House version of the bill the other night, and while it was a whole lot more complicated than the three-page proposal sent to them by the Paulson team, at least all the provisions were related to the financial crisis. Believe it or not, Fools, the present Senate version, at >450 pages, includes health care provisions, tax provisions for the energy industry, and tax earmarks for reasearch into uses for Wool and wooden arrows intended for use by children. You can't MAKE THIS STUFF UP!! Let them know with your vote in November that you don't much appreciate the sticky fingers this bill had as it passed from chamber to chamber and elected leader to elected leader. Call your representatives if you haven't already to let them know you oppose this porked up bailout bill.. or any bailout bill for that matter. [more]