Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Another View on the recent Stock Market Panic

Stock-Markets / US Utilities Mar 19, 2007 - 12:59 PM GMT

By: Roger_Conrad


Speaking engagements are one of the more useful aspects of my job.

This weekend, I'm at the Renaissance Waverly Hotel in Cobb County, Georgia, for the WealthExpo.

I look forward to meeting many readers and hearing of their concerns and queries, and I'll be summing them up in next week's Utility & Income. Utility Forecaster subscribers please note: This issue's Roundup has a brief, between-issues roundup of every Portfolio recommendation.

As the past week's extremely turbulent market events showed yet again, the world's investment markets are increasingly connected.

Events that may seem wholly unconnected on the other side of the globe are increasingly affecting investors everywhere.

Moreover, when panic starts in one market, it spreads like wildfire and becomes very difficult to control. This week's guest columnist, Yiannis Mostrous, and I spent several late nights during the past couple weeks monitoring the opening of the Asian and then European markets, as the selling contagion spread across international boundaries.

The spark to the fire was, of course, growing concern about the subprime mortgage market. That's essentially the segment that lends to riskier borrowers, such as first-time home buyers. As a result, lenders take on more risk and are rewarded for making good decisions.

As is always the case in any lending spree, however, good sense often goes out the window in the name of generating profits.

Salesmen are under the gun to produce, and some are no doubt tempted to cut corners or otherwise approve a loan that wouldn't pass muster in more sober times.

With the housing market slowing down and the economy apparently cooling off a bit, it's no wonder the riskier segments of the lending industry are suffering. Nor should it be to anyone's surprise if a major money center bank winds up neck-deep in this.

Wall Street's handwringing, however, is a day late and several dollars short. Bank stocks have taken a pounding already and any company specializing in any kind of mortgages has been literally taken out and shot. For example, THORNBURG MORTGAGE (NYSE: TMA), a favorite of my colleague Neil George, has taken it on the chin, though it has basically nothing to do with subprime.

The point is the subprime “crisis” is pretty much priced into the market now. Aside from giving your portfolio a good pruning--weeding out investments with high yields but uncertain business prospects--there's not a lot to be done about it now.

There may be a few more rotten trees out there, and I certainly wouldn't touch more money center banks with a 10-foot pole. Their will to dominate means they're always at the epicenter of financial crises. And no doubt one of them is going to crack this time around as well. That's why the best banks to own are always the regionals, which rely on building deposits and knowledge of local loan markets.

For the most part, however, this horse is well out of the barn. The same thing, incidentally, applies to the battered Canadian trust market--also a source of handwringing in recent days.

The worst-case scenario on the taxation issue--full corporate taxation beginning in 2011--is now well in the market, despite a real possibility it could be changed for the better in coming months by an opposition electoral victory or a ruling party change of heart. Oil and gas producer trusts are still adapting to lower energy prices, as hedges come off and they lock prices for their output in at lower prices.

But for the best trusts, there's little to fear. As solid fourth quarter earnings attest, their lofty yields are in no danger. In fact, a growing number, like ARCTIC GLACIER (TSX: AG.UN, OTC:

AGUNF), have announced they won't be cutting distributions at all in

2011 despite taxation. And takeover interest is heating up as well, with a bidding war emerging for GREAT LAKES CARBON (TSX: GLC.UN,

OTC: GLCIF). (For more on Canadian trust trends, sign up for my complimentary weekly Maple Leaf Memo at .

The larger point of this discussion, however, is that global events are increasingly central to how markets move. And while I strive to make such actions irrelevant to my readers--by focusing on high quality situations in a diversified array of markets--I'm always paying attention to the risks and potential rewards from the global markets.

As I spent a great deal of time discussing these larger issues with Yiannis this week, I'm featuring some of his comments below, excerpted from The Silk Road to Riches: How You Can Profit By Investing In Asia's Newfound Prosperity, published by Financial Times/ Prentice Hall. The Silk Road to Riches is available at

The focus is on geopolitics, emerging as a critical factor in early 2007. The discussion doesn't dwell on current events, such as the war in Iraq. But it provides a useful framework for understanding some of the larger issues facing US investors from the global front.

Note that I do cover foreign utilities in detail in Utility Forecaster and will have a feature story in an upcoming issue.

Current portfolio holdings include several Asian plays.

This process will take time and won't dramatically affect our economic and investment projections for the next 10 years. During the next decade, the US must gradually disengage itself from certain security obligations (for example, Korea, Japan and Taiwan) in a smooth manner. But there's no guarantee that a mindless move by any of the major players won't derail a peaceful transition. This is a variable that could threaten stability in Asia and the world.

The Russia-Iran-India-China axis is a potential force with which the US will either compete or cooperate. A competition would involve a division of economic spheres along multipolar lines as opposed to the current unipolar arrangement. Japan's response to the rise of such an axis is also critical; it could be economically beneficial but strategically unacceptable. Based on its history, Japan will most likely develop strong ties with the axis, given the profound economic impact such cooperation will have in Asia.

The West will soon have to alter its foreign policy model to produce results that bring about further stability. The current approach seems to emphasize the adoption by the emerging world of particularly Western ideological values. “It is sheer hubris,”

Samuel Huntington has written, “to think that because Soviet Communism has collapsed, the West has won the World for all time and that Muslims, Chinese, Indians, and others are going to rush to embrace Western liberalism as the only alternative.”

Mark Mazower, writing in the Financial Times, expressed similar concerns. “States that believe promotion of their interests depends on export of their culture and values are doomed to fail...of course China's rise does not portend the downfall of the US or Europe but it does challenge the West's self-perception as the civilizational hegemon in global affairs...[T]he world before 1800 was one of multiple power-centers and value systems: Let us adjust to the fact that it is starting to look like that again.”

It may be difficult for many to accept Mazower's conclusion, let alone imagine a situation where the US is confronted directly. A rising state must first catch up with and then challenge the world's sole superpower. Rather than resting on the ambitions of a single country, the threat to US hegemony lies in the possibility that it exercises its power-projection capability through military action in a number of asymmetric conflicts.

This could push the US into selecting the parts of the world where it concentrates its influence and power.

The question is this: How far can the US stretch itself militarily, diplomatically and economically? The prolonged occupation of Iraq demonstrates that once a large-scale conflict arises, the majority of resources and intellectual capacity are concentrated on that particular conflict. Other issues in different regions are ignored.

East Asia is a clear example of this dynamic, and exposes the previously unthinkable possibility that the U.S. may still dominate the balance of power, but not the balance of influence.

Investors who fail to consider or, worse, treat lightly the geopolitical changes taking place substantially increase the risk to their domestic and international investments.


Please allow me to put in another pitch for this year's Atlanta Investment Conference, to be held at the Chota Falls resort in the North Georgia foothills April 19-21.

This is one of my favorites for several reasons. One, attendance is limited so there's a unique opportunity to meet individually and informally with readers. My colleagues Neil George, Elliott Gue and I will be available throughout. Two, the conference coordinators Martin and Marjie Truax are old friends of ours and attract a wealth of extremely interesting and accomplished speakers. Three, there's nothing like the southland in the springtime and Chota Falls is simply stunning for its natural beauty and bucolic atmosphere.

Finally, the Truaxes are well known in the Atlanta area for their tireless advocacy of autism research and treatment, which your attendance fee will help to fund.

To join us, visit the conference Web site at , or call Martin at 1-866-813-9911. I look forward to seeing you there.


By Roger Conrad
KCI Communications

Copyright © 2007 Roger Conrad
Roger Conrad is regularly featured on television, radio and at investment seminars. He has been the editor of Utiliy Forecaster for 15 years and is also the editor of Canadian Edge and Utility & Income . In addition, he's associate editor of Personal Finance , where his regular beat is the Income Report. Uniquely qualified to provide advice on income-producing equity securities, he founded the newsletter, Utility Forecaster in 1989. Since then, it's become the nation's leading advisory on electric, natural gas, telecommunications, water and foreign utility stocks, bonds and preferred stocks.

KCI has assembled a team of top investment analysts to create the finest financial news service possible. With well-developed research skills and years of expertise in their particular fields, our analysts provide quality information that few others can match.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in