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 The Shanghai index began trading this morning down 7.2%. Given its trend of late, it looked bad. But by the end of the session, the index managed to post a 2.6% gain. Tragedy narrowly averted.
“I recall venturing into a similar type of ‘investing’ at last year’s Agora Financial Commodity and Options Trading Seminar,” our trusty confidant “Extreme” Ian Mathias commented, on hearing the news this morning. “It involved the Bellagio craps table and a few too many gin and tonics.”
 Helicopter Ben is at it again. “On average, over coming quarters,” the Fed chief said this morning, throwing caution to the wind, “we expect the economy to advance at a moderate pace, close to or slightly below the economy's trend rate of expansion.” (Yawn.) Bernanke predicts a relative reversal in the factors that slowed the economy to less than 1% growth annualized in the first quarter. (Where’s my coffee?)
There remains one dark cloud over Bernanke’s sunshiny day. “The adjustment in the housing sector is still ongoing,” he said, parroting the minutes released from the Fed’s last meeting, “and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected.” (Hmm…OK.)
 Syria, the small oil nation, followed Kuwait’s suit and ditched the dollar yesterday. They terminated their currency’s dollar peg.
“Syria doesn't sell oil or consumer goods to the U.S.,” penned Dan Denning in this morning’s Rude Awakening. “Therefore, Syria has no huge U.S. dollar profits it can recycle back into American markets. Syria, in other words, gets all the inflationary, wealth-destroying ills of being linked to the dollar, and no real benefits.”
“The dollar's stature might not be eroding in Syria, for example, if the dollar's stature had not been eroding already in the commodity markets... and in the foreign exchange markets... and in the equity markets,” continued Eric Fry in a Rude tag-team effort. “Everywhere you look, you see withering greenbacks. But we don't call them that. The polite term for a withering dollar is a ‘bull market.’ That's right; a weak dollar is just the flip side of a bull market in gold, and in oil and in S&P 500 stocks.”
Will this trend continue? Read today’s Rude Awakening to find out.
 “Of course, I am a pure and absolute democrat,” declared Vladimir Putin in an interview yesterday. “But you know what the problem is -- not a problem, a real tragedy -- that I am alone. There are no such pure democrats in the world. Since Mahatma Gandhi, there has been no one.”
Let’s see… Mahatma Gandhi, small bespectacled guy in a toga, spoke softly, carried a big walking stick. Vladimir Putin, tall, blond Russian, who’s apparently completely insane. Yeah, we can see the resemblance.
“If part of the strategic nuclear potential of the United States finds itself in Europe,” Putin commented on the U.S. plan to put a missile base in the Czech Republic, “we will have to have new targets in Europe.”
When asked about the Cold War era of hair-trigger confrontation, Putin said, “We are, of course, returning to those times.”
The word “kakistocracy” comes to mind.
 Argentina had its first taste of an infrastructure crisis recently. When Chris Mayer traveled to Argentina in February, the word on the street was the power grid would be overwhelmed by 2008 or 2009. But the reaper seems to have come early.
A sudden spurt of bitter cold weather brought “the national energy system to the brink of collapse this week, leaving schools without heating and residents suffering power cuts and curbs on their fuel supplies,” reports the Financial Times.
 “Large pension fund managers working for those with the least to lose tend to be the biggest patsies when it comes to misguided investments,” declared Dan Amoss in an e-mail to The 5. “The speculation du jour is called a CDO, which stands for collateralized debt obligation.”
While that might sound sophisticated, a CDO is little more than a portfolio of loans like the kind a banker would hold. Wall Street divides the claims on these loan portfolios into “tranches,” or segments with different risk/reward profiles.
“The patsies, expecting they’ll get 20% annual returns with no risk, have been buying the riskiest tranches -- the ones that will absorb the first wave of defaults when they inevitably occur,” explained Dan. It doesn’t seem to matter if these tranches are backed by, say, subprime mortgages written in Detroit at the peak of the housing bubble.
“Putting lipstick on this pig may seem like a savvy way to generate profits for the likes of Bear Stearns, but it strikes me as dishonesty, not beauty,” Dan told us. “Angry politicians will know where to look when it comes time to look for scapegoats.”
 Two independent studies were released yesterday, both predicting staggering growth in India in the coming years.
First, American Express predicted that India’s 100,000 “dollar millionaires” will grow by 12.8% a year for the next three years. That’s a whole lot of rich Indians. What’s more, McKinsey Global Institute predicts that the average Indian’s income will triple by 2025.
Consequentially, 300 million Indians will come out of poverty and cause the middle class to grow by 1,000%. That’s over 583 million middle-class Indians… almost double the entire population of the United States.
 “An estimated 150 million Indians read a newspaper every day, compared with 97 million Americans and 48 million Germans,” reports the AP. “Circulation numbers in India are soaring, and advertising is expected to grow by 15% this year.”
Hmmm… an enormous population growing at a breakneck pace who are keenly interested in educating themselves? Sounds like an investment opportunity to us. Chris Mayer, Karim Rahemtulla and I are leading a tour of India in October. Like we did successfully in China in 2004 and 2005, we hope to get a “frontline” perspective of opportunities. There are a few spots left, if you’d care to join us.
 “You gotta love our socialist Republican Party of free-market capitalism and personal responsibility,” opined Whiskey & Gunpowder’s Greg Grillot. Uh-oh…something must be under ol’ “Grizzle’s” skin. Yeah, it’s meat.
The Bush administration announced last week that it would take strides to keep meatpackers from conducting their own mad cow disease testing. The Department of Agriculture tests fewer than 1% of slaughtered cows for the disease, according to the International Herald Tribune. But the guv’mint is attempting to restrict farmers from conducting their own tests in an effort to “prevent false positives” and keep costs down.
Mr. Grillot, a lover of all varieties of dead, cooked meat, is distressed. “Oh, that makes perfect sense now,” he writes. “The government can't let a small business voluntarily impose safety measures. They have to protect the meat industry.”
 “I keep reading that the Canadian dollar, aka loonie, is advancing toward parity with the U.S. dollar,” writes a reader. “What's the best way to cash in on this? There's still a nickel difference.” For help, we turn to Chuck Butler at EverBank.
“Canada's economy rallied back in early 2007, growing at a 3.7% annualized pace,” Chuck told us. “Domestic demand growth was solid, running at 3.2%. Any time you see that strong/solid domestic demand, you know you have a potential for inflation and rate hikes. It could be the fire that the loonie needs to get on par with the greenback. But don't think the Canadian government won't fight that move every step of the way!”
You can open a forex account, keep a close eye on the Canadian economy and try to time the loonie’s next rally, or flee to more diversified alternatives. Chuck and the EverBank crew offer a World Energy CD. It’s an FDIC-insured deposit account that helps you take advantage of the rising cost of energy around the globe. It’s comprised of four energy-centric currencies, including the Canadian dollar. For more info, e-mail EverBank at worldmarkets@everbank.com or call 800-926-4922. Chuck and his team will be speaking at our Investment Symposium in Vancouver, too. If you’re going to be there, you’ll have ample time to look over their alternatives.
 “Forget Porter,” a reader writes in response to yesterday’s 5. “Although it is very easy for us to get confused as to who does what with whom under what banner, I don’t care who's in charge, only how much money I make.
“Still, the question was a fair one. Some of us have subscribed to a service which you want us to cancel in order to take out another one. One I shall have to cancel is one I paid just under $1,000 for. Do those who have already subscribed to several of these mail-outs get any kind of prorated cash back? If not, those of us already on the bus are paying twice for whichever ticket we've already bought.”
The 5 responds: Of course, we jest. We’ve been competing with Porter for years, but more importantly, we’ve been good friends even longer. We’re publishers of two distinct publishing companies owned by Agora Inc., a holding company. Stansberry & Associates has assembled an impressive array of smart, savvy, talented and aggressive analysts and marketers. They keep our team on our toes.
But the distinctions between our groups are important. Thematically, we often don’t see eye to eye. Ask any one of Porter’s editors what they think of “Peak Oil,” for example… or the housing bubble. Heh. You couldn’t get two more diametrically opposed positions. Neither of them is necessarily correct, of course. But the debate tends to get heated. And the investment recommendations are, by definition, different. Many are profitable in both camps. Some recommendations end in disaster. That’s the nature of the business.
At the end of the day, we all hope you’re making money, too. And learning how to manage your money safely in times of great change in the markets. Frankly, we don’t really care who’s in charge, either.
But to answer your question, yes, if you’ve purchased one of Agora Financial’s investment services, and you’d like to cash it in for an upgrade to the Reserve, we’ll credit your subscription on a prorated basis (for details on your specific pub call
1-866-361-7662… ask for Rob). If that’s appealing to you, this would be the month to do it… we’re closing the membership drive on July 5, and the next time we open it, most likely in December, the price will be $1,500 higher.
We’ll have to ask Porter if he minds if you cancel his publications for a credit to the Reserve. Although, he might have a choice word or two to say about that idea.
Again, many happy returns,
Addison Wiggin
The 5 Min. Forecast
P.S. You can review a complete list of the publications included in the Agora Financial Reserve here.
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While working with Citigroup in Hong Kong,
