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 Major U.S. indexes fell on Friday. Good riddance. After a week of flat trading mixed with small losses, the Dow and S&P 500 shed over 2% -- one of the worst weeks for those indexes in over three months.
 Chinese investors are faring no better today. Chinese central bank governor Zhou Xiaochuan hinted at raising interest rates this morning. The CSI 300 (an index that tracks A shares on both of China’s stock markets) responded by kicking 4.3% of its “value” to the curb.
“We're not sure whether there’s a clear bubble,” said Zhou, “but we worry that shares are priced too high compared with earnings.”
You think? Either Zhou is getting the definition of a bubble out of The Official Alan Greenspan Dictionary of Economic Terms, or it’s normal for an entire market to double in price in less than six months, lose 22% in five days and then gain it back in less than two weeks.
 The pound sterling is back at $2… eh, excusi… $1.9999. A flurry of economic reports scheduled to be released this week -- existing U.S. home sales, consumer confidence, the Richmond Fed manufacturing index -- all present formidable challenges for the greenback. We’ll keep you posted…
 Gold prices sank in nearly all markets, but only slightly. The yellow metal sits at a nice, round $650 this morning.
 On Friday, Bear Stearns bailed out one of the two subprime funds we’ve been following. On fears that the sheer size of this fiasco could topple the subprime derivatives market, BS shelled out $3.2 billion of its own cash. But the other fund carries more than $6 billion in loans and “reportedly holds far riskier investments,” says The New York Times.
Watching this subprime meltdown is like sitting by the side of a major highway in a fog bank, catching glimpses of semis and minivans plow into one another. We can’t really see what’s going on except for the occasional smack down right in front of us, but the noise sure is deafening.
“The effects of the housing slowdown are just beginning to show up,” reports a more sober Chris Gaffney in The Daily Pfennig. “Unfortunately, we will continue to see more fallout from the subprime mortgage mess. You won't be able to say we didn't warn you. Protect yourself by moving a portion of your assets outside the U.S. dollar.”
(EverBank’s World Energy CD is still accepting applicants, if you’re interested in going that route. Call 1-800-926-4922 and tell them Addison sent you.)
 South America is also looking more attractive by the day.
Back in May, Standard & Poor’s decision to bump Brazil’s credit rating to “BB+” put the country near the top of Christopher Hancock’s soon-to-be-bull-market list. Any country’s debt with a rating of “BBB-” (the next step up for Brazil) is considered “investment grade,” and according to Christopher, a flood of international investments nearly always ensues.
“In a global economy,” writes Christopher, “sovereign credit ratings are crucial to informing investors around the world of a country's creditworthiness. They signal domestic and financial stability. Earning the investment-grade rating signals that a country is viewed nowhere near a default. Most institutional money will not even dip their toe in the water of a country that lacks an investment-grade rating.
“That means one thing: The trillions of dollars in excess liquidity that hedge funds, private equity groups and sovereign-wealth funds are trying to invest effectively ignore some of the world's greatest assets for the simple fact that these assets rest in a country with a ‘subprime’ credit rating.”
According to Mr. Hancock, Brazil is on track to get the big bump as early as 2008. If you’re in the right stock before Brazil is a BBB-, you could far outperform your U.S. investments. Christopher is scouring the markets south of the border, looking for little-known South American stocks destined to grow for his Free Market Investor readers. One Chilean stock he’s found he’s labeling… The World’s Greatest Retirement Stock
 India, too, has a nice sheen to it lately. And a soft underbelly.
“The rapid rise of industry in India’s largest city has led to the creation of a large gap between demand for and supply of electricity,” reports Chris Mayer. Chris, a man obsessed with infrastructure plays, is eyeing up a coming Indian electricity crisis.
“India will have to double the capacity of its power-related infrastructure every five years just to keep pace with demand,” says Chris. “Indian companies with plenty of copper and steel are well positioned, as well as the builders of the actual power grids. There are also spillover effects. The sale of home and commercial generators, for example, is up 40% this year.”
There’s also plenty of opportunity in infrastructure plays elsewhere on the planet. The U.S., Argentina, China and South Africa are all on the verge of a major electric infrastructure makeover. Chris’ Capital & Crisis readers own a power grid-maker that’s up 32% in the last six months.
 Several major business transactions over the weekend resulted in more oil and gas for Russia and less for, well, everyone else. At least for the time being…
BP sold its 63% stake in Rusia Petroleum, which holds the license to drill the Kovykta gas field, for somewhere between $700-900 million… a puzzling sum, as the Kovykta field is estimated to be worth at least $20 billion. And Gazprom paid a hefty $72 billion for two other gas fields, Yudokonsky and Arakansky.
“Some Russian analysts forecast oil extraction rising to as much as 15 million barrels per day by 2015,” reports Outstanding Investments’Byron King, “but after that, Russia can expect to see its oil numbers go into irreversible decline.
“In the best of light, Russia’s oil resources are a stopgap that will allow some fortunate few customers to have access to oil while making an economic transition away from using that very oil. To make matters worse, Russia’s terribly inefficient economy currently guzzles 50% of its domestically produced oil. Russia’s oil depletion problem can only be counterbalanced by its very large natural gas reserves.”
 “Some of us who know better should have controlled Congress when they first passed a law controlling what time the sun could come up,” wrote in one reader, still smarting over the passage of “Daylight Saving Time” in 1918.
“Left uncontested, they now think they can control anything by legislation. In the engineering field, we learned long ago that even the good engineers can’t overcome the laws of physics.”
 Another reader agreed with our use of the word “kakistocracy,” which, in the interest of full disclosure, we learned by watching the Scripps National Spelling Bee on television. “I loved the letter on kakistocracy,” he writes. “It is a perfect description of our government and the clowns currently in charge.”
 “Addison,” writes another reader and friend, “I met you in Vancouver last year. We discussed Murray Rothbard’s essay on Pennsylvania’s experiment with anarchy. When I read Market Wizards and The New Market Wizards, and as I've read the works of other investors and traders, even going back to Gann and Livermore, I have found that many of the most successful of these tend to express libertarian views.
“If that is true, why should it be that libertarian-minded politicians, such as Ron Paul, should have such difficulty finding proper funding for their campaigns? I understand that individual traders and investors, no matter how successful, don't have the resources that large corporations have, but this is a relatively wealthy group of people who should have a vested interest in increasing the freedom with which they may trade. Does your proximity to this sector allow you to know to what degree Ron Paul is supported by the trading community? Thank you for input.”
For a little while, Ron Paul was rumored to be leading the pack of all individual donors who contributed $500 or less. But this interactive chart from The New York Times tells an entirely different story: Who’s Encouraging These Guys?
This is democracy in action. The “electorate” will vote for the candidate who promises to go deepest into your pocket. Ron Paul is anathema to the entire political enterprise, so he doesn’t stand a chance.
Likewise for the “libertarian” philosophy. We’ve always thought the term “Libertarian Party” was an oxymoron. Libertarianism is a personal choice, not the basis for a political party. My best guess is any trader worth his salt doesn’t waste his time with politics. Unless, of course, it offers a clear advantage in the pits.
“Sauve qui peut,” the French would say during World War I when their line was broken and the trenches overrun with the kaiser’s minions. We recommend you do the same.
Have a cheery Monday,
Addison Wiggin,
The 5 Min. Forecast
P.S. There are 10 days left in our Reserve membership drive. The Agora Financial Reserve.
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Monday. June 25, 2007: 
