Despite concerns expressed by federal regulators about the growth of nontraditional mortgages, their popularity among borrowers continues to rise, according to statistics released yesterday.

About 26 percent of mortgage loan originations by dollar volume in the first six months of 2006 were interest-only loans, according to the Mortgage Bankers Association, a trade group in the District. Such loans do not require borrowers to pay down the principal.

Analysis: Anything to keep those hpuses moving. So the FED will raise rates on these people. I don’t think so.…

Clive Maund theorizes that the recent silver action may be a precursor to a “superspike” like back in 1979-80. As he cautions, these events only happen once a generation. I would argue that it would not suprise me and we are positioned for a spike. I think the odds favor a pull back as we are way overbought at this point. However I am ready to let the market tell me what it wants to do.…

The reason for this revisit to the “BRIC” story is the enormous amount of press about the “burst bubble” in commodities this month.  It’s an important, some might say, critical, topic.  How we should act and react in the market is intimately related to the type of market we are in.  Viewed in isolation, a bear market rally will look pretty much like a small piece of a bull market rally.  But while you might be looking for periods of weakness to accumulate positions in a bull market you’d be much more likely to be watching like a hawk for any weakness as a sell signal in a bear market rally.

Much of chatter recently focused on “unsustainable” growth in China.  This is said to prove the point that commodity prices have to fall.

We won’t know just how long China’s (or India’s or …) secular expansion lasts until it’s come to an end.  What we do know is that if it looks like recent periods of above trend growth in the region, namely Japan and South Korea, it will last for at least 25-30 years.

This is not wild eyed optimism.  Similar growth periods moving through mass industrialization in both Europe and North America had similar time frames.   That is about how long it takes to move to and through the process and to upgrade infrastructure (both public and private) to the level where it becomes sustainable.   There is absolutely nothing unusual about the length of the China expansion and we expect the one just starting in India will fit the pattern as well.

Analysis: We can see the historical patterns or generational growth and infastructure buildout ie Japan and South Korea. We can reasonably say the same dynmaics will play out in the BRIC countries thereby underpinning long term commodity prices. Once Wall Street figures this out we should a revaluation of the commodity stocks.…

Cameco Corp., the world’s largest producer of uranium, said Monday it was unable to control water flowing into its Cigar Lake project following a Sunday rock slide, and it expects all underground areas to be filled with water.

The company said it evacuated everyone by 11:30 a.m., and it will investigate options to restore access to the mine. Cameco said it is committed to the project, and it will develop new timelines for construction, cost estimates and production forecasts. The mine was originally slated to start production in early 2008.

At 5 a.m. Monday, Cameco closed two bulkhead doors to try to protect the project’s main shaft and key underground infrastructure. The company later, though, found one of the doors did not seal properly, allowing significant water to flow into the processing area.

Cameco said it is adequately positioned to meets its contractual obligations, as it has supply interruption protection in contracts.

Analysis: Well this is no the best of news. This mine was scheduled to come online next year and produce 18 million pounds per year. This is one of the hazards of mining. There are two paths forward for us sell now or hold on ride through this and have confidence management will fix the mine and bring it online in 2008. I am inclined to hold as I have confidence uranium and nuclear power is the only way to go for mass power generation. It will take a few days to digest this information and get a feel for where the stock should trade. You will notice this news got the other uranium stocks to rally hard as this is just makes a bad supply situation worse. I think you can pretty much count on a supply squeeze in uranium. Buying Uranium Particpation Corp. could be a good play here if you do not own it. In summary, I am a long term bull on uranium and I want to own the largest uranium miner so I will hold and add if the stock were to drop enough.…

Fears that the massive Ghawar oil field in Saudi Arabia may have passed its prime have been the stuff of speculation for many years. Ghawar has underpinned Saudi Arabia’s dominance of the oil market ever since it came on stream in 1951. With its ability to pump out some five million barrels per day on average, more than half of Saudi Aramco’s total of 9.1 million barrels per day, the slow death of Ghawar may help to ensure that the low oil prices of the 1980s are but a dream for the average consumer.

Don Coxe, an analyst from the Bank of Montreal, once described Ghawar as having passed “Hubbert’s Peak”, a phrase used in honour of geologist M King Hubbert, who predicted oil field decline in the 1950s. The best indication of this is the steadily increased usage of water injection in the wells. Water injection is normally used on older oilfields to maintain pressure within the well and force out more oil. The problem is, once the water reaches the well head, the field has to be abandoned. Many are now pondering the connection between Saudi production and increasing water usage. As Coxe puts it, “Isn’t water flooding [the] Viagra of ageing wells?”…

CBS Marketwatch:

SAN FRANCISCO (MarketWatch) — As the world seeks alternatives to oil as a source of energy, uranium has been on a tear, scoring a gain of around 700% in six years as interest in nuclear power has revived.
“Uranium’s performance has been in a league of its own,” said Scott Wright, an analyst at financial-services company, Zeal LLC.
Uranium has been one of the best-performing commodities in this bull market, he said. Spot prices are trading at around $56 a pound, an eight-fold increase from as low as $7 back in 2000. See the latest uranium prices.
“And the way fundamentals look today, there could be a lot more room to run,” said Wright.
Crude and gold prices have seen strong gains, but they pale in comparison to uranium. Over the last six years, crude futures are up around 90% and gold futures prices have more than doubled.
The biggest reason for uranium’s rise? Simply put: supply scarcity.…

In recent years, the price of uranium has flown higher than that of gold, silver, platinum or palladium. From 2001 to 2006, the uranium price rose by approximately 700%.

It looks like the upside may have a lot further to go. Global demand for uranium is 160 million pounds per year, but only 90-100 million pounds is produced from mining production. The shortfall is being made up by drawing from stockpiles that had built up from the over-production during the 1970s and from decommissioned nukes from the former Soviet Union.

“For 20 years, mine supply has accounted for 60% of what is needed to supply reactors,” says Dr Tim Sugden, managing director at Nova Energy Limited at the gold and precious metals investment world conference in Hong Kong. Nova owns a major uranium deposit in Australia that it hopes to start mining in the near future. “After 2013, Russia has said it will stop supplying enriched uranium to the West.There will be a supply squeeze.”

Analysis: It is interesting and typical that people gain interest in an investment after it has gone up hundreds of percent. The fact that a supply squeeze is coming is of interest to us as we have fairly nice gains in our uraniums and will look to cash out as the public comes in at the top.…

Comstock Partners:

Widespread reports that the housing industry is stabilizing are just too incredible to believe.  Affordability remains at a 15-year low; inventories are at record levels, new housing permits are plunging; and industry executives are telling us every day how bad things really are.

Foreclosures in dallas highest sine 1980’s oil bust.

Dallas Morning News:

 Home foreclosure postings in the Dallas-Fort Worth area have surged to their highest level since the 1980s.Nearly 4,000 homes in Dallas, Tarrant, Collin and Denton counties have been posted for possible sale in November, up 49 percent from the same period a year ago.

“It’s high, much higher than normal,” said George Roddy, president of Addison-based Foreclosure Listing Service, which compiled the data.

Fueling the foreclosures are interest rate hikes, rising living expenses and consumer debt, and aggressive lending practices.

Home foreclosure postings reached about 35,300 so far this year, increasing 20 percent over the same period a year ago. That figure has already surpassed the total for 2005, which was about 32,500.…


Dune Energy, Inc. (Amex: DNE – News) announced today that it has placed nine wells on production since August 30, 2006. Stabilized rates from these new wells has added gross production of 10.0 million cubic feet per day (MMcfe/d), bringing the Company’s total daily gross production to 12.3 MMcfe/d. This represents better than a four-fold increase over previous levels.

Four wells were drilled and placed on production by Dune on its existing core Barnett Shale acreage, while two were purchased as part of its recent acquisition of properties from Voyager Partners, Ltd.

Dune has also participated in the successful recompletion of three wells on its Bayou Couba property in South Louisiana. Dune owns a 91.4% WI in two of these wells and a 20.7% WI in the third.

In addition, Dune has participated in the completion of two wells on its Welder Ranch property in Victoria County, Texas. Both wells are waiting on pipeline connection. Dune was carried to casing point in the two wells as part of a previously announced farm-in agreement with Chesapeake Energy.

Amiel David, President and Chief Operating Officer said, “Dedicating the Itera #1 Rig to our Barnett Shale properties allows us to drill up to 10 wells per year. We have 24 horizontal and vertical locations in our current Barnett Shale drilling inventory. Upon successful closing of the remaining Voyager assets, our total number of drilling locations will increase to 51, excluding any additional acquisition of acreage in the Basin.”

Analysis: This could be another GMX Resources. If you remember we rode to around 400% gains on that stock under the same conditions. Huge increases in production will move the stock. This stock is a strong buy.…

Smith Blog:

While screaming-head entertainers/pundits can call all the “bottoms” they want, even a cursory analysis of the HGX chart suggests the bottom is a long way down. Not shown on the chart is the third downleg, which will bring the index down to 50 or even lower.

Impossible, you say? Recall the dot-com meltdown, if you will. Take a real company such as Akamai (AKAM) which ran to $348 at the height of the dot-com mania in early 2000. It subsequently fell to 56 cents in October 2003. If the housing sector continues to build unwanted inventory and dumps that inventory for losses, why would anyone buy housing stocks? For the land, which is depreciating rapidly? For the book value of deteriorating assets?

I would say fair value of the housing index at the real bottom several years hence will be about 38. Give or take a few points; check back in October 2008 and we’ll see where the index stands at that point.…