In the news this morning:

1. Stocks, U.S. Futures Tumble on China Growth Concern, BP Spill; Oil Plunges: We discussed the topic of China's unsustainable growth and the knock on effects its slowdown would have on other economies in detail just last week. How timely...
   1. The Narrowing Chinese Trade Surplus
   2. In Australia, Tax as a Contagion
   3. Australia: The Land Down Under(water in mortgage debt)
   4. BoomBustBlog China Focus: Inflation?
   5. BoomBustBlog China Focus: Interest Rates
   6. My China Ruminations Have Come to Pass As the Country Enters a Bear Market
   7. Chubble (The Unmistakeable, Yet Thoroughly Argued Chinese Bubble), Unemployed/Deleveraging Shopaholics Pushing Retail Stocks & Other News
2. Euro Weakens Against Dollar on Speculation Crisis Hurting Region's Economy: Nothing new here. BoomBustBlog newcomers, see the Pan-European Debt Crisis here.
3. BP Tumbles Most in 18 Years After Abandoning Attempt to Plug Leaking Well: The company's future doesn't look to bright!
4. Paulson Drops 6.9% as Hedge Funds Post Biggest Monthly Losses Since Lehman (HNWs and institutional investors should take the time to read this article and my summaries): Many funds, including Paulson's, made hard bullish bets on the financial sector recovering, in direct contravention to my positions and research. Yes, the financial sector took off like a bat out of hell the last 3 quarters of 2009, but one shouldn't confuse sharp market price movements with fundamentals. Many, if not most are in bad shape, and it ain't lookin' much better in the near term either. See The Next Step in the Bank Implosion Cycle???. Most importantly, many (if not most) professional money managers and analysts totally underestimated the extent of the damage being done Europe. I have was weary of Europe since 2008, put short research and positions on in 2009 (with mixed results due to the bear market rally) and went full blown GRIZZLY BEAR in 2010 (reference the Pan-European Debt Crisis which publicly documents and details it all). Back to the news clip:
   
   1. (Bloomberg) -- John Paulson, Louis Bacon and Andreas Halvorsen navigated the global market turmoil of 2008 with little or no damage. They weren’t as successful last month as the Dow Jones Industrial average had its worst May since 1940. Hedge funds lost an average of 2.7 percent through May 27, according to the HFRX Global Hedge Fund Index, as the sovereign debt crisis in Europe triggered declines in stocks, the euro and commodities, and the gap in yields between U.S. short-term and long-term debt narrowed. It was the biggest decline since November 2008, when hedge funds lost 3 percent in the wake of Lehman Brothers Holdings Inc.’s bankruptcy two months earlier. Almost every strategy lost money in May, according to Hedge Fund Research Inc. in Chicago, as the Dow index of 30 big stocks sank 7.6 percent including dividends amid speculation that Greece’s debt problems would spread to nations such as Spain and Portugal. Some of the best-known funds saw their gains for this year erased. “Attempting to manage risk in an environment where everything that could go wrong does go wrong seems like a fruitless endeavor,” said Brad Balter, who runs Balter Capital Management LLC, a Boston firm that invests in hedge funds for clients. “The only defense that seems to work in months like these is being in cash.”

   "SAC Capital Advisors LLC, the hedge-fund firm run by Steven Cohen in Stamford, Connecticut, with about $12 billion under management, lost 2.9 percent last month through May 21 with its SAC Capital International fund, trimming this year’s gain to about 4 percent, according to people familiar with the firm.

   Citadel Investment Group LLC, the $12 billion hedge-fund firm run by Ken Griffin, lost about 2 percent with its biggest funds last month through May 21, said people familiar with the Chicago firm. The funds soared as much as 62 percent last year as markets rebounded after losing as much as 55 percent in 2008.

   Brevan Howard Asset Management LLP in London, Europe’s largest hedge-fund firm, lost 0.1 percent for the month through May 21 with its Brevan Howard Fund Ltd., leaving it with a decline of 0.3 percent this year, according to an investor.

   1. I will gladly compare the performance of BoomBustBlog research to any bank, fund or asset manager that charges big commissions or 2 and 20! Reference Updated 2008 performance and the 2009 Year End Note to BoomBustBlog Readers and Subscribers for rough performance numbers covering 2007, 2008 and 2009.
      
5. Analysts Boosting Forecasts See 25% Stock Gain Defying El-Erian New Normal: Yeah, but aren't analysts mostly wrong unless we're in  a bull  market? Stocks always go up, Right????!!!! Reference Blog vs Broker, Who Do You Trust?
6. Cameron Bull Market in Gilts Beating Merkel Bonds as U.K. Keeps AAA Rating: For now, at least. Subscribers, see 
   UK Public Finances March 2010
7. 
   

I will start posting more news topics of interest and welcome readers to forward research and investment ideas at will. Here is the crop from last week. I will post topics from the weekend later on today, and as usual will randomly comment on daily news events.

From Alliance Bernstein:

• Core Intermediate Producer Prices have taken 6 months to rise 5.2% annualized, recession of 2002 took 2 years to reach same level
• Operating Rate hit low of 65.4% last year and has only risen to 69.4%, still short of historical threshold causing rise in raw material prices (74%)
• Increases in foreign operating rates have started to indicate US may now be a price follower instead of price leader
• The Fed cited lack of resource utilization as reasoning for maintaining record low rates, as these concerns begin to wane Alliance Bernstein sees easing of emergency Fed policy

Bloomberg.com:

• Christina Romer, Peter Orszag, and Tim Geithner have predicted unemployment will settle in 2010 at around 9.7%, citing poor job conditions
• Federal deficit projections for 2011 & 2015 are $1.5 trillion & $751 billion respectively, White House officials cite Bush's medicare and income tax cuts for allowing deficit insanity

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges. Click graphic below to enlarge.

For those "gold bugs" who have never ran the numbers, gold offers less inflation protection than your house does. The same goes for WTI crude and probably most other categories of oil.

From Yahoo News:

Analysts downgrade oil tankers on fears that shipping rates will dwindle in economic weakness

NEW YORK (AP) -- A pair of analysts downgraded several oil tanker companies on Monday, predicting that shipping rates might have reached their peaks as the global economy weakens and an influx of ships approaches the market.

Jefferies analyst Douglas Mavrinac cut shares of Frontline Ltd. and Nordic American Tanker Shipping Ltd. to "Underperform" from "Hold," citing both companies' heavy reliance on the spot charter market, where rates could be "significantly weaker" in 2009.

Mavrinac also lowered his rating on Tsakos Energy Navigation Ltd. and Overseas Shipholding Group Inc. to "Hold" from "Buy," suggesting the stocks have little room to grow if shipping rates fall as expected next year.

The analyst also cut his 2009 earnings estimates and price targets for most of the oil tanker stocks he covers.

Also Monday, JPMorgan analyst Jonathan B. Chappell cut his rating on Nordic American Tanker Shipping to "Underweight" from "Neutral," and downgraded General Maritime Corp. and Teekay Tankers Ltd. to "Neutral" from "Overweight." The analyst suggests that earnings will be dragged down as tanker rates get weaker over the next 12 months.

But he upgraded shares of Overseas Shipholding to "Overweight" from "Neutral," suggesting the stocks strong financial position will be enough to weather -- and possibly benefit from -- the global financial crisis.

First the US bankers threw as much garbage at the world as they could lift, with the US ratings agencies throwing perfume on the trash mid-flight to manage the "stank". Then the Irish guaranteed their bank deposits to an unheard of limit, basically giving the middle finger to the other European banking authorities (you see, money flowed to the "perceived safety of government backed bank funds from an already weakened UK and EU banking system), and now OPEC is cutting product in an effort to elevate oil prices amid a guaranteed global recession. Another "eff you" to the world.

Most people don't realize that in the grand scheme of things, oil has not really went down in price. It is exactly where it was in the summer of 2007 when I first contemplated the contracts. The OPEC nations have went on a "subprime like" debt driven spending binge, and need the petrodollars to keep flowing to support the facade that they are trying to build.