12 Provinces flood in China, the world or rather G-8 meet to discuss commodity and rising food prices in Osaka, and metals rebound

Decompressing all the data and news developments in this world can be difficult. Despite a focus on China and South America, it is difficult with the increasing interconnectivity of this world to ignore many international developments... which now influence, sometimes quite significantly... China and Latin America.

In general, this week ended with energy and oil prices heading downward and major stock markets around the world responded in kind with rallies of their own. Sadly this will all be short lived in my opinion. The scope of the global market is generally very unstable at the moment.

As the article, Gold, Silver Rebound on Investor Demand for Inflation Hedge from Bloomberg LP investors and money mangers around the world don't think this rally is sustainable, as more have moved back into gold and silver markets to protect themselves from further inflation, the low dollar and rising fuel and energy costs--just as the majority of the western/industrialized world enters summer and turns on their air conditioning.

The lower fuel/energy prices we saw at the end of the week, the thereafter rally in airline stocks and other fuel intensive industries in the stock markets is nice, but in my opinion a general sign of investor speculation and ignorance, whom are desperate to make a quick buck $$$ in the wake of declining asset classes. Second thanks to comments by Saudi Arabian Oil Minister, Ali al-Naimi who stated "record prices are unjustified," (see full story - Crude Oil Falls as Naimi Says Record Prices are 'Unjustified' on bloomberg.com) Fuel prices will continue to inch up, my prediction is by September my rough estimate is it will peak at around 155-160 a barrel despite the efforts of international producers. Supply simply will not be able to keep up with demand, and despite rising prices, people will keep demanding. I know I'll be filling my car up in about a day or two, and putting the AC on while I drive.

Moving onto food, things are looking bad. Also summed up quite well in Bloomberg.com's Corn Rises to Record as U.S. Floods Curb Output; Soybeans Gain. The threat of rising oil, food and commodity prices in general has been given attention by leaders of the G-8 countries as they meet in Osaka to discuss the potential ramifications of inflation in food staples consumed by the majority of the world, and also possible ways to address the shortage and deliver relief to poor countries.

"The world economy continues to face uncertainty and downside risks persist," the officials of the G-8 said in a statement they released after the meeting in Osaka. It is clear, we're not through the worst of this global downturn. Other statements from the meeting of the global elite so to speak include:

"The G-8 is turning up the volume in terms of its inflation concern," said Claudio Piron, a currency strategist from JP Morgan Chase". "

"Elevated commodity prices, especially of oil and food, pose a serious challenge."

It's nice to know the leaders of the world are at least talking, but it seemed more talk and arguing was done than actual planning of actions to be taken. Oil output, weak dollar, inflation, etc where debated... sadly, while people go hungry around the world. So I'll use this opportunity to mention to all the readers out there, who like to exhaust their "downtime" on the internet, PLEASE do so by playing the vocab game at FreeRice.com and your efforts and vocabulary improvements can also go towards feeding people (see previous post on FreeRice.com if you want my take on it).

While all this looms in the background, China, which many back in 2006 already was on the brink of emerging as the new global center of economic activity has had a tough year not only because of the poor condition of the global economy, but because of touchy international relations and bad press from the "Free Tibet Protests" and people disrupting their Olympic torch relay... in addition, China's has had a tough year with good old mother nature-- the planets toughest and sometimes very cranky mother you can't exactly fight or argue with (like most mothers hehe).

Adding to the 8.0 earthquake, the aftershocks, the land slides, draining lakes created by the quakes, preventing dams from bursting and flooding 100,000 + people towns/cities, helping minimize the spread of disease among 100,000's of quake victims and displaced people around the country... Might I remind everyone that China also dealt with a devastating snow storm that practically froze southern China. This is something that rarely happens, it would be like witnessing the South East of the US (Florida, Alabama, Mississippi, etc) freeze. Southern China, which represents the center of economic activity was disrupted in the middle of the Chinese Lunar New Year, when people in China tend to move a lot of money around and invigorate the economy... this year that did not happen, if anything the country is still paying for it.

Now as you can see below in video footage and report provided by Reuters.com, China must now also deal with flooding across 12 provinces. These 12 provinces, include both Sichuan province which suffered the earthquake, and also many of the regions most affected by the snow storms earlier this year. Images have been provided by Xinhua, China's premier news agency.

See Video here -- (embed feature keeps putting wrong video on site)

http://news.xinhuanet.com/english/2008-06/14/content_8368178_1.htm


http://news.xinhuanet.com/english/2008-06/14/content_8368178_1.htm

Time will tell if China and the global economy as a whole will see some recovery this summer. The Olympics will as usual bring speculation, price rises in Beijing, and some short-term help to the economy. However, with the natural disasters this year, and the potential political issues that may arise during the games and the looming issue of Tibet-- China is going to have a rough rest of 2008, as will the rest of the world.

South America from a very general macro economic perspective seems poised to ride this downturn out. Commodity prices will continue to help their economies grow, even if they grow at a slower pace compared to the recent boom years (2003-2007), considering Latin America's history and second when the international investors and analysts around the world compare their current growth with other regions in 2008, they will see South America coming out on top.

However, problems are developing in Venezuela and Argentina in particular, where inflation as it does in other areas is picking up. None the less, unlike central bankers in the more fiscally more responsible countries as of recent; Chile, Peru, Brazil and Colombia; Argentina and Venezuela are not acting as they should.

Central bankers and finance ministers in Venezuela and Argentina lack independence are very biased towards supporting spending and keeping price controls in check with the government objectives. In Chile, Peru, Brazil and Colombia, even when influenced by the central government, bankers and finance ministers have exercised incredible restraint and shown great ability to at least manage inflation. For these countries this is a great accomplishment, for these countries that have had a history of being unable to combat inflation and experience's with long periods of hyper-inflation. For this region dangers remain in the form of the commodity bubble bursting from too much speculation--which I personally don't think will happen. The bubble may "burst," but it will be far from the dotcom crash of the late 90's.

Wealthy donors + Rice + Interactive Vocab Game -- beginning the day with a new tool to help the global poor cope with rising fuel costs

I decided to mix a bit of humanitarianism spirit and food aid along with the afternoon analysis today which today, concentrates on rising food prices.

Basic staples of nourishment (food), ranging from wheat, rice, corn, soy to chicken and beef are on the rise around the world. Commodity prices are in a bull market, few can argue that. Combining the factors of rising demand for everything from food, energy and base metals in emerging markets AND sky rocketing energy prices resulting from a variety of factors such as overall economic uncertainty, instability in the Middle East, and supply disruptions in the North Sea or Nigeria, have simply established an environment in which natural resources have proportionately speaking, become scarcer than ever before while demand and necessity for them remains strong.

Many will feel the affects of rising prices and inflation, in particular, the poor of the world. The global poor in large rely on basic staples like rice for a large portion of their diets. In terms of energy, most developing countries, unless they have substantial price controls in place, already pay higher prices per barrel of petrol than Americans in the US. A rise in the cost of gas for a taxi driver in Lima, Peru or in Cape Town, South Africa of 10-15% will be much far more painful for a Peruvian or South African than it is for American's filling their tanks this summer.

In an effort to help the poor of the developing world Poverty.com, has launched a sister website www.freerice.com where people can play a very addicting vocabulary game, where you simply choose the definition of a word displayed on the screen, if you choose correctly, the financial backers and advertisers of the site will donate rice to poor countries in exchange for your time. Defined on freerice.com as follows

FreeRice has two goals:

1. Provide English vocabulary to everyone for free.
2. Help end world hunger by providing rice to hungry people for free.

This is made possible by the sponsors who advertise on this site.

Whether you are CEO of a large corporation or a street child in a poor country, improving your vocabulary can improve your life. It is a great investment in yourself.

Perhaps even greater is the investment your donated rice makes in hungry human beings, enabling them to function and be productive. Somewhere in the world, a person is eating rice that you helped provide. Thank you.

The site in my opinion exploits the short attention span of the millions of people who spend way too many hours in front of a computer screen and are constantly searching for ways to distract themselves (myself included hehe).

Food prices have been on the rise in practically every corner of the world. Whether you’re a mother/father shopping for a family of 6 in the United States, and more importantly if you’re a mother/father providing for a family of 6 in the “global south,” which includes most the developing countries of the world.

Jimmy Rogers Commodity Index (RICI), was created in the 90’s to track the growth of commodity prices by Jim Rogers and has since become one of most well respected benchmarks / index for observing and tracking commodity price movements. It’s also a great index for investors who have used it as a means to identify investments in the commodity market. Growing (YTD) in 2008 by 25.86% while the S&P 500 Composite index is down -8.75% this year, the Nasdaq down -9.35%, the Dow Jones Comp down -8.47% (data gathered and accessed on June 13, 2008 from http://www.rogersrawmaterials.com/).

The Rogers Raw Materials Page describes the composition of the index in greater detail. Below is copy a excerpt of how the index is compiled, provided to give readers a general idea

“Rogers International Commodity Index® (RICI)® is based on monthly closing prices of a fixed-weight portfolio of the nearby futures and forwards contract month of international commodity markets. The selection and weighting of the portfolio is reviewed annually and weights assigned in the December preceding the start of a new year.”

This index is a great measure of rising costs. By rising costs, I mean the rising price of practically all goods in the global economy. The global economy is now beginning to show signs; or rather finally express signs that inflation is a potential threat to global growth and needs to be handled with care to ensure continued growth. Sadly, central bankers and countries around the world do not work together all too well yet, multi-lateral organizations lack the influence to organize a global effort—so countries around the world are raising interest rates in order to re-enforce their currencies strength, institutional investors are buying energy and gold to hedge their investments against the possibility of inflation, and even the US, EU, and UK have expressed signs there will be little possibility of further rate cuts, leaning instead towards increasing interest rates.

Although in economic theory this should do the trick, the problem is more complicated than many are capable of realizing. Yes… easy money for years has contributed to inflation, but more than anything it’s the fact capacity for production is no longer what it was when you consider the growth of countries such as China and India.

Food related commodities included on the Rogers index and their respective weights: Wheat (7%), corn (4.75%), Live Cattle (2%), Coffee (2%), Rice (0.5%), soybean oil (2%), lean hogs (1%), Sugar (2%), azuki beans (0.25%), Canola (0.67%) Orange Juice (0.66%), soybean meal (0.75%), and barley (0.27%). Personally I feel the only under-represented staple would be rice which deserves far more weight within the index considering how many billions of people in the world eat it on a daily basis. Together food related commodities comprise 21.72% of the index. Energy, metals and wood related commodities comprise the rest.

The world is in a correction phase in which consumers, producers and governments are going to have to adjust and adapt to a new global environment—where wasteful consumption is no longer an option. People must adjust to higher prices as other people in emerging markets demand the same things people in wealthier societies have enjoyed for quite some time.

Reflecting in brief upon my own dissertation on China’s growing interest in South America, observe China’s rising demand for soy and meat, only 2 of the commodities mentioned above and only 1 of the major developing markets in the world. Yes many argue China proportionately holds the most influence as the fastest growing and biggest emerging market, China is by no means the only large growing market.

New literature on Sino, US, and Latin America Relations -- China's expansion into the Western Hemisphere: Implications for Latin America and the US

China's expansion into the Western Hemisphere: Implications for Latin America and the United States Edited by Riordan Roett and Guadalupe Paz
click here to purchase



Just picked my own copy up, others interested in this field of growing interest and importance should share my satisfaction of finally having some new scholarly/ academia / writing on the topic.

The book addresses everything from the different opinions and perspectives Chinese, Latin American and US scholars have when it comes to accessing the impact of China's relationships with Latin American Countries and the United States.

Second and of most relevance for this website is part II and III, where the authors describe China's expanding influence and ties with South East Asia, Africa and Latin America in terms of China's security and commodity demand. Which countries stand to benefit? Which to suffer? Is there a happy middle? Last, can Latin America learn from China's engagement with African and South East Asian nations to lessen the possibility of exploitation?

From what I have read thus far, the book seems to be a good overall collection of research and writings that will by books end put the overall ramifications of increasing Chinese cooperation and connections with the emerging world, how the global economy and the influential leaders of the world are shifting into a new alignment, where a multi-polar world will emerge-- represented by the US, European Union and Asia.

Commodities in Focus -- Energy, food and metals grab world attention as prices continue to sour and supply problems emerge

Fitch analyst calls for new investment as oil prices soar - Regional

by Nathan Crooks

Business News Americas
http://www.bnamericas.com/news/privatization/Fitch_analyst_calls_for_new_investment_as_oil_prices_soar

Tuesday, June 10, 2008

High international oil prices should encourage oil companies that operate in Latin America to invest in new projects, Gianna Bern, senior director and oil and gas analyst for Fitch Ratings Latin America Corporate Finance, told BNamericas.

"In Latin America, governments have been the one of the biggest beneficiaries of high crude oil prices in terms of taxes and royalties," Bern said.

For example, Venezuela, Ecuador and Bolivia have increased their take of oil profits in recent years. Brazil and Colombia are mulling plans to increase the state's gains from oil production as well.

"Having said that, at US$135/b WTI, now is the time for the oil companies to invest and pursue those projects that they wouldn't ordinarily," she said in reference to West Texas Intermediate prices. "The economics become compelling."

The analyst, meanwhile, does not see an end to high oil prices in the short term.

"High crude oil prices are driven by a fundamental imbalance in the global market between crude oil supply and demand. Supplies are not able to keep up with rising demand, primarily from non-OECD countries," she said.

The Organization for Economic Cooperation and Development (OECD) includes 30 member countries, including Mexico.

"There could be upward pressure on crude prices until there is more of a market balance which could take months, if not longer, for additional supplies to hit the market," Bern continued.

_____________________________________________________________


Grow more food or starve: FAO
Commodity Online
http://www.commodityonline.com/news/topstory/Grow-more-food-or-starve-FAO-9365-3.html

NEW DELHI: Want to beat the food crisis? Go for more investments in the agriculture sector and grow more food.

That is what United Nations Food and Agriculture Organization (FAO) has to advise the countries across the world.

If you don’t listen to FAO, your population will starve. That is the clear message came from Rome after a summit on food crisis there.

“There is an urgent need to help developing countries and countries in transition to expand agriculture and food production, and to increase investment in agriculture, agribusiness and rural development from both public and private sources,” the FAO summit declaration said.

Donors and International Financial Institutions are urged to provide balance of payments support and budget support to food-importing, low-income countries. Other measures should be considered as necessary to improve the financial situation of the countries in need, including reviewing debt servicing as necessary.

The final declaration also called on governments to assure United Nations agencies the resources to expand and enhance their food assistance and support safety net programmes to address hunger and malnutrition, when appropriate, through the use of local or regional purchases.

Speaking about the growing social threat from rising food prices at the opening of the summit, FAO director general Jacques Diouf said: “What is important today is to realise that the time for talking is long past. Now is the time for action.”

The declaration also called for development partners to participate in and contribute to international and regional initiatives on soaring food prices and assist countries to put in place the revised policies and measures to help farmers, particularly small-scale producers, to increase production and integrate with local, regional and international markets.

Also recommended by the declaration are initiatives that moderate unusual fluctuations in food grain prices. “We call on relevant institutions to assist countries in developing their food stock capacities and consider other measures to strengthen food security risk management for affected countries,” FAO said.

_________________________________________________

Is Nymex admitting to speculation in crude oil? By Sreekumar Raghavan MUMBAI: The debate is still raging on what is causing the crude to rise. It is going from one extreme to the other. Some blame it on high speculation, others on demand-supply imbalances and forecasters predicting it would rise to $200. The actions of world’s largest commodity derivatives exchange, The New York Mercantile Exchange, Inc. during the past two days indicates the possibility that speculation is indeed beyond allowable limits. In the case of oman crude oil, the margins were raised from $8300 to $9500 on June 9. For members it was raised from 9,130 to 10,450 and for customers from 11,205 to 12,825. On June 10 it was further revised to 11,500, 12,650 and 15,525 for clearing members, members and customers respectively. It has announced margin changes for its crude oil and related futures contract even though no explanation has been provided for such actions by Nymex or market regulator Commodity Futures Trading Commission. Among the contracts attracting higher margins from now include: July to December 2008 crude oil, crude oil calendar swap, MiNYTM crude oil futures, Nymed MACI index futures, natural gas, oman crude among others. July-December Contracts Margins for the July to December 2008 crude oil, crude oil calendar swap, and crude oil financial futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from$10,463 for customers. Margins for all other months will increase to $8,500from $7,750 for clearing members, to $9,350 from $8,525 for members, and to$11,475 from $10,463 for customers. The margins for the July through December NYMEX miNYTM crude oil futures contracts will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from $5,231 for customers. Margins for all other months will increase to $4,250 from $3,875 for clearing members, to $4,675 from $4,263 for members, and to $5,738 from $5,231 for customers.The margins for the NYMEX MACI index futures contract will increase to $1,742 from $1,550 for clearing members, to $1,916 from $1,705 for members, and to$2,351 from $2,093 for customers. Natural Gas Margins for the first and second months of the natural gas, natural gas penultimate financial, and natural gas last day financial futures contracts will increase to $8,250 from $7,500 for clearing members, to $9,075 from $8,250 for members, and to $11,138 from $10,125 for customers. The margins for the third and fourth months will increase to 9,000 from $8,000 for clearing members, to $9,900 from $8,800 for members, and to $12,150 from $10,800 for customers. Margins for the fifth to ninth months will increase to $9,250 from $8,500 for clearing members, to $10,175 from $9,350 formembers, and to $12,488 from $11,475 for customers. The margins for the 10th to 21st months will increase to $6,000 from $5,500 for clearing members, to $6,600 from $6,050 for members, and to $8,100 from $7,425 for customers. Margins for the 22nd to 33rd months will increase to $4,750 from $4,500 for clearing members, to $5,225 from $4,950 for members, and to $6,413 from $6,075 for customers. The margins for the 34th to 45th months will increase to $4,500 from $4,250 for clearing members, to $4,950 from $4,675 for members, and to $6,075 from $5,738 for customers. Margins for all other months will increase to $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers. The margins for the first and second months of the NYMEX miNY natural gas and Henry Hub swap and penultimate swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members, and to$2,784 from $2,531 for customers. The margins for the third and fourth monthswill increase to $2,250 from $2,000 for clearing members, to $2,475 from$2,200 for members, and to $3,038 from $2,700 for customers. Margins for the fifth to ninth months will increase to $2,313 from $2,125 for clearing members, to $2,544 from $2,338 for members, and to $3,122 from $2,869 for customers. The margins for the 10th to 21st months will increase to $1,500 from $1,375 for clearing members, to $1,650 from $1,513 for members, and to $2,025 from $1,856 for customers. Margins for the 22nd to 33rd months will increase to $1,188 from $1,125 for clearing members, to $1,306 from $1,238 for members, and to $1,603 from $1,519 for customers. The margins for the 34th to 45th months will increase to $1,125 from $1,063 for clearing members, to $1,238 from $1,169 for members, and to $1,519 from $1,434 for customers. Margins for all other months will increase to $1,000 from $938 for clearing members, to $1,100 from $1,031 for members, and to $1,350 from $1,266 for customers. The margins for the Henry Hub swing swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members,and to $2,784 from $2,531 for customers.

Heating Oil
Margins for the first month of the heating oil, New York Harbor heating oil calendar swap, and heating oil financial futures contracts will increase to $10,000 from $9,000 for clearing members, to $11,000 from $9,900 for members, and to $13,500 from $12,150 for customers.

Margins for the second month will increase to $9,500 from $8,500 for clearing members, to $10,450 from $9,350 for members, and to $12,825 from $11,475 for customers. Margins for the third through ninth months will increase to $8,750 from $8,000 for clearing members, to $9,625 from $8,800 for members, and to $11,813 from $10,800 for customers. The margins for all other months will increase to $8,000 from $7,500 for clearing members, to $8,800 from $8,250 for members, and to $10,800 from $10,125 for customers.

.

Margins for the first month of NYMEX miNY heating oil futures contract will increase to $5,000 from $4,500 for clearing members, to $5,500 from $4,950 for members, and to $6,750 from $6,075 for customers.

The margins for the second month will increase to $4,750 from $4,250 for clearing members, to $5,225 from $4,675 for members, and to $6,413 from $5,738 for customers. Margins for the third through ninth months will increase to$4,375 from $4,000 for clearing members, to $4,813 from $4,400 for members,and to $5,906 from $5,400 for customers. Margins for all other months will increase $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers.

Margins for the first month of the RBOB gasoline, RBOB financial, and RBOB calendar swap futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from $10,463 for customers. The margins for the second to fourth months will increase to $8,250 from $7,250 clearing members, to $9,075 from $7,975 for members, and to $11,138 from $9,788 for customers. Margins for the fifth to11th months will increase to $7,500 from $6,500 for clearing members, to $8,250 from $7,150 for members, and to $10,125 from $8,775 customers.Margins for all other months will increase to $7,250 from $6,250 for clearing members, to $7,975 from $6,875 for members, and to $9,788 from $8,438 for customers.

Margins for the first month of the NYMEX miNY RBOB gasoline futures contract will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from 5,231 for customers. The margins for the second to fourth months will increase to $4,125 from $3,625 for clearing members, to $4,538 from $3,988 for members, and to $5,569 from $4,894 for customers. Margins for the fifth to 11th months will increase to $3,750 from $3,250 for clearing members, to $4,125 from $3,575 for members, and to $5,063 from $4,388 for customers. Margins for all other months will increase to$3,625 from $3,125 for clearing members, to $3,988 from $3,438 for members, and to $4,894 from $4,219 for customers.

If indeed, $25 of the present crude prices are on account of speculation, as suggested by some experts, will Nymex actions result in a fall in prices in near future? That itself can be cause for a speculation.

Meanwhile, a query related to increased margins from Commodity Online is awating reply from Nymex and CFTC

Macro-economic frenzy... expecations, natural disasters, inflation, union strikes? what more?

Couple headlines that have grabbed my attention in recent days.


1) Unions strikes

Unions representing truck drivers are striking across the globe from Spain to England to South Korea, in protest of rising fuel prices, eroded purchasing power of their salaries, and feeling generally marginalized in society.
http://www.allheadlinenews.com/articles/7011212516
http://english.chosun.com/w21data/html/news/200806/200806100014.html
http://www.bloomberg.com/apps/news?pid=20601102&sid=a_EyvKsmJHSM&refer=uk

Peru-- LATAM fastest growing economy in 2007, just recently became the #1 global producer of silver, stands as the #2 producer of copper next to its neighbor Chile, and is the #6 producer of gold in the world. Peru in other is booming thanks to demand for copper, fish meal, and other commodities from Asia, and, second from countries and investors seeking to use metals like gold as a hedge vs inflation. This morning Peru's unhappy workers, currently in protest, due to the government failing to pass a resolution which puts ceilings on the level of profit sharing allowed. 28,000 miners from Peru's biggest mining union have postponed their strike in various mines until June 30-- many silver, copper, zing and gold (Dow newswire, accessed via Resource Investor).
http://www.resourceinvestor.com/pebble.asp?relid=43447

2) Asia plummets
A string of disasters in what susposed to be a continued boom year for the Chinese economy have crippled and done a great deal of damage to the new emerging super power of the world. First with the worst snow storms in 60 years which hit Southern China earlier this year-- where most of the countries economic activity is conducted, then with the anti-china/pro-tibet protests which hit the world stage during their Olympic torch rally, and last--the recent horrendous earth quake that hit Sichuan province. China's exchanges where down almost 5% yesterday at night one point, however it did not lead to the crash of Feb/March 2007, when Chinese market corrections led the way in a short global correction in stock markets. It seems the financial systems of the world has priced in the downside of this years problems in China and general difficulties which will face Asia in the wake of rising food and energy costs.

3) All over the world countries are concerned about inflation. Worse, speculation on metals and other commodities isn't helping the $, still the most circulated currency on earth rally, which would ultimately be helpful to the global economy as a whole. Its scary to see fed officials from the US and even the EU coming out and making comments on inflation. What action will they take? What ramifications will it have?
http://www.foxbusiness.com/story/markets/bernankes-inflation-comments-push-futures-lower/
http://money.cnn.com/2008/06/10/markets/stockswatch/?postversion=2008061008
http://glickreport.blogs.foxbusiness.com/2008/06/10/intervene-already/

What to make of all of this? Well i'm going with the plan of finding a few equities I feel are not still over-valued and are in a good position to retain market position and keep earnings expectations due to their unique business and or market niche. Follow emerging markets and where they head-- as the olympics get underway I'm still confident Asia will have a rally, but if the general health of financial systems of the globe don't improve before then it will be a short lived rally. Follow the price of energy and forecasting the future of emerging markets and the general global macroeconomic health of the world economy will be easier to follow. Inflation in food stuffs is also key... Rising oil and energy prices may hurt everyone-- especially the poor, but when even food is sky rockets in price, the people of the emerging world will feel it extra hard, potentially leading to further slow downs and social instability in countries.

Marc Faber -- One of my Commodity Guru's -- the other being his partner in action Jimmy Rogers thinks Stocks, Real Estate and Oil (energy) overvalued

Reported as a Bloomberg Exclusive and accessible directly
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6vr3uRGjrvw


Stocks, Real Estate and Oil Are Overvalued, Marc Faber Says

By Carol Massar and Alexis Xydias

June 9 (Bloomberg) -- Stocks, property and commodities are overvalued as an economic slowdown and inflation will curb earnings growth and erode the value of assets, investor Marc Faber said.

Oil may have peaked after a 43 percent increase this year, said Faber, the Gloom, Boom & Doom report publisher, in a Bloomberg Television interview today. He said he favors the dollar against the euro, as well as gold.

``I don't see any compelling value in equities, real estate or commodities,'' Faber said from Zurich. ``Contrary to the last 25 years, we are in a period of de-leveraging. Corporate profits in particular are still far too high for 2009 and have to be adjusted downwards, and valuations become less compelling.''

Stock indexes in the U.S. and Europe have tumbled this year as banks piled up $390 billion in losses from credit investments, house prices fell, and investors braced for the possibility of a U.S. economic recession. The Standard & Poor's 500 Index in the U.S. is down 7.3 percent in 2008, while the Dow Jones Stoxx 600 Index in Europe has dropped 15 percent.

Crude oil futures in New York rose $10.75, or 8.4 percent, to an all-time high of $138.54 a barrel on June 6. That was the biggest-ever gain in dollar terms and the largest on a percentage basis since June 1996.

The U.S. Federal Reserve is paving the way for inflation to pick up by slashing interest rates since September, while undermining any strength in the dollar, Faber said.

The Fed's policy ``inevitably is inflationary,'' the investor said. ``Their economic knowledge is extremely limited. They confuse the issues.''

For related news:

To contact the reporters on this story: Carol Massar in New York at cmassar@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

Shanghai Stock Exchange initiates future trading of gold-- In a country where many treat the stock market like a casino is this good or bad?

Response by Bennett A. Reiss from
http://www.resourceinvestor.com/pebble.asp?relid=43400 - written by China Interfax


The Shanghai Stock exchange may still lag behind the major exchanges of Asia; Tokyo, Hong Kong, Singapore, etc-- is quickly growing no less. Despite growing market capitalization and incredible overall market performance, up until this year, the exchange still trades many equities which lack transparency in their business operations, are inter-twined with the Chinese government or provincial governments trying to raise money, and has millions of active participants who truely lack the understanding of financial systems and markets to be investing in what are in reality speculative equities.

Gold--a precious metal which is very prone to speculations, known as a means for countries and individuals to hedge against inflationary pressures which are hurting people all over the world is now going to be traded in a futures market in Shanghai.

Not much has truly been clarified on the regulations which will be in place, but, futures markets... especially in commodities have become quite volatile and to introduce such a feature to the Shanghai exchange right now might help better indicate Chinese demand for gold, but with gold trading everywhere in the world from the London Metals Exchange to free market in Saudi Arabia, this could potentially lead to future volatility.

Don't get me wrong... Shanghai needs a futures exchange, of China in general should create one which could allow it to compete with other exchanges in the world, many of which have futures markets or are connected to another exchange which controls the futures markets. I ask one question. Does the average investor watching his stocks move up and down in China even know what buying a futures contract means???

Chinese I meet here in the United States who have MBA's from US schools know and understand modern financial markets as well as anyone, however many have not lived in China for 2-4 years now (because of their studies in the US), they know about futures but sadly the average investor walking the streets of Shanghai I don't feel does. China needs more time for their greater population to at least become slightly more educated in modern financial institutions before it ventures too far into futures markets. It could be very dangerous if millions of people poor money into gold futures and distort the true price of the commodity.

Time will simply tell... and whether China can wade the woes of post-Olympic syndrome, re-cover from economic problems due to freezing temperatures and snow storms earlier in the year to the recent earth quake in Sichuan Province, and lastly repair their international image--slightly tarnished from the Pro-Tibet protests will all be key factors as well.

Chile asserts its position as Global Copper Monitor -- Estimates global demand for copper to increase 5.2% in 2008

Chile forecasts copper 450.000 tons surplus in 2009

The Chilean Copper Commission (COCHILCO) predicted this week a 450,000 ton surplus in the global copper production for the year 2009. Global supplies are expected to increase by 7.9% between now and then due to increased production.

Growing demand from China, which should increase by 370,000 tons over the next year, as well as demand from European and other Asian countries, should raise global demand by 5.2%. “China has always been the main motor of global refined copper demand” said the COCHILCO quarterly report. Global mining production is expected to rise by 8.2% to 17.8 million tons in 2009. Meanwhile, 2008 production growth will only reach 3.8%. Chile’s copper production is expected to grow by 2.6% for 2008. Chilean copper mines Gaby, Spence, Escondida Oxidos and Collahuasi predict to raise their production to 5.6 million tons alone. COCHILCO said global copper production will record a slight deficit of 46,000 tons for 2008 because of high copper prices. Still, the expected 2009 surplus should make copper price drop. The Santiago Times