|
 The subprime debacle has emigrated back to the Old World.
The French bank BNP Paribas -- Europe’s second largest bank -- froze $2.2 billion worth of funds yesterday. “The complete evaporation of liquidity in certain market segments of the U.S. securitization market,” read a statement from the bank “has made it impossible to value certain assets fairly, regardless of their quality or credit rating."
Sound familiar?
The three funds in question have already shed $600 million in the past two weeks alone. We’ll go out on a limb here: More money will evaporate from these funds before BNP gets out of this one.
 European markets responded to this news with a continent-wide sell-off. The CAC, France’s benchmark index, shed nearly 2%. Deutschland followed. The DAX was down 1.6%. Even the Brits felt the sting… the FTSE 100 lost 1.5%.
In fact, not a single European market was safe… all 18 exchanges fell. Not bad for a crisis that is “largely contained,” eh, Mr. Bernanke?
 Markets in the U.S. enjoyed their third straight day of healthy gains yesterday. The Dow and S&P bolstered well over 1% apiece, and the Nasdaq shot up 2% on nothing-short-of-stellar earnings posted by Cisco, Priceline and Hansen Naturals.
 The Shanghai index… yawn… stretch… posted another record high -- its fifth day in a row. The index is now up 8.4% since last Friday.
 Gold rallied in New York trading yesterday. But overnight, as foreign markets tanked, the yellow metal took it on the chin. The price dropped from $676 to $661 in less than 24 hours.
 Bear Stearns has announced that what little remains of its two CDO-ridden funds will be liquidated in the Cayman Islands. Could Bear Stearns be any more hated by its investors right now?
Imagine you’ve invested in BS’s structured-credit CDO-leveraged high-risk whatever fund, and not only do you lose 91% of your investment, but now you hear that BS is taking the remaining 9% offshore -- to a place known for ruling against private investors in favor of large firms. Could the deal get any worse for you?
 Blackstone announced yesterday that it has successfully raised the biggest private equity fund ever. “Blackstone Capital Partners V” has a war chest of over $21 billion dollars -- record levels of funds donated by investors so that Blackstone can buy, basically, whatever it wants.
 As one bubble’s pop nears crescendo, chances are another is forming right under our feet.
“Where’s the next bubble?” asks Chris Mayer. “How about in commercial property? This chart from The Wall Street Journal tells you all you need to know about commercial real estate,” Chris explained to us this morning.
“Falling cap rates mean rising property prices -- just as expanding price-earnings ratios mean higher stock prices. And here we are, with years of falling cap rates on office and apartment buildings. They can’t get much lower. The 10-year Treasury rate is right underneath it.”
If commercial cap rates are near their bottom, prices are near their top. That leaves only one path for commercial real estate to follow.
 “One hundred and fifteen years ago,” we paraphrase Chris on an entirely different subject, “a one-armed brick maker and self-trained geologist unleashed the ‘Beaumont Miracle,’ sparking a resource wealth explosion and the richest century in U.S. history. Today, there's a whole new and little-talked-about American energy ‘miracle’ taking shape... one that's already creating a whole new wave of resource millionaires.”
Out of 64 publicly traded companies invested in this technology, you need to own only one. To learn how you can get the name of the company and sign up for Mayer’s Special Situations, read this report: The Beaumont Miracle
We updated Chris’ Special Situations track record this morning, following the tumult in the markets... he’s up on 15 out of 20 picks with an average gain of 30%. He’s also planning to sell one of his Blue Gold picks today for a 99% gain in just over a year. At the current price, Special Situations is a steal.
 A prime-beef shortage has caused several famous New York steakhouses to alter their menus. Peter Luger’s, Ben Benson’s and the Old Homestead -- three staples of the New York steak scene -- have all reduced the presence of prime cuts on their menus because of recent price hikes and supply pinches.
"It's getting worse," said Ben Benson himself, who has recently been offering buffalo steaks in order to cut costs. “The problems the ranchers are having are making it more difficult because feed is getting more expensive.” And why is that precious feed more expensive? One word: Deathanol
According to New York restaurant owners, not only is beef harder to attain, but this year, only 0.5% of all beef sold on the market is considered “prime,” considerably down from 2% last year. But don’t worry… you can still get a hamburger at the Old Homestead… for $41 bucks.
 “Did anyone call Wells Fargo to verify the rate for a 30-year Jumbo?” asked a reader, who also happens to work for Wells Fargo Home Mortgage.
“The truth of the matter is that if you went to a mortgage broker, the rate would indeed be 8%, but going direct to the bank, the rate would be 7.125%. This confirms that selling third-party originated loans (loans made by brokers) in the secondary market is becoming more difficult.
“Loans originated directly by the bank have lower risk and can be sold at a lower rate. This could be the beginning of a new trend that will leave mortgage brokers scrambling to find lenders who will offer competitive rates.”
 “Why would the dollar tanking be such a bad thing for China?” asked a reader, armed with a myriad of speculative questions. “All it has to do is what we've been demanding it do and let the yuan float. Then its own currency appreciates a bunch, more than offsetting its dollar losses, right?
“Of course, with all that European Central Bank selling of gold, I'm guessing China bought a few bars. And I'm guessing there's a big enough market in dollar hedges that it likely would load up on, too. But a rising yuan means commodity costs drop in real terms, keeping the economy humming right along, right? And the people start liking how much they can buy now and, gee, isn't their government good to them?
“And it sure lessens the possibility that Bush and his troupe of idiots will think about attacking, should China decide to finally handle its Taiwan issue, not to mention how China does business with Iran while we keep telling it not to. Tanking the dollar makes sense to me.”
The Chinese could give you 1.3 trillion little green paper reasons why a tanking dollar would be bad for them. What’s more interesting is that the Chinese have much less gold than you would expect… and the U.S. has much more. Look at this chart:
Until the Chinese goose domestic and regional demand enough to replace the U.S. and Western Europe as their primary markets for cheap goods, they’re stuck with us… and with dollars as their reserve asset. For better or worse… until death do us part. That’s what makes the “nuclear option” so incredibly stupid. Almost as stupid as going to war over Taiwan.
Best regards,
Addison Wiggin
The 5 Min. Forecast
P.S. We've returned from the Rim of Fire... During our 8th Annual Investment Symposium, the market deflated...and so did investor confidence. But 700 investors were brimming with enough information and profit-making opportunities to go home and make money anyway. Now you can join them... Return From the Rim of Fire
P.P.S. We’ve already filled up 15% of the seats available for next year’s conference in Vancouver. If you’re the type to plan early, you can get your tickets for the event at nearly half off by calling Barb Periello at 1-800-926-6575 and signing up today. Tell her Addison says “hey,” and she’ll treat you extra special-like.
|
Recent guerilla attacks in western Mexico have authorities on both sides of the Mexican border scrambling to protect billions worth natural gas pipelines. Companies such as Hershey’s, Honda, and Kellogg’s are losing up to $7 million a day as local rebels bomb energy sites left and right. Meanwhile, several little known organizations are well positioned to profit from a sudden energy grab... or… worse yet, a full blown U.S. / Mexico Border War. 
