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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (80415)	6/22/2008 4:24:14 AM
From: Haim R. Branisteanu	Respond to of 116555

Now we all know Goldman Sachs is the problem and their friends hyping crude oil as an alternative investment - I partialy agree - WS never cared about moral issues only about their own pockets OIL SUMMIT: Oil Speculators Targeted In Saudi Mtg Joint Paper By Bernd Radowitz and Reem Shamseddine Of DOW JONES NEWSWIRES JEDDAH, Saudi Arabia (Dow Jones)--A joint working paper ahead of an oil summit here Sunday between energy producers and consumers is set to raise the heat on oil market investors by calling for tighter regulation and more data on the role of index funds, though the tone may rankle major free-market consumers such as the U.S. and U.K. The document, seen by French news agency AFP and which could, if agreed, form the basis of the summit's final communique, is to be presented to energy ministers, chief executives from the oil majors and leaders Sunday. It calls for action to "improve the transparency and regulation of financial markets through measures to capture more data on index fund activity and to examine cross exchange inter-actions in the crude market." The document says that index funds and other investors have "unrealistic assessments" of the future value of oil. The summit Sunday between oil producers and consumers was arranged at short notice by Saudi Arabia. Surging oil prices are contributing to rampant inflation in parts of the world and are causing unwelcome headwinds to the sputtering economies of the U.S. and the U.K. Officials from around the world, including U.K. Prime Minister Gordon Brown and U.S. Energy Secretary Samuel Bodman, along with the chief executives of major oil companies, will meet Sunday to discuss oil prices, investment, and the role of speculators. "From a global perspective, we definitely think it's time that financial markets and their regulators take a tough look at how transparent is this market and what needs to be done to improve it," a contributor to the working paper told Dow Jones Newswires Saturday, "and if there is a need for regulation, how that regulation should tackle the issues." Seeking diversification and a hedge against inflation, institutional investors such as pension funds and endowments have invested some of their billions into financial contracts passively following indexes composed of a basket of commodity futures. Often they buy index contracts through a privately-struck swap agreement with a large investment bank. Critics charge their presence helps drive up commodity prices as the banks enter futures markets to insulate against their swap risk. The working paper is unusual in that its contributors include Paris-based energy consumers' watchdog the International Energy Agency - historically, it has attributed record high oil prices to fundamental factors such as a lack of investment in infrastructure - alongside more vocal critics of oil market speculators, such as Saudi Arabia and oil producers' cartel the Organization of Petroleum Exporting Countries. "I very much hope that this will be a start of a more joint approach, trying to move things forward," the contributor said. "Obviously, you would be blind to not see that this also creates tension, both within the IEA as well as in OPEC." The Commodity Futures Trading Commission in the U.S. is mulling greater controls on how pension funds and other index investors passively tracking the price of crude are allowed to trade in the market. The agency's acting chairman, Walter Lukken, Tuesday told senators he would brief Congress on an inquiry into index traders and the swap dealers who serve them by Sept. 15, putting a firm deadline for the results of an inquiry announced two weeks ago as oil prices breached new levels. "Funnily enough, there is no debate in Europe yet, where there should be one as well," the contributor to the paper said. "This is not only a matter for the CFTC and the U.S. but it should also be looked at across the globe, where financial markets play a role, like in London." The paper also highlights refining as an ongoing problem area, shackled as it is by "constrained refining investment, environmental standards, cost inflation and stringent laws and regulations, resulting in poorer refining returns." Also, "spare capacity throughout the oil supply chain is important for the stability of the global oil market, hence an appropriate increase in investment both upstream and downstream is necessary to ensure that the markets are supplied in a timely and adequate manner." Governments must help stabilize the oil market, by taking action against speculators, Saudi Arabia's deputy oil minister Prince Abdel Aziz bin Salman was reported as saying, according to remarks re-published from Asharq Al-Awsat newspaper by the state-run Kuwaiti news agency Saturday. Saudi Arabia is also likely to detail output expansion, with Oil Minister Ali Naimi confirming Friday that it will ship an extra 200,000 barrels a day in the coming weeks. Oil prices in New York hit a new record Monday of $139.89 a barrel but have eased back on a combination of Chinese fuel price hikes and expectations that Saudi Arabia will boost oil supplies. Light, sweet crude for July delivery settled up $2.69, or 2%, at $134.62 a barrel on the New York Mercantile Exchange Friday. The July contract expired Friday. The more actively traded August crude contract settled at $135.36 a barrel, up $2.76. Event Web site: www.jeddahenergymeeting.com

To: mishedlo who wrote (80415)	6/22/2008 6:36:23 AM
From: valueminded	Read Replies (1) \| Respond to of 116555

Mish: Great Blog and on the money. I agree we need a dollar that goes further. On another front, you talk about a credit contraction, but it seems I get as many credit card offers / credit expansion offers as ever. Heck even my HELOC can be expanded by 50%. Hence I am having trouble reconciling your blogs on credit contraction with my experiences. thoughts ?

To: mishedlo who wrote (80415)	6/22/2008 10:01:15 AM
From: ajtj99	Read Replies (1) \| Respond to of 116555

Mish, anti-dumping investigations have been going on for decades. There has been a recent push the past couple of years to go after Chinese firms. All you need to start an investigation with the ITC is a petition from 3-manufacturers in the US. They are required to start an investigation once that happens. The US is the only western country I'm aware of that has an arbitrary method for evaluating dumping. Most countries look at the cost to manufacture the product in the country its being exported from, but the US method involves evaluating what the product should cost to manufacture here, and applying the difference as a dumping duty. For example, a mechanical politician puncher could cost $50 to manufacture in China, be exported to the US for $100, and the ITC could put anti-dumping duty on it because the petitioning companies say this product costs $200 to produce in the USA, so it is being "dumped" even though the manufacturer is making a 100% mark-up on the sale. In Europe, dumping duty is rarely applied, and generally the product needs to be sold below the cost of the manufacturing company that is exporting the goods. In the example above, the product would likely need to be sold at export for $40 or below to be considered for dumping action. Another ludicrous part of this law is the same product shipped from different suppliers can have varying duties. A product made in the same factory, but shipped from different trading companies could have anti-dumping duties ranging from 15% to 700%, depending on the whims of the ITC. Furthermore, the dumping duty is adjusted I believe quarterly, and it could move from 15% to 100% to 50% to 25% from the same supplier over the course of a year even if their export price did not change. Oh, when they change the anti-dumping duty, it's retroactive, so you don't know how much something costs if you import it until a year after it's been received. It's so stupid you'd think this was Zimbabwe, not the USA. In the case you cited in your blog, it is most likely the pipes will now be shipped to Canada, where most products from China are duty free. From there they will be "magically transformed" into Canadian pipes and shipped into the USA. This is common method of circumventing anti-dumping rulings. There was another provision in the anti-dumping law from about 1999 until around 2006 that was real amazing. I believe Rep. Jim Wright from Texas made this change as an amendment to an unrelated bill, but it had huge implications for a few companies. His amendment stated that anti-dumping duties collected by US Customs should be distributed to the petitioning companies as compensation. This resulted in companies like Timkin receiving something like $160-Million from the US Treasury in 2006 from anti-dumping duties on imported ball bearings. It was one of the largest if not the largest source of profits for Timkin that last year the amendment was in force. It was a racket. With little burden of proof, 3-companies could band together, submit a petition to the ITC, get a dumping ruling, and kill competition while generating additional cash flow. The dumping laws in the US are completely arbitrary, and the application of these laws ends up costing consumers in the end.