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 The Shanghai index fell another 8.3% today, the second largest drop since Y2K. This marks a total of 15.3% losses since last Tuesday -- or about $340 billion. But the index is still up about 40% since the beginning of 2007. We expect there’s still more pain to come…
 Crude oil prices dipped below $65 on Monday, keeping oil’s price surprisingly steady in light of early “summer driving season.” But wait… if oil is still at $65, what’s wrong with this picture?
Only half of unleaded’s price is derived from the price of crude oil.
Add in “28% from the cost of refining, 14% in taxes and 8% in distribution and marketing,” says Don Briggs of the Louisiana Oil & Gas Association. Refineries and distribution continue to plague the gas industry… and are helping to keep prices high. Don’t look for a let-up before September.
 Over the weekend, Russian President Vladimir Putin canceled his country’s contract with BP. According to the Kremlin, BP has not been producing a “satisfactory amount” of gas. Fair enough.
But we’re suspicious. Russia has the largest natural gas reserves on Earth and is the world’s second largest oil exporter. Senor Chavez’s forays into nationalization in Venezuela may have Putin longing for the days of yore in his Mother Russia. Will he take the next step? It would be a bold one…
 “The Gulf states have passed China!” proclaimed an excited Chris Mayer in an e-mail to The 5. “Six Persian Gulf States now have almost $1.6 trillion in foreign assets, dwarfing even China’s mammoth $1.1 trillion of foreign reserves, according to a new report from the Institute of International Finance,” writes Chris, citing the Financial Times.
These Gulf states are all members of the so-called Gulf Cooperation Council (GCC). They are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
“There are massive piles of wealth growing in the GCC,” Chris observes. “Along with China and other countries, the GCC is increasingly setting aside more and more of these funds to invest abroad -- in stocks, real estate and private businesses. What they buy could have a huge impact on market prices -- and your investments.”
 We don’t know what they’ll buy, but we can guess where they won’t buy it. “If you were head of a multibillion-dollar sovereign wealth fund,” asks Christopher Hancock of the Free Market Investor, ”and you were given the task of securing a premium well above a benchmark government bond, which markets would instantly grab your attention?”
Consider the following chart before making your decision… it’s the performance of a few of the world’s most notable market indices since the end of 2006:
“One thing’s for sure,” Christopher declared, “Assets denominated in the U.S. dollar would probably be the last place I would sink the majority of my country’s hard-earned cash right now.”
 The Canadian dollar hit 94.77 cents on Friday, its highest price versus the U.S. dollar since 1977.
Loonie-buck “parity will be reached by the end of the year,” said Jeff Rubin, Canadian Imperial Bank of Commerce's chief economist. We’re still speechless over this turn of events.
 “With the sky falling due to the impending burst in the real estate bubble (that will horrifically collapse the economy),” writes a gloomy reader, “is there room for discussion about the value of renting versus owning real estate? Is there ever an economic justification for renting, even after factoring in all the tax ramifications of mortgage interest deductions, property tax deductions, building up equity, etc.?”
Renting can be a good move in a hot market if you don’t expect to stay in your house for a long time. In some markets, it has been so easy to get mortgages that people have ignored the rental markets altogether, driving rental prices way down. In Baltimore, for example, you have been able to rent row homes for several years way cheaper than a mortgage in that same home would cost you per month. There’s always room to discuss renting. Do what makes sense for your finances.
 Real estate’s reputation as a “flight to safety” investment may not be all that it’s cracked up to be, anyway.
“Everyone from your realtor,” our friend Jim Amrhein chimes in, “to most of the hacks in the mainstream press perennially peg real estate as among the best long-term investments you can make -- despite the current nationwide stall in the housing market. But are they talking out of their assets?”
Jim is the “freedom editor” at Whiskey & Gunpowder. Over the weekend, he took time away from preparations he’s making for an African safari to help set the record straight on housing.
“Twenty years worth of data from the S&P National Home Price Index,” writes Jim, “show that the U.S. average annual home appreciation from 1987-2006 amounted to only 5.6%. Even in hot markets like Vegas and D.C., the gains barely topped 7% per year. And that's BEFORE adjusting for inflation and typical annual expenses, which can easily cut these ‘returns’ in half...
“Conversely, the S&P 500 increased in value an unadjusted 575% over this same period -- just under 10% compounded annually. We aren’t suggesting you don’t buy a home… they are awfully fun… just don’t expect it to fund your retirement.”
 “Porter,” writes a reader, obviously confused. “So… you're offering Reserve memberships for about $5,000. What about what I (and others) have paid for, e.g., the True Wealth Alliance. Do paid-up subscribers get some kind of accommodation on the price? I think it's only fair.”
Who is Porter?
 “I thoroughly enjoy reading The 5,” writes another reader, “and agree with most of the points that you raise.
“Having said that, you folks have been so pessimistic for such a long time that anyone who followed your ‘advice’ would have missed out on some huge gains (assuming that they cashed out). How do you explain that? Nonetheless, I do enjoy reading The 5. Keep up the good work.”
We’ll let the record speak for itself:
“Dear Addison,” begins a Reserve Member, “I see from your recent e-mails that you will be opening up the Agora Financial Reserve to new Members. I became a Reserve Member in December, and I have been extremely happy with all of the information provided by the various services. Not only are they interesting, informative and sometimes downright witty... they also provide useful investing advice.
“Check out the table below, which illustrates my personal success so far in 2006 using my Agora Financial Reserve Membership.”
(We’ve included a link to Pete’s e-mail, because the chart he provides is rather extensive.)
Many happy returns,
Addison Wiggin,
The 5 Min. Forecast
P.S. One of the great new services we’re developing -- strike that, have been developing for the past two years -- is a newsletter that delves deep into the heart of darkness. The booming economies of the world are consuming enormous amounts of energy… and devouring the Earth’s resources.
Our energy guru, Harvard-trained geologist and soon-to-be-nonpracticing attorney Byron King, is in Alaska this week for a private tour of Prudhoe Bay. He’ll be reporting back from the scene there in the pages of The 5 Min. Forecast, the Rude Awakening and Outstanding Investments. You can learn more about his new service, Energy and Scarcity Investor, and how you can begin receiving it for free, by clicking here: Get Our Newest $995 Service Free of Charge.
If you’re already a Reserve Member, don’t worry -- we’re putting together Byron’s work as we write this. You’ll begin receiving it as soon as humanly possible. And yes, we’re as excited about it as you are.
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While working with Citigroup in Hong Kong,
