China or Bust

The Daily Reckoning Weekend Edition Saturday, December 19, 2009 Taipei, Taiwan --------------------------------------------------------------- What if China goes pop? Cracks appear in the Great Eastern Hope, Could equity and property markets there "do a Dubai?" Plus, the word on nuclear and geothermal energy and those violent golden dips... --- The Agora Financial Reserve: Offer Expires New Years Eve* --- We'll Pay You $5,909 to Cancel Your Agora Financial Subscription Right Now We know it sounds preposterous, but it's true. Not only that... If you act now* you'll receive every one of our elite publications... And that's in addition to the nearly $6 grand we just mentioned. Just give us 10 short minutes out of your day, and we'll explain everything. *The doors to the Agora Financial Reserve are only open a few short weeks out of the year. We suggest you take advantage while you can. --------------------------------------------------------------- Joel Bowman, entertaining Black Swans in Taipei, Taiwan... When Dubai's debt bubble burst a few weeks ago, few expected that it would precipitate, by itself, a complete collapse of the global economy. Even those who foresaw the mounting and crippling debt loads there weren't that imaginative. After all, the Swarovski-clad emirate's portfolio, packed with high-end New York retailers and Las Vegas casino projects, represented, in many ways, more super speculative hedge fund than measured, robust investment stratagem. Likewise, when Greece, laboring under a deficit not dissimilar to that in the United States, fell prey to the ratings agencies' wrath, few investors conjured up apocalyptic scenarios of mile-long soup lines around the world. The government there had a "poor history" of debt management, the agencies observed. What did we expect? These two debt-addled sovereigns are far from out of the woods, of course. Abu Dhabi might have thrown its meretricious cousin a $10 billion lifeline, for instance, but the emirate's leader must still find a way to meet up to $80 billion in additional debts and liabilities. With soaring interest rates on bonds issued by the emirate and shattered investor confidence, that won't be easy. The Greeks face similar problems, and already their fate weighs heavily on both the Eurozone and its currency. But in any high stakes game, it is always the weakest hands that fold first. That is to be expected. The same casual indifference cannot, however, be indulged when one considers the possibility of a China bust-up. And with investors like Jim Chanos employing – possibly hyperbolic – descriptions like "Dubai times a thousand" to describe the Middle Kingdom's economy, the possibility that we may see a spectacular collapse there is worth, at the very least, a moment of contemplation. Prima facie, China appears to be nursing along the world's nascent recovery rather well. Forecasts of GDP growth around 10-10.5% for 2010 are not infrequent and, judging by the inflow of liquidity into the Asian region as a whole, most investors expect nothing less. According to Nomura Holdings Inc., persistently low interest rates in the US, coupled with the perception that Asian economic growth is a one-way bet, is driving a "tsunami" of capital into the region. Data compiled by the Japan-based financial group show a half-trillion dollar reversal in foreign cash flows over the past year alone as investors pile their bets on a China-led economic resurgence. In the three quarters leading up to March of 2009, widespread economic meltdowns in the west saw some $262 billion vacuumed out of Asia's red hot "tiger" economies as beleaguered funds in The City, Wall Street and elsewhere repatriated capital to meet crushing margin calls closer to home. However, over the past six months, almost all of that cash ($241 billion) has found its way back to Asian shores. Even in a region as populous as this one, that kind of cash does not stay inconspicuous for long. Coupled with ample stimulus spending by local governments, those funds have helped inflate prices from equities through to the local property markets. The MSCI Asia-Pacific index (which excludes Japan) is up 62% for the year, en route to its best twelve-month performance in over a decade and a half. China's own Shanghai CSI 300 measure is higher by more than 65% for the same period. Again, such a strong market performance one year does by no means guarantee a retracement the next, much less a total collapse. But in and of itself, a past rally does not support unbridled optimism for future rallies. Indeed, some fissures are already starting to appear. The same Shanghai index that boasts such impressive year to date numbers slid over 4% last week, and several components of the China Stocks and ADRs Index have slipped by 10% over the same period. Real estate prices in China are also looking rather frothy. A recent editorial that appeared in China Daily ought to inspire at least some skepticism amongst once-bitten investors: "If there is anything more spectacular than the amazing V-shaped recovery of the Chinese economy this year," the paper reads, "it must be the jump in its housing prices which, after dipping for a while, are breaking records in many cities." Statistics cited by the paper indicate prices in 70 major cities (yes, they have 70 major cities) are rising at an incredible pace, outstripping even their parabolic climb in 2008, before the last "dip." "It has been reported that prices for commercially built new residential units in Beijing, Shanghai and Shenzhen have jumped above 50 percent so far this year, outpacing the growth of local economies by more than 5 times," the paper continues. On Friday, Zhang Xin, chief executive officer of property developer SOHO China Ltd, warned that prices in the red hot real estate market may already be overheated. "The government needs to realize how serious the asset bubble is," Zhang told newswire, Reuters. "It cannot control the asset bubble by just saying a few words. The most fundamental solution is to tighten credit." "There is a bubble in every city," Zhang added. That's the problem with central governments' stimulus spending, of course: one never knows when enough is enough. According to Forbes, "More than 1.6 trillion yuan, or about one-sixth of China's new loans, went to the property sector in the first 11 months, including mortgage loans to home buyers and lending to developers." All this is not to say that China will implode, of course, only that it might. Any recovery the world may or may not be experiencing is, at best, embryonic and, therefore, extremely fragile. In an era where Nassim Taleb-style Black Swans darken the skies and "six-sigma" events seem to defy conventional mathematics, it would be foolish to expect only the expected. Join us next week when we'll take a look at a few of the possible geopolitical fractures a China bust up might inspire. In the meantime, this week's regular DR reading is archived for your perusal below. Please enjoy and, as always, feel free to fling any comments or thoughts you have to your managing editor at joel@dailyreckoning.com --- Outstanding Investments Metals Report --- From Hulbert's #1 Ranked Advisory Letter Over a Five-Year Period... Even if Gold hits $2,000 by the end of this year... here's a hidden way you can get in for less than one cent per ounce Over the next two years, you'll witness the greatest surge in gold prices in market history – at least 119% above where gold sits today, as I write this. But even better, I've just discovered a way for you to sneak into the soaring gold market for next to nothing, with what I call "penny-per- ounce" gold. That is, doing this is a "backdoor" way to own as much of a position in gold as you like... for the equivalent of paying a single cent per ounce. --------------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... The Yellowstone Syndrome By Chris Mayer Gaithersburg, Maryland Most people in finance operate under a giant self-deception: they think future economic trends are much more knowable than they actually are. The economy is like a complex ecosystem. You cannot alter one piece of it without causing effects elsewhere in the system. Investors who understand this reality can also understand (and avoid) the hazards of over-confident investing. Financially Befuddled By Bill Bonner London, England Poor Silvio Berlusconi. He was hit in the face with a heavy statuette of the Duomo – Milan's famous cathedral. To our knowledge, this is the first time the image of a major religious building has been used to try to assassinate a head-of-state. China as a Nuclear Power Play By Romeo Dator San Antonio, Texas China is aggressively preparing for its energy future in order to accommodate rapid economic growth for decades to come. The foundation of the nation's electricity generation plan is coal, but with loud calls coming from around the world for China to cut its output of greenhouse gases, a significant portion of new power will be nuclear. A Hot Future for Geothermal By Marin Katusa Vancouver, British Columbia Capturing energy from the earth's heat is pretty easy pickin's for geologically-active areas of the world like Iceland, Indonesia, and Chile. In some locations, hot fluids are so near the earth's surface that naturally occurring hot fluids can be directly circulated through buildings for heating. Iceland, in particular, takes advantage of this low-hanging energy fruit. Depression on Wheels By Bill Bonner Paris, France When the price of oil hit $150 a barrel, the first major alarm sounded. Something was wrong. Now we have a clearer idea of what it was. To make a long story short, leading economists have a one-stop solution for just about everything: stimulate consumer spending. But $150 oil warned us: continue down that road and you will run out of gas. There isn't enough oil in the world to allow US-style consumption for everyone. --------------------------------------------------------------- The Weekly Endnote: As always, please feel free to email us any thoughts you have regarding this week's topics. We can't possibly reply to each and every email, nor can we directly answer financial questions regarding specific stocks or recommendations, but we do enjoy your thoughts and insights all the same. Until next time... Cheers, Joel Bowman Managing Editor for The Daily Reckoning The Daily Reckoning - Special Reports: The US Trade Deficit: Fort Sumter...And The U.S. Trade Deficit US Recession: By far the Weakest Recovery "THE GREAT AMERICAN RECOVERY RP-OFF" Brace yourself for what's about to go down as the BIGGEST FINANCIAL SWINDLE in world history. AGORA Financial Resources: The Daily Reckoning Is: Economics & Politics Crisis & Opportunity Gold, Oil & Energy Growth, Tech & Medical Options Investing Founder: Bill Bonner Editorial Dir: Addison Wiggin Publisher: Eric Fry Managing Ed.: Joel Bowman Web Ed.: Greg Kadajski About The Daily Reckoning: Now in its 10th anniversary year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists.

M&A Lives, FDIC Dying, Obama Busts "Fat Cats" and More!

5 Min blog | agorafinancial.com | login | contact December 14, 2009 One deal makes for several forecasts… how you can profit from the Exxon/XTO buyout Abu Dhabi bails out busted Dubai… Rob Parenteau on the next nations at risk of default President Obama curses "fat cat bankers"… the very ones that paid for his campaign How the FDIC is breaking its own law… and why taxpayers might have to pay for it Plenty of drama in the banking business today (as usual), but first… something that will likely be lots more profitable for investors in 2010: Exxon Mobil agreed to buy XTO Energy this morning for $31 billion in stock. Exxon, the world's biggest oil company, paid a 25% premium for XTO, a big player in domestic energy, especially the shale oil and shale gas that has garnered so much attention lately. Exxon certainly isn't hiding what it's going after… in a report last week, the company forecast energy demand to rise 35% by 2030, with over half of that new demand met by natural gas. "If there is one prediction I feel confident about for 2010," writes Chris Mayer, "it's that the M&A market is going to get going again. Companies have lots of cash -- more, as a percentage of assets, than at any time since 1960. There are fewer opportunities to invest that cash and fewer opportunities to grow, so you buy competitors. Also, the M&A market has been dead since the Lehman bankruptcy, and it's not a market that stays dull for long. "I've also specifically pointed out that the energy sector was ripe for such deal making because the cost of buying proven oil and gas reserves in the stock market is cheaper than creating them from scratch by drilling and exploring for oil and gas. "Today, we got a big signal that the feeding frenzy is on. Exxon Mobil is taking out XTO, America's largest natural gas producer, for a 25% premium. It's a stock deal, but it illustrates the ideas above. "For investors, it means we could see more of these deals, which could provide nice payoffs. (I have a bunch in MSS -- we got one already last week where MSS readers could've made as much as 350% on ROY, which rose 50% in one day.) Second, I think it's also bullish for natural gas. Exxon is no dummy. They see the carbon emission stuff coming down the pike, and cheap clean-burning natural gas is going to be good asset to own." We think Chris is no dummy, either. Last week, his Special Situations readers got a fat payday -- up to 350% gains -- when one of their mining companies got a similar buyout offer. There are many more worthy buyout targets in this portfolio… you should really check it out. The XOM/XTO deal gave markets a nice boost at the open. Major indexes turned positive in the pre-market and opened to small gains. Oil and gas are rising too. Light sweet crude is looking to end its nine-day losing streak today, up about a quarter, to $70 and change. Natural gas just got a big vote of confidence from Exxon Mobil, so it's no surprise to see it up. It's also been pretty damn cold in the U.S. lately, especially in some of the big gas-consuming regions in the East. Thus, nat gas is up to around $5.30 today, its highest level in 10 months. The dollar and gold can finally enjoy a day out of the spotlight. At 76.4, the dollar index is just below its two-month high from last week. And gold is back above $1,120 an ounce, $10 shy of the one-month low it set Friday. As we forecast two weeks ago, Abu Dhabi came to Dubai's rescue today. Nakheel PJSC, a real estate company owned by the Dubai government, had a couple billion in bonds due this morning. Abu Dhabi swooped in with the cash, and then some, to prevent default. Dubai has cost Abu Dhabi $10 billion so far in this crisis… we suspect it'll cost more still. But with Dubai having the implicit backing of its rich brother to the south, "The spotlight has shifted to Greece and Ireland," notes Rob Parenteau of The Richebacher Letter. "Global bond investors are demanding higher yields over German bonds until credible plans for reining in outsized fiscal deficits have been delivered and adequately executed. Since Greece's fiscal deficit as a share of GDP is not that much larger than the U.K. or U.S. deficits, professional investors are also probing these governments' bond markets as possible next fault lines. "If we follow the financial balance approach that Dr. Kurt Richebacher employed, then we have to anticipate Greece and Ireland will face challenges on two fronts. "First, the strength of the euro is making it more difficult for nations in the eurozone to run trade surpluses. Indeed, on a trailing 12-month basis, the improvement in the U.S. trade balance has been a detriment to Europe… What was once a $150 billion leakage of income out of the United States into Europe is now closer to a $70 billion flow. Those are only the direct effects -- no doubt they are multiplied through foreign economies, as businesses in the tradable goods sector have faced weaker revenues and weaker profits… "Second, in the case of the so-called peripheral states in the eurozone (Spain, Italy, Ireland, Greece and Portugal), we must add the increasing pressures to rein in fiscal deficits on top of the weaker trade balances. Unlike the United States and the United Kingdom, none of these states has a sovereign currency. They cannot use currency depreciation to regain global market share. None of these states has an independent monetary policy. They are beholden to the decisions made at the European Central Bank, which will reflect the political compromises judged adequate for the region as a whole… "We see a recipe for increasing social conflict and political instability to arise in the peripheral states of the eurozone. This is not something we state lightly, but the only other way we can see out of the quandary is if global growth takes off in early 2010 and lifts some of the pressure." "I did not run for office to be helping a bunch of fat cat bankers on Wall Street," President Obama told 60 Minutes last night, capturing mainstream headlines left and right. Never mind that those fat cats pay their taxes like everyone else (more than everyone else in many situations). But we'd like to make one distinction: Our President might wag his finger at Wall Street when the cameras are on, but it's never stopped him from bailing them out… or cashing their checks. According to opensecrets.org, the "Securities & Investment, Miscellaneous Finance and Commercial Banking" sectors donated over $26 million to his presidential campaign. But in all fairness to Mr. Obama, his biggest campaign financiers were of a far more noble and respected profession than bankers: "Lawyers and Legal Firms" gave him over $45 million for the election, more than any other sector. The "fat cats" at Citigroup announced today they will soon pay back $20 billion of borrowed taxpayer money. Three more banks failed late Friday, bringing the '09 total to 133 and taking a $126 million bite out of the FDIC's bankrupt deposit insurance fund. "The FDIC must follow the "Prompt Corrective Action" law that was passed in the wake of the 1980s S&L crisis in order to minimize the Deposit Insurance Fund's losses," Dan Amoss suggests. "But the FDIC is not following this law. As we see in every politically influenced organization, it's putting off the pain as long as possible, and ultimately transferring the pain to parties of an ever-waning voice: taxpayers that stand behind the FDIC Deposit Insurance Fund. Instead of imposing credit losses onto the appropriate parties -- bank shareholders and debt holders -- the FDIC is gambling that enough banks will be able to 'earn their way out' of their insolvent positions. "This issue of regulatory forbearance is important for REITs because we know that many regional banks face credit risk on commercial real estate loans that amount to multiples of their equity capital. The sooner these institutions are resolved by the FDIC, the less likely the FDIC will ultimately have to be bailed out by taxpayers (and depositors, who will suffer from lower rates as banks pass on the cost of rising FDIC insurance premiums). "By rolling over the maturing bubble-vintage loans made to underwater, but cash-flowing properties, the banking system, if allowed to by its regulators, would establish a temporary price floor under commercial property. Price floors lead to unhealthy supply gluts. This supply glut will prevent the very recovery in property values that underwater lenders and borrowers are hoping for. 'Extend and pretend' is a strategy that sows the seeds for its own demise." Last, we're not saying it's right or wrong, sincere or overblown, or that this is really about Obama or Bush or whoever… but just that it's happening: That's a tent city just outside Colorado Springs. "The number of government employees earning six-figure salaries doesn't surprise me." A reader writes. "I live in Stamford, Conn. Every year, the local newspaper publishes the names and salaries of the 100 highest-earning city employees. You'd be shocked to see how many policemen and firemen earn $150,000-plus with overtime -- not to mention the generous pensions and benefits that accrue with these salaries." "What shocks my conscience," another reader writes, "is not the six-figure salaries going to executive-type jobs in the federal sector, but the excessive millions being paid to top CEOs in all areas of private businesses. Not to mention the many in this group who have been caught with hands in the till. You might try to be somewhat more 'fair and balanced.' The 5: The percentage of six-figure salaries in government has risen from 14% to 19% since the start of the recession. If you can find another sector with this kind of compensation growth during such a lousy employment environment -- especially one that considers itself a "public service" -- honestly, we'd love to write about it. And we'll leave "fair and balanced" to Fox. "I love reading your newsletter," a reader writes from Scotland, "but the whining London banker complaining about the super tax really got my goat. I would like to point out a few facts to these people: 1) Without the taxpayer there would be no banking system as we know it. 2) The 'profits' they generated were earned by lending our money back to us via the purchase of government bonds, not lending to business, and by shafting taxpayers on everything from loans to overdraft charges. Any fool without a banking background could have achieved these profits with government money at nearly 0%. 3) The extra tax will be used to keep the infrastructure of the country together -- you know, the country where these bankers live and 'earn' their bonus. 4) As a majority shareholder, I say it is time to break up these 'private clubs' and the rules applicable to their bonuses and to stop the practice of fattening the figures by moving liabilities in and out of balance sheets amongst themselves. The system is rotten and deserves to be overhauled. "You may disagree with how governments spend or in the U.K. waste money, but taxes are required to keep the country going. Perhaps he would rather that the poverty-stricken 80% WHO PAY THE MOST TAX should pay more so that the bankers can trouser their bonuses. "Finally, where are these geniuses going to relocate to? They have damaged or closed most of the banks in the Western world, and I doubt many of them speak Mandarin, Portuguese, German, Russian, Urdu or Japanese." The 5: Thanks for writing. In short, we don't see a point in taking 50% of the bonus pool from any sector to support a government that has proven its ineptitude… over and over and over again. Bill Bonner summed up our defense of this sorry lot in Friday's Daily Reckoning: "How does this work again? The bankers lent too much money to too many people who couldn't pay it back, so you insist that they offer more credit, right? "Everyone is mad at bankers. Not us, of course. We pet underdogs. We champion lost causes. We stand by die-hards. "As far as we're concerned, the bankers stole their money fair and square." Be well, Ian Mathias The 5 Min. Forecast P.S. Here's the brutal truth: The Agora Financial Reserve is the best product we offer, period. It is also the best value of all our products, period. To say otherwise would simply be a lie. If this interests you, details are here. Thank you for reading The 5 Min. Forecast! We greatly value your questions and comments. Please send all feedback to 5minforecast@agorafinancial.com You could have turned $5,000 into $1 million in just 5 years! A California Energy Site So Secret, You Can't Even See It Without a Top-Level U.S. Navy Clearance... How To Legally "Hack" Your Way Into the World's Most Secretive "Millionaire's Market" A California Energy Site So Secret,You Can't Even See it Without a Top-Level U.S. Navy Clearance The 5 Min. Forecast is a paid subscriber only , daily e-mail service brought to you by the publishers at Agora Financial, L.L.C. You are receiving Agora Financial's 5 Min. Forecast because you are a paid subscriber to one Agora Financial's paid publications. Agora Financial Resources: Economics & Politics Crisis & Opportunity Gold, Oil & Energy Growth, Tech. & Medical Options Investing Executive Seriers Editors: Executive Publisher & Founder: Addison Wiggin Editorial Director: Eric J. Fry Editor, 5 Minute Forecast: Ian Mathias Editor, Rude Awakening: Joel Bow

Overrating Agencies

The Daily Reckoning Weekend Edition Saturday, December 12, 2009 Taipei, Taiwan --------------------------------------------------------------- Sovereign debt crises threaten to derail the recovery that never was, Investors fall victim to the "Gaderene Swine Rule," Plus, confessions of a lowly paid staff reporter and plenty more... --- The Agora Financial Reserve Closing Soon --- We'll Pay You $5,909 to Cancel Your Agora Financial Subscription Right Now "We know it sounds preposterous, but it's true. Not only that... If you act now* you'll receive every one of our elite publications... And that's in addition to the nearly $6 grand we just mentioned. Just give us 10 short minutes out of your day, and we'll explain everything. *The doors to the Agora Financial Reserve are only open a few short weeks out of the year. We suggest you take advantage while you can. --------------------------------------------------------------- Joel Bowman, reporting from Taipei, Taiwan... As nervous investors await news of the next sovereign debt debacle, Moody's Senior Vice President Tom Byrne gave them another reason to remain on guard this week. During an interview in Singapore on Friday, Byrne made the following comment concerning the health of the US and UK economies. "The outlook is stable." Byrne's placating remarks came in quickstep after a report from his firm earlier in the week let slip that the two massively indebted sovereigns may "test the AAA boundaries." That report, in turn, emerged after the kafuffle in the Mediterranean regarding Greece's ratings downgrade. Markets from The Thames to The Nile and back again immediately plunged into the red on that news. Curiously enough, gold, that safe haven bet AGAINST governmental monetary lunacy fell all week as investors piled into, wait for it...the currency of the most indebted nation in the world - the US dollar. The whole scene reminds us of what theologian Douglas Wilson calls "The Gadarene Swine Rule." Just because a group is in formation, the rule observes, it doesn't mean they know where they are going. That the Greeks are in trouble is hardly breaking news, of course... Heck, even those geniuses at the ratings agencies had time to figure it out! Fitch, one of the other ratings agencies NOT responsible for forecasting the biggest economic tsunami since (at least) the Great Depression, downgraded Greece's sovereign rating this week from a single-A-minus to BBB+. Moody's announced on Friday that they would visit Greece on Monday to investigate the situation on the ground. As that most famous of French seers, Michel de Nostredame, once remarked, "Arrived too late. Act already done." The only thing really surprising about all this brouhaha is that investors should find it at all surprising in the first place. Did they think Dubai was going to be a one off occurrence? That the same immutable laws of nature would not also apply to other overleveraged, undercapitalized economies? Not likely! If the agencies are crying wolf, dear reader, your lamb dinner is likely already minced meat. Fitch worries that Greece's government debt burden may reach 130% of GDP before stabilizing and that it has a poor record of debt management. Now why pick on the Greeks, we wonder? If imprudence and debt additions are the indictments, why not haul the United Kingdom in for questioning? And what about those hot-to-trot Baltic economies? Or, for that matter, all those Gap-going, iShoppers in the US? Household liabilities for the average American family now happen to weigh in at a familiar 130% of total disposable income. But it doesn't take a ratings agency to figure out that consuming more than one produces must eventually end in tears...either for the spender or the lender...or both! Your editor remembers clearly a conversation with a certain head of a certain ratings agency back when we lived in Dubai. We were writing a few pieces for a local rag there, mostly to get behind the scenes for some up-close bubble observation (which we then reported, warts and all, to readers of The Rude Awakening). We asked the gentleman whether he had any concerns over Dubai's ability to service its skyrocketing debt load. We asked about real estate mania, rampant property speculation, and about a possible "dububble." We were genuinely interested, of course, but we had suspicions. And, besides, it's not every day a lowly staff reporter gets to ask the regional head of a major ratings agency what he thinks about a seemingly imminent and obvious economic catastrophe. The certainty of his answer nailed it for us. "It is easy to come to Dubai and look around at all the cranes and think that it's all a bubble waiting to burst. I would caution against taking the 'bubble' approach," he told us. "If you take the UAE as a whole, there are few pitfalls from a ratings perspective." The fellow even went so far as to cite the emirate's strong growth in real estate as a sound economic fundamental. Sadly, the job of a reporter is to report, not opine. Dutifully, therefore, your editor filed his story and watched as the paper printed the "expert's" view. We had the presence of mind to quit that horrid position a short while later. Then we moved out of the UAE altogether. In an effort to purge our conscience of the dirty "ratings expert" story, we ran off a quick rant about the place to Bill Bonner, your senior DR editor. Here's an excerpt from that email, which, thankfully, Bill published, in these very pages. "My short stay here in Dubai has led me to believe that Dubai & Co. is a largely unsustainable enterprise. Dubai's lifestyle makes the average American look like a prudent, energy-conscious, environmentally friendly health nut! "If the American economy is drunk on its own home brew of 'irrational exuberance,' Dubai is sucking down straight tequila shots and desperately trying to catch up. We see it here everyday as the government squanders its unearned wealth on extravagant welfare programs and 'National Identify Preservation' boards and committees dedicated to 'cultural heritage association'-this and 'watchdog for immoral behavior'-that. Then there's the overreaching controls on the economy - price fixing, wage manipulation, rent caps...the list goes on. And on the real estate question, "...as near as I can make out, the biggest developments - including JBR, touted as the 'largest single- phase residential project in the world' - are still ghost towns... "So who's buying all these vacant houses, streets and islands? Some, including myself, reckon speculators buy into the hype...hoping a bigger idiot will buy into it a year later and hand them a handsome return. "The trouble is, sooner or later you're going to run out of idiots. Even here in Dububble the supply of them is not without limit." In other words, Dubai's bird was cooked long before the Thanksgiving Day announcement. Any lowly-paid staff reporter could have seen that coming. Credulous bulls may derive peace of mind from Byrne's "stable" outlook for the American and British economies, but anyone keeping a mental tab on the performance of the ratings agencies themselves will do well to assume otherwise. And now, more from the week that was... --------------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... Food... The Trade of the Decade By Chris Mayer Gaithersburg, Maryland "If you can tell me something else where the fundamentals are so attractive...I'd be happy to put my money there," said Jim Rogers, the famed investor and self-made billionaire in a recent interview. "But I don't know of any other place." What's he talking about? Agricultural commodities like soybeans, wheat and corn. An Intriguing Mosaic By Chris Mayer Gaithersburg, Maryland The relationship between grain prices and fertilizers is pretty clear. It's all about profits. Let's take corn. Higher corn prices mean more profits for farmers. Fertilizers help grow more crops. So high corn prices encourage more corn planting - which leads to more fertilizer use. At today's prices for corn and fertilizer, a US farmer can clear about $2 a bushel on corn. So net cash income is high for farmers right now. Today's farmer also carries low levels of debt, relative to times past. The Credit Crunch Continues By Douglas French The credit crunch continues, with businesses large and small finding that their bankers remain exceedingly stingy in the wake of the 2008 financial debacle. The On-Again, Off-Again Depression By Bill Bonner Johannesburg, South Africa The US stock market is still in "bounce mode." All bounces come to an unhappy end. This will be no exception. If you step back a bit further, you could see it in a different light. The Retarded Recovery By Bill Bonner Dakar, Senegal Nothing is quite as disagreeable as a neighbor who has made a lot of money by not following your advice. After 9 months of 'recovery' they are all around us. They think they have perfected the art of bubble riding. --- Activate Your 60-day, Risk-Free Trial Now --- We're looking for readers to test one of our most profitable buy and sell recommendation research services for a full 60-days, starting now. So far in 2009, our research analyst has delivered 1,685% cumulative gains with a 70.1% gain per recommendation. That means by February of 2010, you might have already had the chance to more than DOUBLE your money. We have one spot open for you, click here and find out how to activate your trial. --------------------------------------------------------------- The Weekly Endnote: Got a reckoning of your own you want heard? As always, we welcome any and all comments from DR readers. Simply drop us a line at the address below. We can't possibly respond to all reader mail, but we do read all the nice ones twice. Now get out and enjoy your weekend. Until next time... Cheers, Joel Bowman Managing Editor, The Daily Reckoning joel@dailyreckoning.com The Daily Reckoning - Special Reports: The US Trade Deficit: Fort Sumter...And The U.S. Trade Deficit US Recession: By far the Weakest Recovery "THE GREAT AMERICAN RECOVERY RP-OFF" Brace yourself for what's about to go down as the BIGGEST FINANCIAL SWINDLE in world history.

AGORA Financial Resources: The Daily Reckoning Is: Economics & Politics Crisis & Opportunity Gold, Oil & Energy Growth, Tech & Medical Options Investing Founder: Bill Bonner Editorial Dir: Addison Wiggin Publisher: Eric Fry Managing Ed.: Joel Bowman Web Ed.: Greg Kadajski About The Daily Reckoning: Now in its 10th anniversary year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists.