By Chua Kong Ho

Oct. 29 (Bloomberg) — China Life Insurance Co. surpassed AT&T Inc. in market value, giving China five of the world’s 10 largest companies, compared to three for the U.S.

China’s stock rally has almost tripled its benchmark index this year, prompting securities regulators to say on Oct. 16 that the market holds “great risks.” The nation’s households are pouring more of their $2.3 trillion savings into shares to beat inflation, which exceeds the return on bank deposits, and to profit from the world’s fastest growth rate among major economies.

“China is one of the most exciting economies,” said Jim Rogers, the chairman of New York-based Beeland Interests Inc. “The market is willing to pay a lot more for future growth.”

Beijing-based China Life, the nation’s largest insurer, gained 2.2 percent in Hong Kong and added 5.3 percent in Shanghai as of 11:29 a.m., valuing the company at 1.92 trillion yuan, or $256.8 billion. San Antonio-based AT&T, the biggest U.S. phone company, is valued at $252.9 billion.

The People’s Bank of China has told lenders to set aside more reserves eight times this year, most recently on Oct. 13, and has raised interest rates five times to help cool the economy.

China Life, PetroChina Co., China Mobile Ltd., Industrial and Commercial Bank of China Ltd. and China Petroleum and Chemical Corp. are now in the list of the world’s 10 biggest companies by market value. Only two of those are in the top 50 by sales.

The three U.S. companies in the top 10 by market value are Exxon Mobil Corp., General Electric Co. and Microsoft Corp. Russia’s Gazprom OAO and The Hague-based Royal Dutch Shell Plc complete the list. Exxon Mobil retains its No. 1 place.

Best Performer

The CSI 300 Index, which tracks yuan-denominated shares traded on the Shanghai and Shenzhen stock exchanges, has risen 169 percent this year, the best-performing of the 91 global indexes tracked by Bloomberg. Hong Kong’s Hang Seng Index, which is dominated by Chinese companies, has gained 57 percent.

Shares in Hong Kong, where the five biggest Chinese companies are listed, have surged 45 percent since China’s government said on Aug. 20 that some of its 1.3 billion citizens will be allowed to invest in the city’s stock market. Chinese companies list in Hong Kong to lure international investors, who are prohibited from buying shares on mainland exchanges.

In the U.S., the Standard & Poor’s 500 index has climbed 8.2 percent in 2007. The 1,856-member Morgan Stanley Capital International World Index has gained 12 percent this year.

World Beaters

The rally in Hong Kong and mainland Chinese markets has boosted valuations for Chinese companies past their global peers. Citic Securities Co., China’s biggest publicly-traded brokerage, trails only Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. in market value among securities firms. Air China Ltd. is now the world’s biggest airline by the value of shares, outranking Singapore Airlines Ltd. and Deutsche Lufthansa AG.

China’s new giants are now setting their sights on overseas acquisitions as they put to use cash raised from stock sales.

Citic Securities said Oct. 22 it will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns Cos.’ shares, which is reeling from mortgage-related losses. The U.S. brokerage is investing the same amount in Citic.

ICBC, now the world’s largest bank by market value, will set up branches in cities including New York and Moscow and make acquisitions to speed up its overseas expansion, Chairman Jiang Jianqing said in an interview on Oct. 17.

More global acquisitions by Chinese companies are likely, said Mark Mobius, who oversees $45 billion at Templeton Asset Management Ltd. in Singapore.

Lagging Sales

“This has already been happening and it’s just a matter of time until we see the trend accelerate further,” he said.

While Chinese companies have made strides in terms of market size, only China Petroleum and Chemical, or Sinopec, and PetroChina are among the world’s biggest 50 companies by revenue.

PetroChina, the nation’s largest oil company, passed General Electric Co. on Oct. 15 to become the world’s second-biggest company, behind Exxon Mobil. PetroChina on Aug. 23 reported first- half net income rose 1.4 percent to a record 81.83 billion yuan ($10.9 billion). It is the world’s 44th biggest company in terms of sales, according to Bloomberg data.

China’s CSI 300 benchmark is valued at 43 times estimated earnings, compared with the average 29 times for Chinese companies on the Hang Seng China Enterprises Index. The U.S. S&P 500 Index, in contrast, is valued at 16 times estimated profit.

`Too Expensive’

“Chinese companies are far too expensive from any rational measure,” said Fraser Howie, co-author of the book “Privatizing China: The Stock Markets and Their Role in Corporate Reform,” in Singapore. “It’s a bubble and in a bubble things are priced wrongly.”

Investors pay 76 times estimated full-year profit for China Life in Shanghai and 42 times in Hong Kong, according to Bloomberg data. That compares to 9.3 times for New-York-based American International Group, the biggest U.S. insurer, and 8.4 times for Europe’s largest, Munich-based Allianz SE.

China Life said in August first-half profit more than doubled to 23.3 billion yuan, on soaring returns from the stock market. Its shares have jumped 90 percent in Shanghai since they started trading there on Jan. 9, and 98 percent in Hong Kong this year.

Chinese investors opened about 49 million trading accounts this year alone, nine times the total for 2006. Total accounts in China have swelled to 127.8 million. In the U.S., brokerages manage more than 83 million accounts, according to 2006 statistics from the Securities Industry and Financial Markets Association.

`Big Bubble’

“It’s pretty unnerving,” said Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in Singapore. “It’s all building into one big bubble. The Chinese companies are trading on euphoria.”

Gross domestic product in China rose 11.5 percent from a year earlier in the third quarter. Inflation surged to a 10-year high of 6.5 percent in August and was at 6.2 percent in September. That’s more than double the central bank’s annual target of 3 percent and higher than the key one-year deposit rate of 3.87 percent, encouraging speculation in stocks.

The China Securities Regulatory Commission must protect investors and prevent market risks, Vice Chairman Tu Guangshao said at the Communist Party congress in Beijing on Oct. 16. Investors should be “more rational” since “the higher the share prices, the greater the risk,” Chairman Shang Fulin said.

The rise of China’s companies has drawn comparisons to the ascent of Japanese firms during its stock market bubble two decades ago.

Japan Redux?

“Japanese companies in the late 1980s traded at similar P/E multiples to Chinese companies today,” said Elan Cohen, a Singapore-based portfolio manager at JPMorgan Private Bank, which has $350 billion in assets. “The parallels end there. Japanese companies’ earnings growth in the 1980’s was anemic, whereas Chinese companies’ earnings growth today is astronomical.”

Marc Faber, who manages $300 million at Marc Faber Ltd. in Hong Kong and who told clients to sell stocks one week before the 1987 Black Monday stock market crash, said it may only be a matter of time before some of China’s biggest companies become household names throughout the world.

“European countries were also surprised at the beginning of the 20th century when American companies overtook European companies,” he said. “The world better get used to it.”

http://www.bloomberg.com/apps/news?pid=20601013&sid=aZn22KdUc5OY&refer=emergingmarkets

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By Feiwen Rong and Glenys Sim

Oct. 29 (Bloomberg) — Gold climbed to the highest since January 1980 as crude oil rallied to a record and the dollar slumped to an all-time low against the euro, boosting the appeal of the precious metal as an investment. Silver also gained.

Gold has increased almost 25 percent this year, heading for the seventh straight annual gain, as rising energy costs spark demand for the metal as an inflation hedge. Trade expectations that the Federal Reserve may cut interest rates this week also damped the dollar while boosting the appeal of bullion as an alternative investment.

“Gold prices were markedly stronger, being bolstered by the low U.S. dollar, high oil prices, and expectations of a cut to U.S. interest rates,” said David Moore, commodity strategist at Commonwealth Bank of Australia.

Bullion for immediate delivery gained as much as $8.01, or 1 percent, to $793.21 an ounce, and traded at $792.99 at 11:52 a.m. Singapore time. The precious metal for immediate delivery reached a record $850 an ounce in January 1980. Silver gained 0.8 percent to $14.35 an ounce.

The dollar fell as low as $1.4422 per euro today, the weakest since the introduction of the 13-nation common currency in 1999, before trading at $1.4411 as of 11:54 a.m. in Singapore.

Crude oil rose to a record $93.19 a barrel in New York after Turkey’s Foreign Minister Ali Babacan said his government is considering “all options” including military action to deal with Kurdish rebels operating from Iraq, heightening concerns about potential supply disruptions.

Inflation

Base metals including copper, lead and zinc have also gained today on expectation demand from China, the world’s fastest growing major economy, will rise despite of prospect of slowing growth in the U.S. due to worsening housing slump there.

“Underlying concerns about Chinese inflation and the U.S. economy have risen over the past two months, providing further stimulus to the gold price,” analysts led by Jim Lennon at Macquarie Bank Ltd. said in a report today. The bank on Oct. 15 raised its forecast for gold to average $795 an ounce in 2008.

The December-delivery gold contract on the Comex division of the New York Mercantile Exchange gained $8.9, or 1.1 percent, to $796.40 an ounce at 11:52 a.m. Singapore time.

In Japan, gold for delivery in August gained 51 yen, or 1.7 percent, to 2,930 yen a gram ($798 an ounce) on the Tokyo Commodity Exchange at 10:49 a.m. local time. It reached as high as 2,931 yen a gram, the highest for the most-actively-traded contract since July, 1984.

Fed Cut

Gold have gained 9.5 percent since the U.S. Federal Reserve cut its benchmark Federal funds rates by a larger-than-expected 50 basis points to 4.75 percent on Sept. 18.

Losses at financial companies including Merrill Lynch & Co. last week also led traders to bet the Fed will cut its benchmark lending rates at its Oct. 31 meeting.

A Labor Department report Nov. 2 is forecast by economists to show U.S. employers created the fewest jobs this month since June, adding to evidence of a slowing U.S. economy.

“If the Fed does cut the interest rate this week, I certainly wouldn’t rule out the possibility of gold getting up to $800 an ounce or even go beyond that,” Commonwealth Bank’s Moore said.

http://www.bloomberg.com/apps/news?pid=20601012&sid=aDE0QtwxtPzc&refer=commodities

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by Robert McHugh

Because the U.S. Dollar Has Just Been Devalued by a Third Over the Past Five Years.

And more devaluation is coming. Perhaps another 50 percent. The markets are convinced that the Fed is going to drop rates again on Halloween by another half percentage point. This means hyperinflation, and all markets moved accordingly Friday. The Dollar hit a new low, at 77.00, and is worth 53 percent of what a Euro is worth. This is a massive currency devaluation right before our eyes. It means the cost of everything is going up, which the Master Planners figure will diminish the debt load as debt contracts are expressed in Dollars from the past that were worth more than they are now. Those debts can be paid back in the future with dollars that are worth less. But this thinking requires folks to get their hands on a greater quantity of these devauled dollars. This thinking is ludicrous, but reality.

When the Master Planners devalued the dollar over the past five years, they raised the cost of living for everyone. The Middle Class is getting annihilated from this silent event. Incomes are not keeping up. This was done because this administration “equates stock market success with economic success and has directed their efforts to drive up equities at literally any cost,” to quote one of our subscribers. This is pure fallacy as market declines are proven to be beneficial to Middle Class investors who use the safe, time-tested investing strategy of Dollar Cost Averaging (occurring in 401(k)’s for example), where stock market declines can actually accelerate wealth generation. All this administration has accomplished is to ensure that Wall Street Banking Firms continue to make huge profits. This is not to bash Republicans, as this was not the case under Republican Ronald Reagan.

M-3 remains hidden by the Fed, so that We the People can’t know what the Federal Reserve is up to, like supplying the PPT with money to buy markets. Where’s the transparency Ben? We continue to monitor the monster charted below — it tells you all you need to know about what the Fed has been doing with M-3:

The situation has deteriorated as we see a decisive break below the neckline. The Dollar could drop faster than perhaps anyone thought. The pattern is a Head and Shoulders top. These patterns are highly reliable. It is now a “confirmed” pattern, meaning prices dropped decisively below the neckline, below 80.00 to 77.00ish. This means the probability of the minimum target of 40.00ish being hit is great. Now that the Dollar dropped down to 77.00, we are in a high risk situation of a devaluation of the dollar all the way down to 40.00. Remember, this mess started with the Dollar at 120.00 five years ago. 40.00? Not all at once, but over the course of several years. Perhaps all at once, should the government elect to flat-out issue an edict that a dollar is now worth 50 cents. Would they? Maybe. Why? It is a way to repudiate half of all the debt in the United States. Why would they want to do that? Perhaps if a recession became a depression, or the risk thereof. Perhaps if Housing was to absolutely dive into the tank. It would be a way to relieve mortgage holders of a huge chunk of their obligations in lieu of mass foreclosures, and bailout financial institutions holding substantial portfolios of mortgage backed securities - IF households can get their hands on enough of these hyperinflated dollars.

However, the problem for the middle class, is will any of this monetary hyperinflation find its way into their checking or savings accounts? Will their incomes rise from this artificial economics policy? We don’t think much of it will. The Master Planners figure if they give the money to Wall Street, enough of it will trickle down to enough of the small folks on Main Street to alleviate widespread economic distress. But how can this happen if folks do not own the equities that this master plan requires folks to own? No, Wall Street will get richer and that is about it.

If the plan is to monetize our nation’s debt through extraordinary injections of money supply in exchange for Treasuries, if the plan is to support equities through injections of money into Plunge Portection Team Wall Street surrogates who then support stock prices, how does that help mom and pop with their debts? How does that help them pay for rising insurance premiums, and real estate taxes, and tuitions, and home repairs, and on and on? It won’t.

If the Master Planners are going to devalue the Dollar another third or by even half, they better figure out a way to get all those freshly printed dollars directly into the hands of households.

This is all extraordinarly good for precious metals, the HUI Gold Bugs index, and other inflation defensive assets. But will Main Street be holding enough of them to keep breath above water?

http://www.safehaven.com/article-8711.htm

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Alex’s Notes: By posting this I am not indicating that I believe the events described here are destined to unfold, but it is definately a mind expanding exercise to consider the possibilties.

——————————————
by Michael S. Rozeff
October 27, 2007

Bush and Cheney are steering the U.S. into a collapse. Only strong public voices by influential people can prevent the coming disaster. We desperately need for men and women who are known to the public and have credibility to speak up in the critical period ahead to avoid catastrophe.

• A few weeks ago, Israel bombed a alleged nuclear facility in Syria. This is a warm-up for an attack on Iran.
• In the last few days, the U.S. unilaterally tightened sanctions on Iran. Russia and China do not support this move.
• A week ago Bush warned Iran that its attainment of nuclear arms would lead to World War III.
• Russia, which has been assisting Iran in its nuclear construction program for decades, regards Western military action against Iran as unacceptable.
• China has been arming Iran with missiles. Its relations with Iran have been improving for years.

We know that Bush and Cheney are capable of pre-emptive attack. We know that Bush will act if he believes he is right no matter what the costs are. In his distorted worldview, Iran with nuclear weapons is a scenario worth any cost to avoid.

We know that Bush, Cheney, and Rice have repeatedly warned Iran of meaningful consequences if Iran arms itself with nuclear weapons. We know that their terms in office end in 15 months. These are the critical months.

But it is by no means clear that the front-running candidates for office who may replace them hold substantially different views. Hillary Clinton has publicly called for sanctions against Iran and has called Iran a threat to Israel.

Why may an unprovoked attack on Iran lead to WWIII and why may it lead to the collapse of the U.S.?

Imagine this scenario. The U.S. encourages Israel to bomb the Natanz nuclear facility in Iran. Russia attempts to restrain an Iranian response but fails. Iran responds in any of many ways, such as launching missiles on Israel, firing on shipping in the Straits of Hormuz, mining the Straits of Hormuz, sending troops into Iraq, or allying its military with Hezbollah and attacking Israel from Lebanon.

The U.S., citing Iran’s aggressions (that will be the story), launches a full-scale attack on Iran designed to devastate the country. This attack has actually been planned by the U.S. for years. Syria is unable to maintain neutrality and quickly becomes a battleground between Iran and Israel.

The price of oil by this point has already soared to $200 a barrel. The U.S. begins to use its strategic reserve and to divert Iraqi production. Russia responds by taking steps to prevent its oil production from reaching the U.S. China responds by cutting off its support of the U.S. Treasury market. Venezuela halts oil shipments to the U.S. The first stages of WWIII are economic warfare designed to cripple the U.S. and halt its war-making capacity.

The U.S., unable to finance its deficits and fund its sovereign debt, is forced into raising interest rates drastically in order to borrow. The Fed is forced to print money. An inflationary spiral occurs. Meanwhile the high interest rates and high oil prices, not to mention the shock of a spreading conflict, drive the U.S. economy into severe decline. The U.S. attempts to raise taxes in order to fund itself, further crippling the economy. Gold soars to $1,500–$2,000 an ounce.

The U.S. attempts to bolster its military forces. The draft is reinstated. The severity of the emergency allows Bush and Cheney to assume emergency powers and begin a dictatorship. Elections are postponed.

The U.S. collapses.

Unfortunately, even if this scenario does not occur, the position of the U.S. is so precarious that any number of other scenarios equally disastrous lie in wait. This house needs urgently to be put in order or it will fall, and especially if it does not terminate its imperial adventures. The very fact that Bush and Cheney (or any major U.S. political officials) gain by starting WWIII is a terrible indictment of our entire political system.

Who can stop this? Who can prevent this? It will only take a few well-placed people to prevent this catastrophe. My guess is 5–20 people could sway public opinion against war or provide enough cover for Congressional dissenters to screw up their courage. Maybe even as few as 3 or 4 influential people could derail the Bush-Cheney train to disaster. They need to speak out at the right times and they must be heard. Previously mute or muted voices simply must speak out. They know who they are. They know that their silence will mean silent approval of a U.S. collapse.

http://www.lewrockwell.com/rozeff/rozeff183.html

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By Peter Degraaf

Margin calls hurt, but when margin calls run into the millions of dollars, they really hurt!

The commercial traders have been shorting gold since the market last dipped, with gold at 660.00. Imagine covering margin calls when the price has run 15% against you!

The problem with short selling during a bull market, is that no matter how many times it works, there comes that one time when your timing is wrong. If you can be wise enough to cut your losses quickly, (very few do so), you may live to trade again.

The market action we are watching now reminds me of the trading we saw in the late 1960’s. The central banks of the London Gold Pool were desperately trying to hold the gold price down at 35.20/oz. To allow it to rise would be detrimental to the confidence level of western currencies in general, and the US dollar in particular. People might realize that money was being inflated.

Most of the gold at that time was being supplied by participating countries, to the gold users via the London Gold Market. Normal turnover was about 5 tonnes per day. Suddenly volume began to increase to 20, 30 and 50 tonnes per day. During most of 1967, the London Gold Market officials kept having to sell gold faster than they could replace it with freshly mined gold from South Africa and Ghana. In 1968 US central bank officials re-affirmed their commitment to hold the gold price to 35.20 – “down to the last ounce!” Gold was being flown in from the US to London, to help meet the demand.

On Friday March 8th 1968, 100 tonnes were gobbled up, almost 20 times the normal volume. By the middle of the following week the demand rose to 175 tonnes, then on Thursday the total rose to 225 tonnes.

On Friday March 15th 1968, Queen Elizabeth, after a meeting at Buckingham Palace the evening before, declared a ‘bank holiday’.

The London gold market was officially closed for two weeks, and when it re-opened 2 weeks later, we were introduced to ‘two-tier’ gold prices. One for banks, and one for the private sector.

Once the banks threw in the towel, gold rose to 850.00 in February of 1980. A rise of almost 2400%. It took Paul Volcker and interest rates of over 20% to finally halt the price rise.

The situation today has a lot of similarities to the scenario of the 1960’s. Thanks to Frank Veneroso and Gata (www.gata.org), we know that the banks are trying to play the same game again. Anyone who ‘shorts’ gold at this time is counting on the banks to be more successful than they were in March of 1968.

I am well aware of the fact that the commercial short position is currently larger than ever, but if you turn that around, it means that every one of these contracts will have to be covered!

And the day will come when they burn there fingers! Is this the time? That is the 64$ question.

As for me and my subscribers, WE’RE ALL LONG!

Summary: These are volatile days. We must be prepared for some wide swings. There will be days where gold will rise or fall by 25.00. The overall trend is up. Technical analysts who focus only the technicals, without taking the bullish fundamentals into consideration will be tempted to sell gold short, just when they should be holding on for the wild ride ahead.

http://www.kitco.com/ind/Degraaf/oct262007.html

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