Asia is still cooking and posting very robust growth. China's second-quarter GDP came in at 10.1%, and even though that's a smidgen less than expectations, it’s still impressive double-digit growth. Meanwhile, India continues to grow at near 9% … Malaysia at 7.1% … Indonesia at 6.3% … and Thailand at almost 6%.

On another note, a new study just released by the Carnegie Endowment for International Peace forecasts that China’s economy is on track to surpass the U.S. by 2035, and that it will be spurred by domestic demand. This isn’t news to me. I’ve been reporting my front-line analysis from Asia and China since way back in 2004, and I told my Real Wealth Report subscribers then – and even now – that when it comes to China’s economic growth, you ain’t seen nothing yet!

The list of Chinese solar companies listed in the U.S. is already pretty long: Suntech Power, LDK Solar, JA Solar, Canadian Solar (yes, it is a Chinese company), Trina Solar, Solarfin Power, ReneSola, China Sunergy.

Kingsgate Jumps Most in 10 Years After Winning Approval for Thailand Mine Kingsgate Consolidated Ltd., owner of Thailand's biggest gold mine, rose by the most in a decade in Sydney trading after receiving final ministerial approval for the Chatree North mining lease next to its existing operation.

Sino Gold 2nd-Quarter Output From Jinfeng Mine Rises More Than Threefold Sino Gold Mining Ltd., owner of China's second-largest gold mine, said second-quarter output at the Jinfeng operation rose more than threefold as a greater volume of ore was mined.

And here's my latest interview with Phil at HoweStreet.com ...

http://tinyurl.com/6cc7qb

In Other News …

Just how much money does China have? How fast are China’s foreign assets growing? And how much is hot money?

ECONOMY

The global economy is at the point of maximum danger

It feels like the summer of 1931. The world's two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.

The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a "chance of a global recession". Plainly, the IMF cannot or will not offer any useful insights.

Its "mean-reversion" model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True "mean-reversion" would imply debt deflation on such a scale that would, if abrupt, threaten democracy.

FANNIE MAE-FREDDIE MAC MELTDOWN WATCH

Pimco's Gross Says Fannie, Freddie Need Treasury

Bill Gross, who manages the world's biggest bond fund, said it's not possible for government sponsored mortgage-finance companies Fannie Mae and Freddie Mac to raise capital without the Treasury Department's support.

``Let's be blunt: to the extent the Treasury suggests they'll never have to use their authority, that's a sham,'' said Gross of Pacific Investment Management Co. ``It's fallacious to suggest that the agencies could issue capital, preferred stock, without the co-participation of the Treasury. I don't think that's possible.''

Fannie, Freddie May Record More Losses on Subprime, Alt-A Debt, Ofheo Says Fannie Mae and Freddie Mac may need to record more writedowns after they expanded their purchases of non-guaranteed subprime and Alt-A mortgage securities just as other investors fled to safer investments, their regulator said

Measures to avoid the worst recession in 30 years

Ben Bernanke, Federal Reserve chairman, this week alluded to an economy facing “numerous difficulties”. In fact there are only two, but each alone is cause for genuine concern over the US economy’s prospects: first, an implosion of the financial system triggered by the teetering housing market; and, second, record prices for oil and other commodities that are largely driven by events abroad. … It is time to devise a programme to promote overall economic recovery by fighting for the economy’s future on both fronts simultaneously.

ENERGY

Goldman Sachs Group Says Energy Stocks Are a `Buy' After Shares Retreated Investors should buy energy stocks, which fell the most last week in six months, as oil prices will rebound, Goldman Sachs Group Inc. said.

OPEC Must Increase Oil Output to Lower Prices, Promote Growth, CGES Says OPEC needs to raise oil production to reduce crude prices and help global economic growth, the Centre for Global Energy Studies said.

IEA warns non-Opec oil could peak in two years

Oil production in non-Opec countries is set to peak within the next two years, leaving the world increasingly dependent on supplies from the cartel of exporting nations, according to one of the world's leading energy experts.

Fatih Birol, chief economist of the International Energy Agency (IEA), said that falling production from key regions such as the North Sea and the Gulf of Mexico would leave international oil companies such as Shell and BP increasingly sidelined at the expense of national oil companies, such as Saudi Aramco.

Crude oil rose from a six-week low as a tropical storm headed toward the Gulf of Mexico and Iran, the world's fourth-biggest producer, resisted demands to suspend nuclear research.

Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad

About one-fifth of securities issued by Fannie, Freddie and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States.

Now that the two companies are at risk, how their rescue is handled will ultimately test the world’s faith in American markets. It could also influence the level of interest rates and weigh on the strength of the dollar for years to come, analysts say.

“No less than the international perception of the credit quality of the U.S. government is at stake,” said Richard Hofmann, an analyst with CreditSights, an independent research house with offices in London and New York."

Also at stake is Americans’ future ability to gain access to credit. If foreign companies and governments abandon United States investments, home, auto and credit card loans will be much more difficult to come by.

Never Have So Many Short Sellers Made So Much Money With Stocks Worldwide Investors worldwide are betting more than $1 trillion on a collapse in stock prices.

Economist’s View on Why The Economy Is as GOOD as It Is (and not worse … yet)

Commercial bankruptcies soar, reflecting widening economic woes.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.

The Coming Systemic Bust of the U.S. Banking System: “Dead Stocks Rallying”

This past week started with concerns about another systemic meltdown of the U.S. financial system as the insolvency of Fannie and Freddie was revealed and as IndyMac went bust (this third largest bank collapse in U.S. history). But the week ended with a remarkable rally of financial stocks as better than expected results from Wells Fargo, JP Morgan and Citi soothed the fears that major financial institutions were in even more distress than already predicted by market analysts.

Unfortunately, this massive rally of financial stocks in the latter part of the week is just another temporary bear market rally that will fizzle away once the onslaught of bad financial and macro news builds up again.

Paulson braces public for months of tough times

Treasury Secretary Henry Paulson sought to reassure an anxious public Sunday that the banking system is sound, while also bracing people for more troubled times ahead.

The 2008 oil shock

This calculation assumes that the oil exporters will export about 45 million barrels a day of oil.
Each $5 increase in the aver

age price of oil increases the oil exporters’ revenues by about $80 billion, so if oil ends up averaging $125 a barrel this year rather than $120 a barrel, the increase in the oil exporters revenues would be close to a trillion dollars.

Beijing orders half its cars off roads to clear air for Olympics

Authorities forecast that the sweeping traffic restrictions, and measures to shut down polluting factories, would help clear smog over Beijing in time for the Games, which begin Aug. 8.

Same-store sales in the U.S. grew by 2% but same-store sales grew by 14% in mainland China and 4% internationally. Yum added nearly 100 restaurants in China during the quarter and said the pace of new development in 2008 is ahead of last year's record pace. Yum expects to  reach 3,000 units by the end of the year.

The short-term trend in oil is now down.

This is probably due to the fact that the US has decided to make peaceful overtures to Iran and the fact that we are seeing demand destruction here in the U.S. and in other Western nations. However ...

* So far, demand destruction is NOT accelerating. Mastercard says U.S. retail gasoline demand plummeted more than 5 percent last week compared to the same week last year. But Mastercard's April 8th figures showed a 6.8% decline from the same point last year. So, according to Mastercard's measure, demand destruction slowed down from April to June.

Keep in mind that Mastercard only tracks credit card sales at the gas pump. Some retailers are now demanding payment in cash or offering discounts for cash payments. So Mastercard is probably undermeasuring gasoline sales. Still, this shows the inelasticity of demand comes in to play and mitigates demand destruction, even as prices go higher.

* Global exports are flat to trending down. Take a look at this chart ...

Source: http://netoilexports.blogspot.com/

This is because oil producers are using more and more of their own product. Combine this with my first two points, and the longer-term trend for oil is much higher, even though the short-term trend is down.

In Other News

Gold eased on Friday as the market responded to this week's big fall in oil prices and a rise in the dollar against the euro, denting bullion's appeal as a currency hedge. However, gold recovered from lows as weakness on the equity markets burnished its appeal as a haven from risk.

Get ready for the last oil war

The now accelerating countdown to Peak Oil marking the ultimate peak of world production – with a faster fall-off in net export supplies than total production under several logical scenarios - can only aggravate existing global and regional tensions, especially in the Mid East. Any decline in global export supply (currently running at about 51 million barrels/day (Mbd)) will be catastrophic for attempts at maintaining flagging credibility in ‘market supply/demand balance’ and open market price setting. The date at which this will happen, without war accelerating the process through destroying oil infrastructures is of course disputed. Several studies indicate likely date could be 2012-2013.

Pakistani investors attack bourses after share collapse

Investors ransacked stock exchanges in Karachi, Lahore and Islamabad yesterday, reacting to a share-price rout that has devastated the life savings of many Pakistanis.

Police and paramilitary officers were drafted in to protect the Karachi Stock Exchange after a mob stoned the building and smashed windows. In Lahore, investors burnt tyres and blockaded the local bourse.

The violence came after a 35 per cent fall in the Karachi index in the past three months on concerns over the stability of Pakistan's fragile coalition Government, soaring inflation, and the weakness of the rupee.

When the monied interests whined, they made themselves heard by dumping the stocks of these two quasi-public private corporations, threatening to collapse the two financial firms like the investor "run" that wiped out Bear Stearns in March. The real distress of the banks and brokerages and major investors is that they cannot unload the rotten mortgage securities packaged by Fannie Mae and banks sold worldwide. Wall Street's preferred solution: dump the bad paper on the rest of us, the unwitting American taxpayers.

This is why I hate government most of the time.

According to Reuters, The U.S. Securities and Exchange Commission issued an emergency order on Tuesday placing restrictions on the short selling of shares of certain major financial firms.

Here are 19 stocks where no naked short selling is allowed from July 21 through July 29 (though they may extend it to 30 days):

* BNP Paribas Securities Corp
* Bank of America Corp
* Barclays PLC
* Citigroup Inc
* Credit Suisse Group
* Daiwa Securities Group Inc
* Deutsche Bank Group AG
* Allianz SE
* Goldman Sachs Group Inc
* Royal Bank ADS
* HSBC Holdings Plc ADS
* JPMorgan Chase & Co
* Lehman Brothers Holdings Inc
* Merrill Lynch & Co Inc
* Mizuho Financial Group Inc
* Morgan Stanley
* UBS AG
* Freddie Mac
* Fannie Mae

Gee, I thought JP Morgan had blow-out earnings today … but apparently they’re so weak you can’t short-sell them. And yet Washington Mutual, which is swirling in a sea of failure rumors, is not on the list. I have no position on whether those rumors are true or false – it’s just that that if any stock is going to need protection from speculators, it’s WM. So is the government protecting weak stocks … or is it something else?

Have you ever seen anything so cockamamie? Either allow short-selling for all stocks or don’t, but picking out 19 stocks for special treatment is ludicrous. And while I appreciate they are trying to give the market time to find its footing, changing the rules like this could backfire and just put off the day of reckoning, making it worse. Let’s see what happens after July 29 (or after August 20 if they extend it)

As has been pointed out elsewhere, China had short sale restrictions on and it did not stop the Shanghai index from falling over 50%. Insolvency cannot be cured by short sale restrictions and some or even many of those companies may be insolvent.

The SEC’s list of 19, of course, is heroin for conspiracy junkies. But what if the conspiracy theorists are right? Check out this comment I picked up from Mish Shedlock’s blog, where savvyinvestor writes…

I would like you all to consider a market manipulation scenario which is becoming increasingly credible when you consider the moves in equities and commodities over the past 2-3 days. Let us suppose that Paulson went to his buddies at Goldman Sachs and worked out a deal: "We will give you the regulatory framework you need to make a killing; in turn, you bail out the financials."

So here's how it works. "Naked short selling" will not be allowed starting monday - why not today? Because they need several days to get the mother of all pump-n-dumps in place. To raise money, GS first dumps all its commodities longs. It dives into the targeted financials and begins accumulating massive numbers of shares.

Come Monday, you can short the stocks if you like - but you have to borrow the share first. And where are you going to borrow the share if Goldman Sachs' hedge funds have a lion’s share of the float? With no possibility of short selling, and a huge number of shares tied up so that buyers are competing for a much smaller share pool, the financials' shares skyrocket, getting back the last years' losses in a couple of weeks. Then GS dumps its shares, for profits in the hundreds of billions, Fannie raises its capital, and the crisis has been averted without spending a single taxpayer dime - but at the cost of swindling millions of investors who don't have the inside knowledge of how this scam is being worked or what the timing is.

XX Sean’s note -- That theory may not be correct, but it sure is interesting. Meanwhile …

As faith in bank bailouts dims, losses set to deepen

The nightmare scenario for U.S. economic authorities is here: confidence in their ability to rescue the country from a housing-led financial panic is now at its lowest level since the crisis began.

XX Sean’s note – and what about the U.S. dollar? Well, there are some pretty interesting developments there, too. The Financial Times reports that …

Sovereign funds cut exposure to weak dollar

Some of the world’s largest sovereign wealth funds are seeking to scale back their exposure to the US dollar in a sign of global concern about the currency.

One big sovereign fund in the Gulf has cut its dollar-denominated holdings from more than 80 per cent a year ago to less than 60 per cent, while China’s State Administration of Foreign Exchange (SAFE) has been looking to strike deals with private equity firms in Europe as a part of a strategy to reduce its dollar holdings.

In Other News

ENERGY

Oil Falls for Third Day as Slower Global Economic Growth Curbs Fuel Demand Crude oil fell for third day, the longest losing streak for a month, on speculation slower global economic growth is curbing fuel consumption.

Xx Sean’s note – still, the support I talked about yesterday seems to be holding, so far anyway.

Summary of Weekly Petroleum Data for the Week Ending July 11, 2008

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.0 million barrels from the previous week. At 296.9 million barrels, U.S. crude oil inventories are near the lower boundary of the average range for this time of year. Total motor gasoline inventories increased by 2.4 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and gasoline blending components inventories increased last week. Distillate fuel inventories increased by 3.2 million barrels, and are in the upper half of the average range for this time of year. Propane/propylene inventories increased by 1.0 million barrels last week but remain below the lower limit of the average range. Total commercial petroleum inventories increased by 7.5 million barrels last week, and are near the bottom of the average range for this time of year.

XX Sean’s note – so, higher prices at the pump are definitely having a deeper effect on consumption. Top of Form

And here's what they were expecting: Analysts surveyed by Platts expect that U.S. crude stockpiles decreased by 3 million barrels last week. They also expect a decline of 1.1 million barrels in gasoline inventories and a buildup of 1.7 million barrels in distillates.

Crude Awakening

If this document is accurate, it means that Simmons was right on the money. What's worse, the details are even more discouraging: as the chart on the right shows, what little production increase the Saudis can sustain is all in medium and heavy crudes. Production of light crude, preferred by most refineries, actually decreases by 200,000 barrels per day between now and 2013.

CLIMATE CHANGE

Ice shelf near collapse

Scientists are warning that an Antarctic ice shelf the size of Northern Ireland is on the verge of disintegration, even though it is the middle of winter. The shelf, near the base of the Antarctic Peninsula, had not been expected to collapse until the early 2020s.

China's Economic Growth Cools to 10.1%, Adding Pressure to Slow Yuan Gains

China's economy grew at the slowest pace since 2005 in the second quarter, prompting speculation the government will slow the yuan's gains to protect export jobs.

China's First-Half Vehicle Sales Growth Slows to 19%

XX Sean’s note – US car makers would kill for 19% growth. And this is an interesting line in the news item: “vehicles are becoming affordable to more people in China because of the country's 10 percent economic growth rate and price cuts triggered by rising competition. The proportion of people owning vehicles in China is also only equal to that seen in the U.S. in 1925 and in the U.K. in 1950.”

Private cars to be on Beijing streets on alternate days

Car owners in Beijing will have to remember the last digit of their licence plates and the day of the week before taking their vehicles out on the streets from Sunday as traffic management gets into top gear for the Olympics next month. According to an odd-even number traffic control plan devised by the local authorities, private vehicles will be allowed on the streets on alternate days. If a car with an odd numbered licence plate is allowed to ply Sunday, those with even numbers will get the opportunity the next day.

XX Sean’s note – this may weigh on global oil demand and prices going forward. I thought Beijing would wait until the games started to begin their “license plate bingo” but apparently they’re starting early. They’ve closed down over 100 polluting factories, too.

CANADA

May Factory Sales Gain More Than Five Times Forecast on Energy, Metals Canadian factory shipments rose 2.7 percent in May, the biggest one-month gain since March 2007 and more than five times as much as anticipated, as sales of petroleum and coal products surged.

US ECONOMY

U.S. Consumer Prices Climb Most Since 1991; Homebuilder Confidence Slumps

U.S. consumer prices surged 5 percent in the past year, the biggest jump since 1991, just as households struggled with falling home values and the credit crunch. Spiraling expenses for food and fuel spurred the increase in June, the Labor Department said today in Washington. The cost of living rose 1.1 percent from May, more than forecast and the second-largest rise since 1982.

`Misery Index' in U.S. Advances to 15-Year High as Inflation Accelerates

Misery hasn't had this much company in more than 15 years. The jump in consumer prices reported today by the Labor Department means the so-called Misery Index, the sum of the unemployment and inflation rates, is the highest since President Bill Clinton took office in January 1993. The measure, created by Arthur Okun, an economics adviser to President Lyndon Johnson, rose to 10.5 in June from 9.7 in the prior month.

Starbucks has 300 stores in China already and will open another 80 in 2008. That is just the tip of the iceberg though. 

"We still have a long way to go. We'll continue to expand. The number of stores will not be in the hundreds, but in the thousands,' said the head of Starbucks China.