Archive for the ‘commodities’ Category »
Global Markets: The Mushroom Cloud
As the bottom falls out of the dollar, and people’s cash goes up in a mushroom cloud of smoke, someone’s going to make a lot of money… from foreign currencies
I’m reading all the front pages this morning, and I’m seeing nothing but fear:
Bloodbath
Global Rout
Panic Selling
Roller Coaster
It’s enough to make seasoned brokers and pit traders jump out of windows, not to mention the folks who’ve watched their retirement funds lose $2 trillion (over the past year and a half). It is truly a global market meltdown.
And it would seem that there’s no safe place to run anymore. Even commodities are flopping like a fish out of water.
Ever see that show on The Learning Channel called Trading Spaces? It has two neighbors swap houses for a couple days to remodel each other’s rooms. There have been some surprising results, from an all black room (which was not what the owners had in mind) to wonderfully tasteful decor.
That’s why it’ll be interesting when two countries swap sectors: the UK could be the next oil frontier and Dubai could be the next major hotel owner in Europe.
Let’s start with the more unusual of the two…
The UK has been beholden to imported natural gas since 2004, and could be a net importer of oil by 2010 once the North Sea reserves really begin to run dry. North Sea oil accounts for 98.5% of UK production. Onshore oil fields produce only 24,000 barrels of oil a day.
To give you an idea of just how little that amount is, 24,000 barrels of oil is less than two-minute’s worth of U.S. oil consumption.
High energy prices make companies both rich and greedy… In Western Europe, that boils down to acquisitions.
Last week, Electricite de France (EDF:Paris), who has been courting British Energy (BGY:London), announced it would not up its bid for the owner of most of the U.K.’s nuclear power plants. It was ready to announce an all-cash offer of $23.4 billion on Friday, but apparently, that offer is too low for the institutional investors holding large stakes in British Energy.
EDF isn’t going to let all that money sit around for long, though. With $54 bilion to spend on investments over the next two years, it’s already eyeing up other companies and developments.
Today, EDF increased its stake in Constellation Energy Group (CEG:NYSE) to 9.9%, up from 4.7%. And on Sunday, the company signed agreements to “invest in and operate two new-generation reactors in [China's] southern province of Guangdong.”
In fact, EDF is considering a number of countries and international developments for expansion. From South Africa to Qatar, EDF is looking for ways to secure both energy supplies and customers.
China’s Next Big Oil Play?
One of the biggest business stories of the year has literally been buried by the media — and it could cost you a lucrative opportunity.
On July 9, the China Investment Corp (CIC), the country’s $200-billion sovereign wealth fund, said it will start investing in global equity markets through its overseas asset managers, according to the China Securities Journal.
CIC said it will allocate $250 million to eight different overseas asset managers.
Why Big Media didn’t play this up more prominently is a real joke. CIC is the world’s sixth biggest sovereign wealth fund (SWF). The decision to start actively investing in emerging market equities is a clear indication that emerging markets cannot be ignored.
