Danfonds had a one on one with Bjorn Englund, the manager of the Babylon fund, today in Copenhagen. Bjorn is one of those managers who inspires confidence and is prepared to push the traditional boundaries of investment out to their geographic limits. br /br /Iraq is not a stock picking market but rather a politically driven one. We therefore prefer to access it through a basket or a fund such as Babylon. Although an oil resource story, the listed companies are largely banks. These are generally small. Even Dar El Salam Investment Bank, owned 70% by HSBC, is only USD 248m. Commercial Bank of Iraq, however, sounded more interesting to us, standing on a PE of 5 and PB of 1. There is, as they say, a price for everything.

HIDDEN VALUE

Dear Value Seeker,

Yesterday, the “Big Three” automakers came to Washington with a plan: ask for even more money.

GM wants $18 billion, with $4 billion for December’s bills.

Chrysler says it needs $7 billion in the next few months.

Ford is after $9 billion…but only as a precaution. It feels pretty confident it can make it without help.

After all, Ford’s sales fell only 31% year-over-year in November. GM and Chrysler both saw sales for the same period tumble by over 40%.

In exchange for $34 billion in taxpayer money, the automakers promised major restructuring, reduced labor costs (that’s right, it’s promising to fire employees in return for taxpayer backing) and the sale of some product lines.

The CEOs even said they would even work for $1. (Never mind that their salaries only make up about 10% of their overall pay packages.)

But decades of waste and mismanagement aren’t forgotten

...

I stumbled upon a great quote from Godvig Capital fund manager Bjorn Englund, whose $22 million Babylon fund is the only notable foreign portfolio investor in the Iraqi bourse. Englund, on the moral for investing in a downturn: “The lesson is that you shouldn’t follow the herd.  You have to go somewhere where other people are not, where you have the first-mover advantage.” As to Iraq in partiuclar, Englund mentioned that “there is very little foreign money in the market so it has not seen the sort of outflows you have had elsewhere.  The exchange has been immune to what has happened in the outside world.” Both Iraq and Ghana, whose market I touted not too long ago and is up roughly 60 percent this year, will soon become electronically traded, which should deliver greater volatility and ease of access for foreign investors in the hope ...

Danfonds noted last month that rising equity indexes in Iraq, amidst improving security, were in stark contrast to other stock markets around the world ravaged by the credit crunch. That said, the glass is not necessarily half full. The Economist’s Iraq briefing this week suggests that whatever ‘good news’ that may be coming from the country must be tempered by the realization that, as recently departed American General David Petraeus has repeatedly said, the gains remain “fragile and reversible”. 20,000 out of Iraq’s 34,000 doctors have left (after 2,000 were murdered) and few of the 2m-plus Iraqis now living abroad (many of them middle-class professionals) are yet willing to return. In the past few weeks, suicide-bombers have killed people at the checkpoints into Baghdad’s international zone, on the road to the airport, by one of the main bridges and outside the ...

Reckless government spending has already put the US taxpayer on the hook for trillions of dollars, says Eric Roseman. And there is no telling how many more bailouts and loans are to come. Eric says gold will emerge as a surrogate currency as the Fed prints the US dollar into oblivion. And that means a sharp return to its long-term bull run.

This from The Sovereign Society:

The Federal Reserve this week announced new plans to unclog credit markets as the economic recession continues to deepen across the country, stifling bank lending and resulting in widespread hoarding of cash.

The Fed announced two new efforts to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion dollars. The move is timely as LIBOR rates ratchet higher again after a period of tightening since mid-October. Corporate bond spreads are also widening while mortgage rates remain elevated.

The Fed will purchase

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U.S. stocks posted the biggest two-day rally since 1987, rising over 13%.  That coming after the Obama announcement of his Treasury Secretary choice on Friday and the weekend announcement of over $300 billion for the  Citi bailout, and in spite of Bloomberg’s calculation of total rescue costs over $7.4 trillion.

The two-day rise is certainly impressive, but it is not yet a trend reversal.

If you believe this is a blip and one more head feint in a larger down movement, the chart below will support that view.

If you think the last two days may be the beginning of a new bull market or a major bear market rally with legs, wait a while for a clear and sustained penetration of the general 850-900 area for the S&P 500 (roughly SPY 85-90) before risking capital.

Not only does the chart need more confirmation

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As security increases in Iraq the local stock market is up - apparently as much as 40% in the month of September, when the global financial crisis were raging through the rest of the world.It is now becoming more and more official that things in Iraq are really improving. There were already some clear indications in the summer, when many of the major US news stations cut down on their staff in Iraq. Sorry to be blunt, but most of their news coverage included people - especially Americans - getting blown up. Since that number is falling, the number of stories fell and the need for journalists fell. Now the Journalist have to write the positive stories to get attention. Like this wonderfull story from CBS news.

Really. It’s too much. Yesterday, George W. Bush told foreign leaders “Our aim should not be more government, It should be smarter government.” Didn’t Bush just spend the past eight years embodying the exact opposite? Where was the smart part creating an “ownership society” with phony money? Where was the smart part of running up record deficits? Or the war in Iraq?

- But W. didn’t stop there. Apart from wanting governments to be “smarter” (who doesn’t?), he called for called for leaders to recognize that “government intervention is not a cure-all” for economic problems. So what was Fannie and Freddie all about? Or Hank Paulson’s Troubled Assets Relief Program. Or the bailout of AIG? If government is not a cure-all, then why has Bush orchestrated the biggest government intervention in the free markets in history? Is he really that unaware of

...

Really. It’s too much. Yesterday, George W. Bush told foreign leaders “Our aim should not be more government, It should be smarter government.” Didn’t Bush just spend the past eight years embodying the exact opposite? Where was the smart part creating an “ownership society” with phony money? Where was the smart part of running up record deficits? Or the war in Iraq?

- But W. didn’t stop there. Apart from wanting governments to be “smarter” (who doesn’t?), he called for called for leaders to recognize that “government intervention is not a cure-all” for economic problems. So what was Fannie and Freddie all about? Or Hank Paulson’s Troubled Assets Relief Program. Or the bailout of AIG? If government is not a cure-all, then why has Bush orchestrated the biggest government intervention in the free markets in history? Is he really that unaware of

...

It seems as though decades have passed since the heydays of U.S. Defense Secretary Donald Rumsfeld's ascendancy; back before critics were braying for his resignation over a few human rights snafus, back when this titan of American power strode across the international arena with great aplomb. Nowadays, just a little over two years since his resignation on the day before the elections (which shifted control of the House and Senate back to the Democrats), Rumsfeld, and the Bush administration for that matter, seem like a distant memory. But many underestimate the important legacy left behind by Rumsfeld. Though arguably damaging, the man contributed to a dramatic shift in the balance of power in Europe, driven mostly by his diplomatic tactics to achieve support for the war in Iraq. Needless to say, Moscow experienced a generous increase in its ...