Tuesday, June 15, 2010

The Agricultural Investment You Need to Make Right Now

The appeal of farmland as an investment is pretty clear in a market in which clarity on anything is hard to find. It starts with one basic premise: The global population is expected to reach 8 billion by 2030. There are certain inevitable outcomes we can take from this. The most reliable is that we’ll need to produce a lot more food.

Though not original, I don’t think the market quite realizes the challenge involved in feeding all those mouths. Now, I’m not saying we face mass starvation. I’m not saying it can’t be done. I am only saying there are challenges and constraints more acute now than in the past. And these constraints make for an appealing investment idea. (more)

Report: Goldman Betting Against California

Goldman Sachs made a $35 million bet in the credit derivatives market against California, the biggest issuer of U.S. state debt, the Financial Times reports.

The trade was the biggest such bet placed in the past few years by Wall Street banks that underwrite the state’s bond sales, according to information that the banks provided to the state.

This year, California began an inquiry into credit default swaps trading by its six major underwriters, who have earned $215 million of commissions on its bond sales since 2007.

However, California state treasurer Bill Lockyer said the effect of CDS trading on California bond prices was not significant enough to cause concern “at this time” and that the banks themselves have not bet against California debt “to any meaningful extent.” (more)

Rosenberg: Six Ways to Fix the Economy

Gluskin Sheff analyst David Rosenberg has come up with six ways to fix the U.S. economy.

Were he in charge, Rosenberg would:

1. Give large tax cuts to small businesses because payroll taxes discourage hiring.

2. Permanently reduce energy costs by adopting and implementing a coherent energy policy that weans us off imported oil and supports nuclear, wind, and especially natural gas energy.

3. Provide retraining and skill retooling for long-run unemployed. (more)

Greece rejects Moody's 'junk' rating

Greece's finance ministry on Monday rejected a decision by Moody's rating agency to slash the country's sovereign rating to "junk" status.

"This downgrading in no way reflects the progress we have made in the last few months, nor the opportunities opened by our budgetary stabilisation and the improvement of our country's competitiveness," it said in a statement.

It said its budgetary measures "showed very clearly" that Greece was meeting the requirements of the EU and IMF, which have together provided Athens with a 110 billion euro ($A157.06 billion) bailout. (more)

Spain sees credit squeeze, denies EU rescue bid

Spain admitted on Monday that the European financial crisis is taking a toll on the country's banks, with foreign banks refusing to lend to some, while Germany said the EU stands ready to help if Madrid needs a Greek-style rescue.

Highlighting persistent doubts about Greece's ability to repay its debt mountain despite last month's 110 billion euro multilateral bailout, credit ratings agency Moody's slashed Greek sovereign debt by four notches to junk status.

Moody's, in a statement explaining the unusually steep cut, cited the "macroeconomic and implementation risks" in Athens' draconian austerity program agreed with its 15 euro-zone partners and the International Monetary Fund. (more)

BNN: Larry Berman

Click here for video

'Act two' of crisis begins: Soros

Billionaire investor George Soros says ''we have just entered Act II'' of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession.

''The collapse of the financial system as we know it is real, and the crisis is far from over,'' Mr Soros said at a conference in Vienna. ''Indeed, we have just entered Act II of the drama.'' (more)

Angela Merkel's government threatened with collapse

German chancellor Angela Merkel's centre-right coalition government looked to be close to collapse today, weakened by a string of disagreements and intense infighting over austerity cuts, policy reform and the departure of senior conservatives.

Less than eight months after it took office, the government was given only a narrow chance of running to a full term by the majority of Germans, 53% of whom said in a poll they expected it to fall.

"Either we get things sorted out in Berlin, or it will soon be the end for the coalition," said Jorg-Uwe Hahn, head of the Hessen branch of the Free Democrats (FDP), the junior coalition allies of the Christian Democrat Union (CDU) and its Bavarian sister party, the CSU. Renate K√ľnast, leader of the opposition Greens, said: "The phrase 'new elections' is in the head and the heart of anyone who is thinking in a politically responsible way." (more)

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry. (more)

Chart of the Day