Argentina is not given enough credit for its contributions to world culture. We all know about the tango, but did you know about tango-terapia, which helps overcome autism and depression by sexy dancing? Tango-terapia gaves a legitimate function to the national dance.

    It was in Buenos Aires that dog walking was invented, after people stopped going home for lunch. Fido could not be left all day without making a mess on the carpet, so trusted youths from the neighborhood were employed to walk the dog. For the unemployed, it certainly beat sorting people's garbage, another source of funds in B.A.

    Now Cristina Fernandez, the Argentina Presidente, has worked out a new breakthrough for economics to go with the tango and the pooch-walkers: nationalizing private pension funds. The closely-regulated Argentina fund administration industry will be taken over by the state. Pension funds had been required to keep 60% of their assets in bonds (and allowed only a maximum of 40% in shares). Given the shortage of peso private sector bonds, in fact the FPPs have 55% of people's pension money in government debt.

    If the state takes over the funds, it can write off the debt, the beleagured Peronista president figured. She presented the measure as of a piece with interventions in foreign markets to stave off the crsis. The Casa Rosada was only copying the White House and the Fed.

    Unfortunately, the Bolsa and the bonos markets didn't agree. The stock market fell 11% on the news and the yield on bonds rose to 24% as their prices plummetted. Only hefty intervention kept the Argentine currency from falling too.

    The good news is that after Argentina's last default, there are few foreign holders of Argie bonds, most of them investors who refused the derisory buyout of 2001.

    *Argentina does impact the world. Our Santander, a Spanish bank with an Argentine network and an Argentine pension plan sub, was zapped by 6.5% in European markets today. STD is not alone among Spanish majors hurt by developments on the River Plate.

    *With Galp of Portugal, Companhia Vale do Rio Doce bought Repsol's stake in a Santos oil field under exploration. CVRD is benefitting from the impact of Argentina messes on Repsol, a Spanish oil company which produces a lot of gas with its YPF sub in the south Atlantic offshore Argentina. RIO also will invest $150 mn in a new open pit iron mine in Serra Leste (northern Brazil) to produce 2 mn metric tonnes/yr.

    *In Brazil, there is talk (according to O Estado newspaper) of China's CNOOC investing in the huge "pre-salt" petroleum fund off the coast, and in sugarcane ethylene production on land. This could pay off for beaten down BRGGY.PK (BG of Britain, partner in the offshore fields) and CZZ (Cosan), the leading producer of ethylene from sugar. The U.S. corn ethylene boondoggle is not the only venture in this area. 

    *OAO Gazprom publishes its accounts ad lib; the Russian gas company, controlled by the State, does not operate like a normal business. So today we got the figures for OGZPY.PK's Q1 of 2008. It earned 273.44 bn rubles in net profits, up 30% from prior year levels. Today that works out to $10.34 bn, although the sum was higher back when the money was earned. (The ruble is sinking fast with the sinking price of oil.)

     Besides the rubbished ruble, the price of oil (and therefore natural gas) is off since the end of Mar. too. Then higher domestic gas prices, sustained domestic demand, and higher priced exports fed the energy shock which made Gazprom money. Today its debt, a total of $55 bn, is viewed as "distressed" in the collaterized debt market, incurring 1.14% charges for coverage. The current program is for OGZPY to repay $6.6 bn in 09 and 12.5 bn in '10. But this presumes that oil remains over $70/bbl.

     I kind of hope the Kremlin will send the cavalry to help. But the Russian state also depends on high oil prices for its budget. Unlike conservative Saudi Arabia, whose budget assumes the price of a barrel of oil will be $50, Putin too needs high priced oil. So all that talk about a gas OPEC (reported yesterday) and today's visit of OPEC's head to meet in Moscow with deputy energy minister Igor Sechin is about as convincing as Cristina Fernandez.

      Mr. Sechin is talking about Russia creating reserves (i.e. keeping oil and gas off the market) in order to become a "swing producer" to stabilize prices, a function ow being performed by the Saudis. But unlike the desert kingdom, Russia has no rials for this ploy. Having said all that, I still think Gazprom is so cheap I won't sell it now. But I wish I had taken profits earlier.

     *GlaxoSmithKline reported Q3 results today in London. GSK was of course hurt by the association of its Avandia diabetes drug with heart disease, however ill proven. Sales were off 23% for that, but it nonetheless reported net profits of GBP 1.03 bn ($1.72 bn) or 20 British pence per share, down 21.5% from prior year levels. In dollars the drop was only 17%. Revenues rose 7% to GBP 5.88 bn.

    Moreover, if you exclude the costs of restructuring and taxes, the number analysts try to figure, GSK reported per share earnings of 25.2 pence, up 6%. This beat the consensus which was 24.3 pence/sh according to Bloomberg. Sales of Advair (against asthma) rose 7% to GBP 982 mn. However, generic copy-cat drugs threaten future sales of Lamictal (for epilepsy), Wellbutrin X (for depression), Coreg (for high blood pressure) and even Requip (for restless leg syndrome.)

    To riposte, GSK has a bundle of programs. First of all, it is increasing sales in developing countries (like Egypt) but buying drug firms; it is also increasing its own ability to make copy-cat drugs with buys for example in South Africa. Then too it is focussing on consumer products liek teh oral purchase reported yesterday. It is focussing on vaccines, a growth area. It is also going to take advantage of the current financial crisis to buy up companies starved for cash in the genetic and biotech areas, Andrew Witty, GSK's new CEO forecast. And it will continue to cut back on in-house pharmaceutical research in facvor of outsourcing. It is cutting 650 R&D jobs mostly in the U.S. Research Triangle area. 

    GSK is also considering cutting down on frequent visits to U.S. doctors of its drug sales team; the high frequency sales model is not typical of other GSK markets and its time may have come. These cuts will save GSK GBP 700 mn next year, double current levels, according to GSK.

    GSK maintained its forecast of single digit sales and provit growth this year supposing that currencies do not move much. (It sells 45% of its drugs in the U.S.). It willstop its share repurchase (buy back) program next year, in part I think because analysts don't track it properly, and instead increase its divided to 14 pence/share.

     Excuse me. Yesterday I mistakenly said Goldman Sachs had removed GSK from its conviction buy list. In fact, it was removed from Goldman's conviction sell list. GSK was rated a 'buy" today by Peter Cartwright of GGA, a British broker. He expects eps to hit GBP 105.6/sh this year and 106.8 next year.

     *Another error pointed out from Mexico City by Eduardo Garcia in yesterday's blog: Asur is not builind a new airport in Huatulco on the site purchased from the Mexican govt. agency which owns the land. The airport already exists and is being run by ASR in the Mexican Pacific coast. The site will be used to build a hotel.

    *Crucell won a buy recommendation today from an analyst at UZA in Holland. He expects it to lose 11 eurocents/sh this year and 10 eurocents next year. CRXL is the kind of company that will be confronting GSK bargain-hunting in the future.

     The blog is late because I went back to sleep after the GSK conference call.

My theory that Veolia, a French water/sewerage firm, would be a haven in a downturn was wrong. VE cut its '08 cash flow forecasts because of a "clear slowdown" in waste management and lower water sales as global economies deteriorate. The stock was cut to add from buy by Dexia, and to reduce from add by Oddo, two French brokers. Sell VE.

       Here is some bail-out gossip picked up at the FT Electric Markets conference yesterday.

   *Lehman was let go because its counterparties were largely outside the U.S.; Bear Stearns was saved because its counterparties were largely here. I do not understand why European banks do not complain (a securities lawyer);

   *The bailout was precipitated because of the fact that this is an election year. Otherwise it would never have come back again to Congress before the recess and the crisis might have died down a bit (a non-U.S. lawyer);

   *The advantage government funding is giving to AIG, a misbehaving insurance group, is hurting its competitors who had been behaving better (a New York insurance exec);

    *The banks are getting set to lobby as hard as the defense industry in the new year;

    *FNM was bailed out because China held $300 bn of its paper. Had Fannie Mae been allowed to default the next in line would have been the U.S. Treasury itself. So to keep China buying T-bills, they had to save Fannie;

    *What did Alan Greenspan do with his royalties to save them from the meltdown?;

    *A defense analyst: at least Russia, Venezuela, and Iran are being defanged by the price of oil falling below $79/bbl. Russia is not a threat to anyone except Georgia. Not even to Ukraine;

     *The dollar is going up because foreigners react to a crisis by buying dollars. They did this in 2000-1 and are doing it again;

     *The dollar is going up because hedge funds are deleveraging and going into their native cash. (I have my own theory below);

     *A Ukrainian MBA: after the Orange Revolution there was a period when we had no currency at all. We got little pieces of yellow paper with stamped on "coupons" which we cut out to buy things with;

     *An Electric Market expert: Walmart reports that they are selling vastly more safes for home-owners. Are they putting dollar bills in them or gold coins and bars?

         *Why the dollar is going up? Almost every solvent country is now financing banks within its borders and providing deposit insurance. This is to stop outflows generated by more attractive terms across borders. The U.S. hit first and hardest against the meltdown, and that is pulling money into our system.

     At some point currency flows will revert to normal triggers like inflation fears and balance of payments expectations. But not soom.

     *Canada cut interest rates by a modest 1/4 percent to 2 1/4%. Intervention in one country requires intervention in others. There are old rules about this. One is Gresham's Law which says bad money drives out good.

     *Barclays will pay the U.K. Treasury GBP 42.6 mn to sell GBP 1 bn ($1.7 bn) of 3-yr bonds with a guarantee after all. This is made up of a 50 basis points fixed amount and a fee related to the swaps rate in sterling. This offers two advantages: it gets BCS/BARC the cash need and also helps tighten sterling swap spreads. Initially, Barclays had said it would raise capital required from its existing shareholders, but like the U.S. banks summoned to the Treasury, it is now accepted state help it may not need.

     *Fitch Ratings statement today helps explain why we continue to pound the table in favor of Royal Bank of Scotland (and National Westminster which RBS owns) preferred shares listed on the NYSE. We recommend that readers who have taken losses in these shares (as we all have) switch into different series in order to mop up any taxes on capital gains they might otherwise owe Uncle Sam this year.

     Fitch wrote that it "continues to view recent UK government actions as positive developments for the RBS Group. Fitch also considers RBS' franchise and aggregate credit profile are consistent with a high investment grade rating. However, Fitch is concerned about increasing risks and worsening outlook for certain of the group's main businesses. Consequently, Fitch has downgraded the long-term Issuer Default Ratings (IDRs) of The Royal Bank of Scotland Group plc, The Royal Bank of Scotland plc, and National Westminster Bank Plc (NatWest) to 'AA-' from 'AA'. The group's short-term IDR has been affirmed at 'F1+'.

      "Fitch does however view positively the UK government's actions to underwrite a GBP15 billion ordinary share issue and inject a further GBP5 billion of preferred shares into RBS Group, in terms of restoring confidence to a group and sector that has suffered from heightened market uncertainty over recent weeks. By committing to these capital measures, RBS Group is eligible to participate in the UK government's broader funding programme, which will enable the group to issue government guaranteed debt up to three years term, within the next six months. Fitch expects RBS Group to use the guarantee and, together with ongoing deleveraging, this will have a positive impact on funding.

    "Fitch therefore believes that the group's ratings have upside potential in the medium term and key drivers will be how the group deals with deteriorating market environments, the successful integration of ABN Amro and deleveraging of the balance sheet and the implementation of a refocused, lower risk, strategy.

     "Fitch has also has downgraded the group's Individual rating to 'B/C' from 'A/B' to reflect the uncertainties facing the group. The economic outlook for RBS Group's main operating markets (particularly the UK and US) is negative over the short-medium term and there remains significant uncertainty over the depth and length of any recession. Management has indicated in its announcement on 13 October that all divisions of the RBS Group traded profitably in Q308, although results for H208 are likely to be below prior expectations. In the UK, RBS Group has a better quality consumer loan book than many market participants and has been less aggressive in building up residential mortgage assets in recent years which should offer some protection. Nevertheless, Fitch expects impairment charges across the group to rise in 2009 in line with deteriorating market conditions. Fitch does not believe the commitment to maintain the availability of credit to the UK's SME and housing sectors to be material to the group's ratings as the agency does not expect weaker credit standards to be imposed on the UK bank.

     "In response to the UK government's support package Fitch, on 13 October, raised its support floor for RBS (and the operating UK banks of other systemically important UK banking groups) to 'AA-('AA minus')' from 'A-('A minus')'. In a similar action, Fitch has today raised the support floor for NatWest to 'AA-('AA minus')'from 'A-('A minus')'.

   "These actions follow a review of the outlook for the group's main operating environments. The review also factored in the unique challenges the group faces in integrating ABN Amro in difficult market conditions, the potential for restricted operational flexibility as a result of conditions that could be imposed by HM Treasury should it become a controlling shareholder in the group, and changes to the group's senior management and board."

     *Defanged though it be, Russia (via OAO Gazprom) is creating a "Gas Troika" with Iran and Qatar to jointly explore and produce natural gas. The three countries account for half the world's gas supplies now. OGZPY.PK also set a modest $800 mn budget for development of its offshore Shtokman gasfield in cooperation with foreign partners including Total. Chrisophe de Margerie, CEO of TOT, says this is for 2008-9 pending finaly decision on going ahead with the costly Arctic field.

     *ASUR, the Mexican airport operator, bought a site in Huatulco for a new airport on the West Coast from a Mexican govt. agency developing the resort. ASR.

     *My theory that Veolia, a French water/sewerage firm, would be a haven in a downturn was wrong. VE cut its '08 cash flow forecasts because of a "clear slowdown" in waste management and lower water sales as global economies deteriorate. The stock was cut to add from buy by Dexia, and to reduce from add by Oddo, two French brokers. Sell VE.

     *GSK won a strong buy from Buckingham today. But it was removed from Goldman Sachs' European "conviction list". It bought from Laclede a set of dental and consumer products with annual sales of $170 mn marketed under the Biotene label for $50 mn. The company reports on Q3 tomorrow morning.

     *ICICI saw curious movements last week. Foreign investors in India cut their exposure to IBN by 2%, part of a 3% draw-down in their overall Indian exposure. However, the ADR won considerably more investment in the same week (that of Oct. 13) as those in local markets were selling off IBN. But in both cases, the international investors were buying while Indian short-selling was targetting IBN.

     *ING, the Dutch brokerage, raised Crucell to a 'buy' with a euros 10.30 target. CRXL.Q is doubling its production of Quincaxem (the 5-in-one shot for babies) and is moving its Korean poruduction to Incheon (a Special Economic Zone) to produce this and other vaccines.

      *CLP reported 9-mo revenues rose 6.9% over last year to HK$42.71 bn. The company did not reveal its profits. The dividend was kept unchanged at HK$52/sh. CLPHY.PK.

      *Cryptologic is focusing its business on selling branded games to Internet casinos, starting with a deal via its WagerLogic Ltd. sub with PatryGaming, an on-line operator. CRYP.Q, the formerly Canadian gaming software firm now operating out of Ireland expects to cut operating expenses 12-15% with the new strategy of licensing its popular brands to on-line casinos. PartyGaming works in China, Singapore, and South Korea.

      *Elbit Imaging, an Israeli property and royalty group, is buying back shares of its Plaza Centers sub which are listed in London as PLAZ. The buyback will take back nearly 7% of the PLAZ stock over the next half year. EMITF.Q.

      There is a lot of news today because it is from Monday and Tuesday. I attended a memorial service this morning which is why it is late.

     On Friday, my daily New York Times op ed page contained an article by Warren Buffett, the so-called Oracle of Omaha. I think he is more Omaha than Oracle. He wrote:

      "I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities. Why?

       "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

      "Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher." Here ends my quotation from Mr. Buffett.

       Mr. Buffett seems to ignore something regularly written about on the Times' op ed page: the world is flat (to quote Tom Friedman, who wrote the book on.) Global economies are interrelated. Troubles spread across borders unchecked (as Mr. Buffett himself wrote). So why can't recovery from troubles spread across borders also?

       Mr. Buffett, one of the world's best and most admired investors, is showing that he is extremely insular in making this case for investing in stocks. Because he insists that only U.S. equities will attract him.

      What of the rest of the world, Mr. Buffett? Your Berkshire Hathaway has invested in Israel, in South Korea. Why don't you invest your own money the same way?

       Berkshire has taken preferred stock and option stakes in world-scale companies like GE and Goldman Sachs. If the rebound in shares is confined to the U.S.A., you will have made a bad move in buying into these global companies.

       If most major companies achieve record profits in the next 5 to 20 years, this will not be confined to companies incorporated in the U.S.A. Business does not stop at the water's edge.

       As has become abundantly clear as governments around the globe attempt to counter the crisis: "if we don't hang together we will all hang separately". That is a quote, not from Buffett's guru Ben Graham, but from Ben Franklin.

       A purely single-country nationalist focus to resolving the crisis will fail.

       And it will open the door to the very populist protectionism that extended and deepened the post-1929 economic recession. Job creation in America does not depend on U.S. companies, nor should it. We do not need to "beggar our neighbors" to achieve a rebound. We do not need to stop imports with a revived Smoot Hawley tariff system to get the U.S. back on track.

       Currently, the main reason foreign stocks appear to have performed worse than U.S. shares is the impact of the rush into dollars. This is a technical result of the shortage of liquidity as foreign banks and other players lose credibility (from which they get credit).

       This is a more temporary trend than the low prices of U.S. stocks. It is not resulting in huge and scary increases in volatility such as we have seen with the Dow. Currency trends are just taking their time to get better. The dollar is only slowly losing its temporary edge over the Euro and other moneys.

       The dollar's rise also reflects concerns about the continuation of demand for raw materials; countries producing commodities have had the biggest currency haircuts. I think this is mistaken, as I explain below. Even growing only 8% a year, China and India are not going to stop importing raw materials they cannot produce at home.

       The currency impact of the crisis has been huge. It am indebted to Geoffrey Bell for the following table showing exchange rate movements against the dollar between the dates July 15 to October 17 (as of 9 a.m) His table follows:

       Euro             -15.7%

       Yen               +3.7

       Pound sterling   -13.5

       Canadian $       -19.0

       Swiss franc      -11.9

       Australian $     -30.6

       Chinese yuan      -0.3

       Indian rupee     -13.4

       Brazilian real   -34.6

       Mexican peso     -24.6

       So. African rand -33.5 

       *An example for Mr. Buffett to ponder is Schlumberger Ltd. which is run from Houston by a Scotsman, and is incorporated in Curacao (Netherlands Antilles) with a French family the largest shareholder bloc. SLB trades on the NYSE. Would Mr. Buffett not invest in SLB which sells technical services to oil drillers around the globe because it is not as red, white, and blue American as some of the companies that buy its technology services to drill for oil in remote parts of the globe? Is Exxon really more of an American pick than SLB?

        I failed to realize on Friday that SLB would suffer despite meeting analysts' forecasts and then some for Q3. SLB reported earnings of $1.25/sh vs $1.09 in 2007. (As a company in the oil services business, it operates and reports in dollars, not in euros.) But for the hurricanes in the U.S. Gulf, it would have earned even more, $1.29. Then Andrew Gould (the Scots-born CEO of this Dutch company) warned that sales might be off next year if the credit crunch continues. This cut SLB's stock price by 6%. Yet in the panic, people failed to listen to the rest of Gould's remarks, pointing out that falling oil supplies would boost demand regardless of money shortages.

       Unlike some oilfield services firms focussed on the Home of the Brave, SLB does about 80% of its business booked from Houston in countries other than the U.S.A. So in fact it is a better bet now for investors than other firms in the oilfield services sector reporting this week. (SLB by tradition is the bellwether.)

       *Here is another example. Teva the Israeli generic drug firm taking over Barr, raised money by selling its Israeli veterinary drug unit to NJ's Phibro Animal Health Co. for $47 mn. Phibro once belonged to Solomon Bros. in which Mr. Buffett invested. The Tel Aviv Stock Exchange rose 11.1% on Sunday, which is an indicator that Wall St. may also go up Monday. It may have more impact on the NYSE than Mr. Buffett's article. TEVA.Q

      *Mr. Buffett invested Berkshire Hathaway into Posco, the Korean steel giant. Last Friday it announced a huge investment, with Japanese partners, in a CSN iron ore mine in Brazil. As we forecast, that impacted the prices of other makers of iron ore pellets, like Companhia Rio do Vale Doce, Vale (NYSE-RIO). There is no market in iron ore pellets for speculators to play; but there is an interconnected world of suppliers and consumers.

       *Another. Having been defeated in its plans to have EdF buy Constellation Energy of MD, by Berkshire Hathaway, the French are still working to advance U.S. nuclear power plant technology. Our Areva is in a joint venture with Bechtel employing 500 engineers (200 of them newly hired) to design the specifications for generation 3-plus nuclear reactors. This is going on even before the plants have won approval. The potential buyers include Unistar Nuclear Energy, Amerin UE, and PPL (formerly Pennsylvania Power & Light). The eventual 1600 mW-plus pressurized water plants, built based on technology developed in France and being installed there and in Finland, will be built in Maryland, New York, Missouri, and Pennsylvania. I am not sure where the new-hire engineers are located, but I suspect it is right in the U.S. of A., M. Buffett!

      Apologies to ARVCF.PK for implying last week that the Berkshire victory over Constellation would endanger its Unistar nuclear ambitions. It won't.  

      *GlaxoSmithKline rose 3.5% Friday because analysts figured out that a higher dollar would vastly boost its earnings (in sterling.) The figure of GBP 1.1539 per London share was bandied about. We also consider GSK defensive because of its business (drugs and vaccines, which will be consumed even in a depression) and because of its decent yield.

       *More apologies, first to Dan Mc Cabe for calling him a visiting analyst. He can get into trouble with the SEC if he calls himself an analyst. He was just a visitor with an idea.

       *I cannot always read my own handwriting, and gave the wrong co-author for the Bloomberg article highlighting how Putin might just let the crisis run for a while in Russia to get rid of the headily-indebted oligarchs he inherited with the job. He was Henry Meyer not Henry Dennis.  

       *This blog is being filed Sunday so that I can go to a Financial Times conference on Electronic markets Monday morning. On Wall Street not in The City of London.

    Having long argued that there is no such thing as BRIC markets, since the quartet of large emerging markets are very different critturs, I am not going to follow up my analysis of China (Weds.) and India (Thurs.) with reports on Russia and Brazil.

        However, for the record, I would like to tip my hat to Torrey Clark and Henry Dennis of Bloomberg   who wrote yesterday about Vladimer Putin's revenge. Having had to tolerate the oligarchs who came on board when he gave no-action guarantees to succeed Boris Yeltsin, the Russian premier has long cherished a desire for revenge on the Russian mafia of illicitly enriched new men, many of whom have moved themselves and their money outside its borders.

    Now, with the financial crisis exposing these highly-leveraged parvenus to margin calls, P.M. Putin has an interest in taking his time to bail them out.

     *Visiting advisor Dan McCabe, CEO of Next Investments, is a specialist in designing products for mutual and exchange traded funds. His firm created the SPDR Gold shares (GLD) which we own, along with currency ETFs for Euros, C$, Yen, Mexican pesos, Swedish krona, Swiss Francs, Australian dollars, and British pounds sterling. These are bought with a normal brokerage account and are very liquid.

    Today he tells how to use ETFs in markets which are under siege. He writes:

    "There has never been a failure among demand-deposit accounts in the U.S. All of the CurrencyShares assets are held by in trust by JP Morgan Chase, with Bank of New York as trustee.
 
     "Although the dollar has gained strength against other currencies in recent weeks, most advisors recommend diversifying dollar-held assets to hedge against the inevitable turn of global events that has rocked financial markets. 
 
     "If the recent gyrations have taught us anything, it's not to put all your dollars into dollars - or indeed any single currency. And one certain byproduct of all the money being pumped into the system by the world's central banks will be a rise in inflation, which only increases the need to own a basket of currencies as a hedge of being overexposed to any one country - including the U.S.

    "Currency ETFs are actual demand-deposit equities traded on the New York Stock Exchange. Each individual currency pays overnight rates - investors have the assurance of inter-day liquidity and virtually no counter-party risk. They aren't swaps or derivatives, they're not leveraged - for the average investor, they are meant to be held as a means of asset diversification.
 
    "At the same time, CurrencyShares are the only currency ETFs with options available for trading, allowing investors a chance to more actively hedge their currency holdings.
 
     "Example: an investor buys 100 shares of FXE (the Rydex euro ETF) at a price of around $134.60 given the [Friday] conversion rates. Simultaneously, the same investor sells a November 138 call option at $2.00.
 
     "By this scenario, you would receive 38 cents in dividends before the November 22 expiration, along with the $2.00 from the sale of a single call - protecting you to $132.22 on the downside. (Editor's note: Mr. McCabe subtracted the 4 cents/mo management fee from the 42.27 cents of monthly dividend.) 
 
     "If the FXE trades up to 138 or higher by its expiration date, you make $5.78 for each share, which represents a 52% annualized return.  Given what's happening right now, with banking bailouts on both sides of the Atlantic, it's not at all hard to imagine the euro going back up to 138 over the next month."

      Vivian adds: You are protected to $132.22 if FXE falls.

      The trade outlined sounds much more interesting than just holding the European stock ETF, EZU, and we advise switching.

     *A further note to show that the Sino-Brazilian negotiations over iron ore pellet prices we reported on yesterday are not reflective of the real economy is news that Posco is buying (with Japanese partners) from CSN of Brazil the Nacional Mineiros S.A. (Naminsa) iron mine. PCX and partners are paying 400 billion yen, about $3.9 bn.

      *The OAO Gazprom deal to buy out the Kovytka mine from TNK-BP (a fatal combo of oligarchs and a British firm owning 63% of a Russian resource) will be abrogated if the license is not renewed next week.) OGZPY.PK would then presumably be able to buy the license directly from its controlling shareholder, Russia.

      *Crucell with its partner Aeraas Global TB Vaccine Foundation, will begin phase II testing of their vaccine, Aera402/CrucellAd35 in Africa. The TB vaccine uses PER.C6 manufactuign technology and a vaccine vector from CRUX and if this pans out the shot can more into large-cale manufacturing. The rests will take place in Kisumu in western Kenya among healthy people and in Cape Town among people exposed to TB.

      *Raymond James today issued a strong buy on Sun Tech Power which we have also been enthusiastic about. STP is the oldest, largest, and wisest of the Chinese solar ADRs.

      *Areva, the French nuclear powerhouse, is facing a few hurdles. First of all, its buddy, EdF, pulled out of the bidding for Constellation Energy (MD), leaving Berkshire Hathaway in control. The two companies have a joint venture to develop a U.S. standard nuclear power station based on ARVCF.PK models in wide use in France.

     Secondly, Finnish licensing delays mean that the Olkiluro nuclear power plant there will not be commissioned until 2012. The plant is being built with Siemens, and is the first of a new generation of nuclear electricity generators. The Franco-German partners have also called for arbitration of the contract because of approval delays which are costing them money. The delays have nothing to do with safety, because all standards are being met; they are about NIMBY.

     *Yara reported a very strong Q3 today, with net at NOK 3.36 bn ($455 mn or NOK 11.55/sh or $1.76/sh) double year-earlier levels. The company benefited from higher fertilizer prices which overcame higer oil costs. The figures exclude the impact of acquisition of Kemira Grow How early this year. Sales however were down because of lags in Brazil and Asia. YARIY.Q warns that financial turmoil may have unpredictable effects and orders may be delayed because of the credit crunch going forward. However, it also points out that demand for food is pretty inelastic.

    Mes excuses for the blog being late. I spent hours fighting with the blogsite today.