News You Can Use for Tuesday

Waiting for Gustav

Hurricane Gustav grew stronger as it moved on a path projected to take it over Haiti on Tuesday and just south of Cuba on Wednesday, according to the National Hurricane Center.
Forecasters say they believe Gustav will strengthen into a "major hurricane" and move into the central Gulf of Mexico by Sunday, but there is little certainty about where it might go from there.

CRUDE OIL

Oil Companies Win $1 Billion Reimbursement Over Drilling Leases
Devon Energy Corp. and Anadarko Petroleum Corp. were among a dozen oil companies that should be reimbursed more than $1 billion they paid the U.S. for leases to drill off the California coast, an appeals court ruled today.

XX Sean’s note – Anadarko was recommended in my Running on Fumes energy report and Devon was recommended in my Energy Panic of 2008 report. So, if you have those reports, this is a heads-up. Also, a heads-up on Petrobras.

OPEC likely to keep output steady in Sept.
OPEC is likely to keep oil output policy unchanged at its meeting in September as prices remain high despite a sharp fall from July's peak, an OPEC source said on Monday.
U.S. demand fell 800,000 barrels per day (bpd) on the year in the first half of 2008, the steepest fall in 26 years. But in the long-term, fundamentals looked tight, the OPEC source said.

Foreign oil producers have U.S. over barrel
AGRICULTURE

The Grain Markets Are Getting Ready to Rip
Corn just flat isn’t going to make it. “It’ll run headlong into problems with frost. In addition, though, it’s dry not only in the eastern Corn Belt, but the entire Corn Belt. As a result, corn prices will continue to go up. The harvest lows are already over—and we haven’t even gotten to harvest yet!” Woolverton says.

XX Sean’s note: And yet …

Wheat Futures Decline on Dollar Gain, Production Outlook; Soybeans Tumble Wheat declined for a third day as the dollar strengthened, making U.S. grain less attractive to buyers overseas, and on speculation favorable weather in major producing countries will help increase harvests. Soybeans dropped.

WIND POWER

US becomes top producer of wind power
The U.S. wind industry now tops Germany in terms of how much energy is being produced from wind, the American Wind Energy Association (AWEA) said.

Germany still has more installed capacity -- 22,000 megawatts vs. 17,000 in the United States at the end of 2007. But the average wind speed is stronger in the United States, which means more energy is being generated, the group said. This year, Germany will add only about 1,600 megawatts of wind energy, while the United States will add more than 6,000 megawatts, said Randy Swisher, executive director of the association.

Wind, solar projects race to finish before tax credit expires
A congressional stand-off that has blocked extension of federal tax credits for renewable energy projects is setting off a boom in the wind and solar industries. Developers and customers are racing to install systems by year's end to qualify for the credits, which can cut the cost of a large commercial system by 30%.

US DOLLAR

Dollar's `Unprecedented' Gain Has Further to Go, Lehman Says The dollar's rally over the past month is ``close to unprecedented'' in the 35 years since the currency was decoupled from gold and will have room to rise on bets the European Central Bank will begin cutting borrowing costs, according to Lehman Brothers Holdings Inc.

URANIUM

Paladin Energy Says That It Is Set to Expand Uranium Production in Africa Paladin Energy Ltd., the Australian producer of uranium in Africa, said an expansion of its mine in Namibia is due for completion at the end of the year, while a project in Malawi will start operating in January.

MINING

Rio Tinto Earnings Double as Iron-Ore Miner Fights $142 Billion BHP Offer Rio Tinto Group, fighting a $142 billion hostile offer from BHP Billiton Ltd., posted first-half profit that beat analyst estimates on increased aluminum sales and record iron ore prices.

GOLD

U.S. Mint resumes gold coin orders on limited basis
The Mint said that it will equally divide its Eagles inventory available for sale each week into two equal pools, with the first allocated equally among all authorized dealers, and the second pool distributed according to the dealers' past sales performance

Check out my new gold and energy blog at MoneyAndMarkets.com

Monday Charts on Gold, Oil & The Dollar -- and Plenty of News You Can Use

Analysts said this week -- with some U.S. markets closing early on Friday for the Labor Day holiday -- would likely be characterized by volatile prices and low trading volumes.
http://biz.yahoo.com/ap/080825/oil_prices.html

News of Interest

ECONOMY

U.S. and Global Economies Slipping in Unison

Only a few months ago, some economists still offered hope that robust expansion could continue in much of the world even as the United States slowed. Foreign investment was expected to keep replenishing American banks still bleeding from their disastrous bets on real estate and to provide money for companies looking to expand. Overseas demand for American goods and services was supposed to continue compensating for waning demand in the States. Now, high energy prices, financial systems crippled by fear, and the decline of trading partners have combined to choke growth in many major economies. The International Monetary Fund expects global growth to slow significantly through the end of this year, dipping to 4.1 percent from 5 percent in 2007.

How to stop the next bubble

"The financial crisis has shown that markets are bubble-prone and that laissez-faire regulation doesn’t work. The authorities need to get a grip if we are to avoid a mega-bubble. But we may need an even deeper crisis for that to happen."

BANKS

Columbian Bank and Trust Company, of Topeka, Kansas, is the latest bank to fail. Can things get worse? Heck, yeah! Check out the following chart from Calculated Risk …

From Calculated Risk: even with the failure of almost 3,000 banks and thrifts during the S&L crisis, the overall economy stayed fairly healthy with only a mild-to-moderate recession starting in July 1990.

Libor Signals Credit Seizing Up as Banks Balk at Lending in Money Markets Most of the bond strategists and salesmen that Resolution Investment Management Ltd.'s Stuart Thomson talked to last August expected the credit crunch to be long over by now. Instead, money markets show there's no end in sight, and it may even worsen.

CURRENCIES

Organized Crime Groups Dump Weak US Dollar For Euro

The weakened US dollar has fallen out of favor with organized crime groups to pay for drug shipments or to settle scores, a Canadian government report said Friday.

PAKISTAN -- THE NEXT CRISIS?

Pakistani Government On Brink Of Collapse

Pakistan's ruling coalition was at risk of collapsing Monday if its junior partner carries out a threat to quit unless judges ousted by ex-President Pervez Musharraf are restored immediately.

Taleban winning war (in Pakistan), says Zardari

The Pakistani Taleban have "the upper hand" and should be put on the list of banned organisations in Pakistan, Benazir Bhutto's widower has said.

CHINA

Olympics disappoint China business owners

Many owners of small restaurants, hotels and shops in Beijing are wearing long faces this summer, especially those who poured their life savings into buying businesses or sprucing up their shops ahead of the Games. About half a million foreign visitors were expected in Beijing this month. But many businesspeople think that because of stricter visa rules and other hassles, there are no more here now than there were last August, when 420,000 visitors from abroad came to the capital. In July, Air China, the nation's flagship carrier, saw its international passenger traffic fall by 19% from a year earlier.

China's Economic Gains Give Way to Hazy Future

In the next few years, China will cross the threshold to a majority-urban society. China's urbanization rate is about 40% to 45% now, well below levels of about 75% in most of Western Europe and Latin America, but statistics show that growth in China's urban population is already slowing.

China's 1.3 billion people each consumed the equivalent of 1.4 tons of oil in energy last year, a relatively low figure. If each Chinese was to consume the same amount of energy as each person in the U.S. does -- the equivalent of 7.82 tons of oil -- then China alone would consume nearly as much energy as the entire world does now.

So far, China's government is falling behind in its drive to cut the amount of energy required to produce each yuan of economic output. It managed a reduction of just 2.9% in the first half, less than last year's 3.7%

MINING & RESOURCES

Mining Industry Shifts on Bad News

Weaker commodity prices and higher costs are starting to take a toll on the global mining industry as the billions of dollars being spent on new projects could take years to recoup.

…

Demand for resources by China and other emerging markets still is expected to soar in the years ahead.

Some analysts view the recent mine closures as bullish for commodity prices in the long run, because the moves suggest companies are imposing more financial discipline than in past booms. As miners curb output, it could help prop up prices.

Still, the economics of mining have shifted drastically in recent years. The cost of energy to run mining trucks and other equipment has skyrocketed, while steel and other building materials also are more expensive.

Commodities Hint of Bottom as Mines Close, Crop Supplies at Five-Year Lows Corn and soybeans have rebounded as reduced crop yields push U.S. stockpiles to near five-year lows. Oil has reversed on U.S.-Russian tensions. Nickel has turned after Xstrata Plc closed a Dominican Republic plant.

Corn, Soybeans Jump as Midwest Crop Tour Forecasts Smaller U.S. Harvests Corn and soybeans gained after Professional Farmers of America said harvests in the U.S. will be smaller than forecast by the government as dry weather in August hurt Midwest crops already stunted by flooding in June.

Check out my new gold and energy blog at MoneyAndMarkets.com

BHP May Be Ready to Start Buying the Smaller Fish

BHP is the world's largest mining company, so what it says carries some weight. Now, BHP is saying that demand for commodities continues to be strong as countries urbanize (that's right along the same lines of the OECD outlook that I wrote about yesterday), and BHP may seek to make acquisitions, especially gold mining companies.

Australian mining stocks are up on the news, but BHP has world-wide reach.

In a story on Bloomberg News Service, CEO Chip Goodyear had some interesting comments...

Demand for commodities continue to be strong, Goodyear said, as countries urbanize. ``Over time, we expect the trend to continue and we see strong support from governments,'' said Goodyear. ``We continue to be quite bullish.''

Demand for iron ore, a steelmaking ingredient, continues to be good, Goodyear said. Demand for coking coal, also used insteelmaking, may be ``softer,'' as China has developed its own supplies faster than expected. Miners are now negotiating with steelmakers to setbenchmark annual prices for 2007.

The Bloomberg piece closes with this: "BHP is spending as much as $13.8 billion on mines andoilfields to meet rising demand from China, the world's fastest-growing major economy. It posted a record $10.45 billion full-year profit in August, and then said it will spend $3 billion buying back shares over 18 months."

Well, sort of. An optimist would say that if a company is buying its own shares, it believes it is undervalued. A pessimist would say that the company obviously can't find better things to spend its money on.

Personally, I look for the small caps to continue outperforming this goliath. BHP is a well-run company and a good stock; I just find better value elsewhere ... especially in stocks that BHP may potentially buy.

So far this year, we've seen $157 billion in mergers and takeovers (including proposals that haven't closed yet) in the mining industry. The way BHP is talking, 2007 could be an EVEN BIGGER year.

Read the Bloomberg story on BHP by CLICKING HERE

Check out my new gold and energy blog at MoneyAndMarkets.com

M&A Fun Factoids

• So far this year, mergers and acquisition deals in the mining industry have topped $113 billion US worldwide, according to figures from Bloomberg, as soaring commodity prices drive a takeover surge
• Total worldwide merger and acquisition activity so far this year has reached a record $3 trillion US.

Check out my new gold and energy blog at MoneyAndMarkets.com