Bear Sterns Collapse

Part of the reason why the Great Depression was so Great was because people that trusted banks etc with their money, lost their money to the institutions who were supposed to be able to return a persons investment. Fast forward to today, and we hear about the case of the Bear Sterns hedge fund:

The value of the Bear Stearns Asset-Backed Securities Fund has fallen amid a flurry of mortgage markdowns, the Wall Street Journal reported, sparking fears the bank will have to close the fund as it has done to two others.

Bear Stearns (Charts, Fortune 500) has delayed paying back investors' money in the hope that the values of the fund would rise again, a source told the Journal.

The asset-backed fund's value was up 5 percent from Jan.1 to the end of June, the source told the newspaper. The troubled fund reported holds a range of mortgages with only a sliver being of the subprime category, the Journal reported.

Things are going to get much worse. They'll get better because of the Long War

Gold

Some thoughts on gold. While it has been urged by many, including times at this blog, to buy gold, one has to be in continuous dialect with oneself in order to make sure that his or her investments are made in the right sectors of the economy.

Gold prices will collapse with an equities crash as traders sell everything to meet margin calls. Anybody long gold will most likely get stopped out in the confusion. Only when this has been manifested will it be time to by gold and not equities which will continue to be in a bear until 2010. If it was that easy to just buy and hold gold now everybody could become rich and as one that knows the market, this is an impossibility. Perhaps the reason Europe is now selling is to take profits in anticipation of exactly this scenerio...

A Bad Week

Wall Street extended its steep decline Friday, propelling the Dow Jones industrials down more than 500 points over two days after investors gave in to mounting concerns that borrowing costs would climb for both companies and homeowners. It was the worst week for the Dow and the Standard & Poor's 500 index in five years.

Investors cast aside a stronger-than-expected read on the economy and maintained negative sentiment that dominated Thursday when the market shuddered amid worries over the U.S. mortgage and corporate lending markets. Investors globally took flight from equities, shifting cash into safer investments in Treasury bonds.

CNPC secures control of Canadian oil sands project

The source for this important development is here. Overall, these Chinese movements in the energy sectro shoul dnot be ignored since it is the case that they are trying to make sure that the U.S. will be a good and equal competitor for them.

exploration, pipeline construction and downstream operations.

According to company statements, CNPC said it received rights to explore 11 oil sands blocks in Canada since the beginning of the year.

State media earlier reported that CNPC, the parent of PetroChina, won exploration rights to oil sands in Alberta with exploration operations expected to eventually yield 220,000 barrels of syncrude daily.

The deal marks the first time a Chinese company has secured control of a Canadian oil sands project.

CNPC first set up an exploration and development company in Alberta in 1992, the company said.

"CNPC has been positively cooperating with Canadian firms on the projects including oil sands explorations, pipeline transport as well as oil and gas trading," the company said.


Chile to court Canadian energy firms

Chile is inviting Canadian oil companies to help increase its oil and gas output, Karen Poniachik, Chile's mining minister, said Thursday.

Poniachik said Chile has put up 10 drilling blocks for bid, the Calgary Herald reported.

"This is our first-ever international hydrocarbons bid round and we want Canadian investments in Chile," she said. "We are opening to the world and have signed free-trade agreements with several nations, including China, Japan and South Korea. Only just recently (Canadian Prime Minister) Stephen Harper was in Santiago and he spoke about Canada and Chile being like-minded nations. We need this relationship to grow."

With an annual gross domestic product of 6 percent, Chile is now actively looking for foreign direct investments.

"Chile has been a closed country and things are changing fast there." Poniachik informed that until last month, state-owned Empresa Nacional del Petroleo has signed 21 CEOPs (special operating contracts), the most recent being two contracts with Calgary-based March Resources Corp. that plans to invest $20 million for exploration in the Tamarugal basin.

Gerrit Maureau, president and chief executive of the Calgary-based Canadian Petroleum Institute, said Chile's economic environment is conducive for international investments.

"It is (now) a democratic and stable nation," Maureau was cited as saying in the Calgary Herald. "The economy is growing at a steady pace, and poverty rates have decreased by over 50 percent in the past few years. Also, a literacy rate of 95 percent has meant the creation of a pool of qualified workforce."

He added, "On the very upside and best estimates, the reserve potential could be 500 million barrels and 5.6 TCF."


Sinopec to export Sichuan gas to other parts of China

China Petroleum & Chemical Corp., or Sinopec, Asia's top refiner, plans to supply Sichuan natural gas to Guangdong province, Hong Kong and Macau by the end of 2009, its parent, Sinopec Group, said.

The National Development and Reform Commission has approved the plan, the company said.

Sinopec's Puguang Sichuan field had proven reserves of 356 billion cubic meters at the end of 2006, local media reports said.

Output from the field is expected to reach more than 10 bcm at the end of 2008 and 15 bcm by the end of 2009, Sinopec said.

Sinopec Corp. and China National Offshore Oil Corp. have secured an agreement with the Guangdong provincial government to set up a joint venture on natural gas supply and transmission, Sinopec said.

Under the agreement, the joint venture will assume the responsibility of investing and constructing natural gas pipeline networks in Guangdong, Sinopec said.

Sinopec and CNOOC will secure natural gas supply to meet high demand in the southern province using resources both at home and abroad, it said.

Tumbling Bonds, Great Debt

The big guys (J.P. and Golman, amongst others) are burdened with more debt that they can sell. This is indicative of the wider problems in the U.S. economy. We are a nation of debtors and spenders. It was only time that it caught up with us.

``The private equity firms, being very tough negotiators, are unlikely to let the banks off the hook, said Martin Fridson, chief executive officer of high-yield research firm FridsonVision LLC in New York. ``They'll say that's your problem and that's why we're paying you: To take risk.

As the market began to turn sour last month, Goldman Sachs, Citigroup Inc., Lehman and Wachovia Corp. had to buy $725 million of bonds that Goodlettsville, Tennessee-based Dollar General Corp. was selling to finance Kohlberg Kravis Roberts & Co. purchase of the company for $6.9 billion. All of the securities firms are based in New York, except Wachovia, which is located in Charlotte, North Carolina.

Bonds Tumble

Those bonds are probably worth 94 cents on the dollar, or $43.5 million less than when they were sold on June 28, according to Justin Monteith, an analyst at high-yield research firm KDP Investment Advisors in Montpelier, Vermont. KKR completed the acquisition of Dollar General on July 9.

Bear Stearns Cos. strategists estimate that about $290 billion of deals still need to get funded, including those of Greenwood Village, Colorado-based credit-card processor First Data Corp. and energy company TXU Corp. of Dallas.

The question is ``how much yield are the brokerage firms going to have to eat, said Hintz, who is now an analyst at Sanford C. Bernstein & Co. in New York. ``What they've committed to is not current trading rates in the market. If I have a problem it doesn't mean I can't place the problem, but it's going to cause a mark-to-market loss.