GalaTime

• Marketwatch: Indonesia and India are emerging markets to watch

According to researchers CLSA Asia-Pacific Markets, Asia’s infrastructure is growing at dramatic rates. Most investors are looking at China, where infrastructure spending is growing at about 60%. Both India and Indonesia are growing at even faster rates.

India has been the second-biggest spender on infrastructure in Asia over the past year.

• NY Times: Rogue Wheat Trader Blamed for $141 Million Loss

A rogue trader at MF Global Ltd. rang up $141.5 million in losses on the broker’s account this week . . .

An entry-order system that should have blocked the trades failed, the company said.

Mr. Dooley had bought a few thousand lots of wheat futures contracts on the Chicago Board of Trade, MF Global said. The price of wheat has surged in the past month because of constraints to global supply and swelling demand from China.

MF Global’s chief executive, Kevin Davis, said Mr. Dooley did not have nearly enough cash to support such a big position, and the computer system should have nixed the trade.

Blame the damn IT guys!

• Bloomberg: Vulture Fund Deals With Delinquent Homeowners Lost by Subprime

Dellacamera, 54, is a hedge-fund manager with years of experience in vulture investing, the strategy of buying assets at distressed prices in an effort to profit when prices recover.

He is one of several investors — among them Goldman Sachs Group Inc., the world’s biggest securities firm; private equity firm Equifin Capital Partners; and billionaire Wilbur Ross — seeking to make money from the collapse of the subprime mortgage market while helping borrowers hold on to their homes.

Dellacamera says . . . he is planning to raise $1 billion from investors willing to bet there’s money to be made from the mortgage mess, one loan at a time.

Gotta hand it to GS: making money on the way up & on the way down!

• Bespoke: Crazy Commodities

Gold gets the most attention when metals rally, but surprisingly, it has gone up less than both Platinum and Silver since the parabolic rally began. As shown below, Gold has rallied 44.17% since the start of August, while Silver has rallied 47.63% and Platinum has rallied a whopping 66.52%. Next time you’re at the jewelry store, remember that Gold is actually a bargain comparatively!

• Safe Haven: Who is Blowing Bubbles in the Commodity Markets?

“Too much money, chasing too few commodities,” might be the best way to explain the historic rally that is underway in the global commodities markets.

. . . super-easy central bank money policies, and rate cuts in Canada, Hong Kong, Saudi Arabia, England, and the United States, combined with strong demand for industrial and agricultural commodities from emerging China, India, and the Arab oil kingdoms, are laying the groundwork for a new era of hyper-inflation worldwide.

• Yahoo Finance Poll: Commodities have been on fire. Which will perform best through year-end?

Commodities have been on fire. Which will perform best through year-end?

Agricultural — wheat, corn, sugar 36%

Metals — gold, silver, copper 32%

Energy — oil and gas 32%

70525 Votes to date

The reason for highlighting this poll is that commodities have ‘arrived’ on the public radar - makes me wonder how long this boom/bubble is goin to last.

• Underground Value: Notes From Buffett Meeting 2/15/2008
  

There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.

What we are seeing is a huge repricing and evaluation of risk, correcting for problems of the past. I don’t know of good credit propositions that are going unfulfilled. There’s lots of cheap credit for sensible deals, which I don’t define as anything that happened over the last 12, 18 months. A lot of things that didn’t make sense are being washed out of the system.

I have simple pleasures. I play bridge online for 12 hours a week. Bill and I play, he’s “chalengr” and I’m “tbone”.

Life’s good!

• Condenast Portfolio: Would You Buy a Bridge From Warren Buffett?

Who wouldn’t want Buffett as their insurer? It’s a great break for a brilliant investor who managed to be in a strong position when others were weak and now may reap the rewards. Other savvy investors, such as Wilbur Ross, have contemplated joining Buffett in jumping in. The reason the business can be so rewarding is that government bonds are intrinsically safe: Municipalities almost never default.

• CNBC: I Will Reinsure $800B in Municipal Bonds

The billionaire says this is an offer designed to make Berkshire Hathaway money, not to just do a good deed. He is not offering to take on liability for other, riskier investments insured by MBIA, Ambac and FGIC, such as CDOs. That makes the deal potentially unattractive to the insurers, because they would be left with the ‘bad’ risks.

Why go public? It seems to me that Buffett is trying to put some pressure on those insurers to take the deal by talking about how the financial world would be reassured should all those bonds get Buffett’s AAA backing.

• John Mauldin @ Investors Insight: Get Ready - Here Come the Gold Stocks!

As gold began its upward move in 2002, it did so against the backdrop of an industry still in mothballs and still run by managers whose primary skills were cost cutting and frugality.

. . . it was only in February 2003, with gold trending over $350, that Barrick Gold Corp., the world’s largest gold miner, began the expensive process of unwinding its hedges. And it wasn’t until November of that year that the company announced it would stop forward selling altogether and would eliminate its entire hedge book.

Once the turning point came - when management finally realized the bull market was for real — the industry began to scramble to catch up. Which, in a choo-choo industry like mining, means hiring and training lots of people, buying or refurbishing the equipment needed to reestablish production on second-tier deposits, upgrading facilities, building expensive new mills, etc., etc. And, of course, dealing with the challenge and expense of unwinding hundreds of millions of dollars worth of forward hedge contracts.

• Businessworld: Grain drain
  

“There is a conspiracy in the commodities market. Nothing else can explain the current status,” says Jignesh Shah, chief executive officer and managing director of Mumbai-headquartered Multi Commodity Exchange of India (MCX), which has the highest turnover among the three national commodity exchanges. This statement, from a man who is always subdued in public forums, is an indication of a deepening crisis of credibility in the commodities market.

The markets have little depth since banks, mutual funds and other financial institutions, which are allowed to trade in the securities market, are prohibited. In fact, “Satte-baazi (speculation) rules,” says Minesh Shah.

• Economic Times: Capital gains, STT sop for short sales

Short-selling of securities on the stock exchanges, a market reform long-promised by the finance ministry and capital market regulator SEBI, is set to commence. The government has clarified that lending and borrowing of securities under the securities lending and borrowing scheme will not attract Securities Transaction Tax (STT) or capital gains tax. However, it is not clear if sale and repurchase transactions made on the basis of borrowed securities would be taxable.

Short-selling is being allowed for all institutional investors, both FIIs and domestic institutions. Retail investors are already allowed to undertake short-selling of securities.

• Bloomberg: Reliance Power to Give Free Shares to Investors

Reliance Power Ltd., the company that raised $3 billion last month in India’s biggest initial public offering, will issue free shares to compensate investors for the slump in the stock price after listing. The Mumbai-based company will issue 3 shares for every 5 . . .

The bonus issue will reduce the cost of acquiring Reliance Power shares to 269 rupees for individual investors, 40% lower than the IPO price.

‘Seven Mauritius-based investors went on selling within four minutes of the listing even when the market was falling,’

• Economic Times: Value of investments takes a tumble in stock mkt reversals

Virtually every big PE from Citigroup, Temasek, 3i, UTI Venture Funds, CLSA and Warburg Pincus to JP Morgan have been left licking their wounds in the wake of the sudden market reversal. The situation is so bad that the value of investment in some deals of 2008 is down by 21%.

The average loss on investment for all private equity deals done in 2007 is 30%. And if you think that is bad, then private equity investors who did deals in 2006 stand to lose two-fifth of their investment at 43%.

All valuation tools have been savaged at the altar of market volatility.

Love that last line! But where were these valuation tools on the way up to 21k?

• Mint: Sugar back on a winning roll as surpluses shrink

Comparatively cheap sugar may have been a late-starter in the global commodities boom, which started at the beginning of 2007, but it has been among the strongest of commodities in 2008, outpaced only by soaring platinum.

May white sugar futures on the IntercontinentalExchange rose to an 18-month peak of 14 cents (about Rs5.60) a pound on Thursday, up 30% this year and more than 40% since December.

“A lot of the funds’ analysis suggests that this thing called ag-flation is here for a while.”

• Wall Street Journal: Hedge Funds Feel New Heat

The most-successful fund managers enjoy celebrity-billionaire status, even as regular investors struggle to figure out what they are up to. This opacity, though, is now hurting hedge funds. Investors are pulling back, worried as they watch assorted financial institutions suffer from bad trading bets.

The recent exodus from the most sophisticated hedge-fund variants represents a flight to simplicity as investors snap up easier-to-understand assets instead. As a result, gold, silver, oil and other commodities are soaring. Even agricultural commodities, once the most boring part of the market, are on a tear. Soybeans and wheat are up more than 75% in the past year.

• Economic Times: LIC agents promise 200% return on ‘0-investment’ plan

. . . a section of agents have gone to the extent of asking policyholders to take loans on their existing policy and invest in Market Plus—a unit-linked policy. What’s more, they are claiming it to be a zero-investment plan with a return of about Rs 75,000.

These letters look typically like the ones sent by LIC, only that they do not have the LIC logo or LIC office address on the envelope .

Insurance Regulatory & Development Authority (IRDA) has made it clear time and again that agents and insurers cannot portray more than 10% return on any type of policy in the long run. In contrast agents are assuming a 200% return here, which is against the IRDA norm.

Beware - there are more snake-oil salesmen in this industry than you can count!

• Putnam Lovell: M&A and Capital Markets Activity in Global Fund Management, 2007

Transaction activity in the global asset management industry once again shattered records during 2007. Buyers spent more than $51 billion to acquire partial or full ownership of 241 fund managers, well over 2006’s chart-topping metrics. Total assets under management changing hands, however, fell to $2 trillion in 2007, 25% below the previous year’s level.

India, where mutual fund assets expanded 70% during 2007, was the second-most popular Asian destination among buyers. India’s largest fund manager, Reliance Capital Asset Management, sold a 5% stake to hedge fund manager Eton Park Capital Management for $127 million.

45-page report with tons of data. See Exhibit 3: Despite the hype, hedge funds & private equity are miniscule when compared to pension, muutal & insurance funds.

We have put out a newer version of the Moneyoga site, along with a bunch of new features. Check out this set of posts at the Moneyoga Blog for details:

Feedback, Questions & Answers - Part 4

It has been two months since we last responded to the plentiful - and very helpful - feedback that we continue to receive from Moneyoga users. Do check out Moneyoga.com for a bunch of new features, as well as an updated FAQ. As for your latest suggestions, here goes:

Site Redesign: Better Navigation, Help Pages

Along with new features like F&O analytics, Sector classifications, Watch lists, etc. we have also redesigned the interface at Moneyoga to help users access our content as efficiently as possible. The header now features three sections:

1. Analytics
2. Commentary
3. Community

New Features: Sectors, Watch List, Bonus & Split Candidates

In continuation of our recent series of blog posts, this one will elaborate on three new feature additions at Moneyoga:

• Sector classification for F&O-able stocks
• Daily watch list
• Bonus & split investment strategy

New Feature: Futures & Options - Snapshot & Analytics

As you may have noticed, we have re-designed the Moneyoga site - navigation has been made easier, and there are a bunch of new features for our users. We’ll explain the main ones in a series of blog posts, starting with this one featuring:

• Futures & Options Snapshot
• Futures & Options Analytics