Is Potash deal doomed?

BHP bid for POT is facing provincial government's opposition and the final federal government's decision is on Nov. 4. The concern is a 10 year tax revenue loss of 3 billion dollar for the provincial government. I do not believe that 3 billion dollars will be a big obstacle for BHP, considering the deal size (around 45 billion at the end). The most important issue is still the takeout price. I do think that BHP does not want to go beyond $155. If POT is not satisfied with that price then the deal may fail.

China raised interest rate

China has moved to curb its inflation by increasing interest rate 25bps. It is unexpected but a correct move.

The commodity market has retreated because of the Chinese move. But the obvious trade sometimes is not the right trade. I do not believe that The Fed will abandon its QE2 and probably will increase the amount of QE2. The increased money supply will stimulate emerging market more than U.S. itself. The dilemma is QE2 will hardly move the U.S economy (maybe 50bps for GDP) but will inflate CPI in emerging market.

I will buy 500 IMG @17.1 (C$) today.

What's wrong with big banks in U.S

The big banks are trading around 52 weeks low and the problem is not new. The CDOs and mortgage backed securities they sold a few years ago are coming back to bite them. There are lawsuits to force banks to buyback these products. If these lawsuits are successful, the liabilities could reach a few hundreds billions.

I will wait a while to see the situation develops to bargan hunting

intel and JPM number

Intel's number is relative strong. I like its position as more intel based ipad like devices getting into the market. My target is 24.

JP Margan's number is ok. The strong equity market since September will give it a boost in trading revenue next quarter. The foreclosure legal mess may pose a risk for large financial institutions.

The market is strong because of the expectation of QE II.

Japan moves

Central Bank in Japan is doing QE again to try to weaken its currency. The competitive devaluation is intensifying. The Fed is going to do QE II in early Nov. In short term, it is going to inflate both physical assets and financial assets. But in ling run, it is going to end badly. Some bubbles will be inflated and bursted. Gold and precious metals will be benefiting from all these madness. I will buy some IMG today below 18.

When to take profit on Gold

Gold is reaching new highs everyday and it is quite possible there will be a correction. However, I believe the uptrend is still on tack as long as the Federal reserve and other central banks are printing money like crazy. The only thing will stop them is higher inflation. I will sell gold when inflation starts to go up. On good indication is ten-year treasury yield. If the yield go above 3.5%, take profit on gold.

Anything to stop QEII

The Fed is on the way to QEII which will result a competitive devaluation of global currencies. A global inflation is unavodable which will be a disaster in two years. Gold, silver and real estat will be good investments right now.

The only possible reason that may stop the FED to start QE II is the inflation but it will not rise for a few more months.