Well, we’ve secured an exclusive interview with Dr. Faber – hosted by our own Dan Mangru – which will premier on Tuesday, November 24th at 2 PM…and it’s already creating quite a bit of buzz. Be sure to check out the trailer below, and click here to sign up for your access to this free event.

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Dr. Marc Faber’s Predictions for 2010 and Beyond originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

What strikes me first is demographics. Dubai’s indigenous culture is small and practically invisible to the casual tourist. In Dubai, the ambient noise you hear is construction equipment. Almost no smells stand out. Everything is modern, new and arid.

In India, there are people everywhere…living everywhere…sidewalks, riverbanks, parks, monuments. There are shanties built on any available spot. You hear the sound of people…the murmur of voices, bicycles, car horns. Even today, when the weather is a beautiful 30 or so and the breeze steady, the air is tropical, dank and full of all manner of indescribable odors.

Soon after we arrived at the Taj, a sarapi-wrapped young lady delivered Chris and I personalized letters. Each informed us that due to state elections being held, it would be illegal for the hotel to serve us alcohol of any kind beginning at 5 PM on that day, ending 48 hours later. We found out later too that if our partners here in India were to keep the office open for work on Election Day, they risked being arrested, fined and possibly put in jail.

“Can a democracy be a dictatorship at the same time?” an op-ed asked in this morning’s Times Of India in response to the draconian efforts the Maharashtra state had taken to boost voter turnout. The idea simply: if people weren’t allowed to work and didn’t have the option to spend the day drinking… they might turn out and vote. Right.

In Mumbai, voter turn out was just over 40% – respectable by some US standards – but down a bit from the last election in 2004. “Worth 2 days without the hooch?” might have been our op ed title, had we been asked to submit one.

When we asked one of our colleagues here if he voted or not, he said ‘no’ and laughed. “Maybe if there were a category that gave me the option to choose ‘none of the above’, I would do so. But there isn’t.”

Bureaucracy and corruption, are the two words we’ve heard most this week when asking what’s holding India back. In one example, a national auction for oil and drilling rights held on Monday closed with only half of the contracts even receiving bids. A conflict between the Oil and Energy Minister and his brother have left many would be suitors for the rights contracts unsure who’s calling the shots. This week, no one wants to put their own money down in fear of losing it unceremoniously.

Upon entering one of the security firms we visited we faced a door, but no walls. It looked every bit as if an architect had gotten carried away with “form” and completely forgotten “function”… Or a cubicle concept plan for “open space” office design gone horribly awry. Later we learned they’d planned to install glass walls several years ago during a renovation, but had never received permits to erect walls higher than 7 feet in their own office space. Huh?

“If we were willing to bribe the local building authority,” our host suggested, “the walls could go up this afternoon.”

Bribes, corruption and bureaucracy are part of the culture. But it’s also part of what makes Mumbai work. “This is a ‘make do’ city,” our travel compatriot Chris Mayer observed while we were driving around the city shooting video for a documentary short we hope to produce on the opportunities in the Indian market. We’d stopped in front of the state Police Headquarters for Maharashtra. It’s a formidable colonial era building. But apparently they don’t like you taking pictures… or stopping at all… in front of the building. An angry police officer began yelling at our driver in Hindi. Several officers carrying impressive weapons were standing behind him.

“Uh, maybe they don’t like us shooting here?”

The driver got out and disappeared around the corner behind a truck followed by two of the police officers. One stood watching us in the back of the car. A few minutes later the driver returned.

“It’s okay,” he said and we carried on about our business.

Later we learned a quick 100-rupee note had saved us from a trip inside the police headquarters, rather than just gawking at its façade.

With 16 million residents here, many whom live below the poverty line, the roles defined over the millennia help ensure every mouth gets fed. The only part of the city that gets consistent electricity and water is Southern Bombay. The other parts of the city, and everywhere else in the country, go through regular interruptions in basic power.

Traffic is really a sight. Harsh, a twenty-two year old graduate of Northwestern in Chicago, explained that the population has been trained by years of scarcity to try to push their way to the front of the line. It used to be because they didn’t have rice, bread or food; but now, they’ve been doing it for so long, it’s a cultural thing. So, for example, when a train pulls up to the station everyone tries to get on at once. That’s the way they drive, too.

“Harsh represents the future of India,” his father Jayesh told us proudly. Jayesh and his family have been stockbrokers since 1954 when his grandfather founded KC equities “For years Indians have felt like second class citizens of the world. But not these guys. They grew up with the Internet. They’re highly educated, motivated, confident. Rather than striving to stay in the United States after university, they’re coming back to India to participate in the development of the economy, the markets here.”

Having been to Dubai and meeting Moe, we were struck that a trend seems to be underway. In 1976, Richard Dawkins authored a book called The Selfish Gene, in which he identified a cultural unit – called a meme – that evolves and transforms as it gets passed from one human being to another.

Today, the “capitalist meme” is still actively cultivated here in the US. But because of access and speed of modern communications…coupled with the crisis in markets and entitlement programs in the West… that meme is being carried by young, intelligent, educated, active and motivated youth to the far corners of the earth. Indeed, in today’s Wall Street Journal’s op ed pages, Susan Hockfield, the president of MIT, laments that the current immigration policy in the US is actively aiding and abetting the return of science and engineering students to their home countries.

But more so, opportunities in Dubai, Mumbai… Shanghai… are inviting students back home in droves as well. At dinner one night, Jayesh made this suggestion to his son: make a list of all the things you take for granted in the US and start businesses to provide them to the Indian market. Refrigeration, for example, or electricity and roads. India is the world’s second largest producer of fruits and vegetables, but it loses 30-40% of them because lack of refrigeration.

Indeed, the small cap companies we looked at while working with our partners at Equitymaster.com included:

• India’s largest financier of trucks and construction equipment
• The company leading the introduction of RFID and AIDC technology into retail purveyors
• The leading LED displays and light bulb maker in India
• The world’s second largest steelmaker
• Largest producer of roses in the world

Foreign direct investment into the Indian stock market is still restricted and won’t be available until the rupee and dollar become fully convertible. And that won’t likely happen for several years. India is a net importer of grains etc. If the rupee were to float openly on the world’s forex exchanges speculation alone could cause major disruptions in India’s ability to feed itself.

For now, there are several companies available on the NYSE via ADR. And People of Indian Origin (PIOs) can invest in special accounts directly in the Indians markets. Likewise, Indians are now able to invest $250,000 a year outside the US. But progress in opening the flow of capital between India and the West remains a question for the future.

Bureaucracy, corruption and regulation are indeed impediments to short term growth. And reforms in a democratic society may come slowly… but the long-term opportunities are abundant. We intend to be there when they break.

Regards,

Addison Wiggin
for The Daily Reckoning

P.S. We left the Taj at 2 AM to catch a flight at 5 AM. Our flight passed through Doha, Qtar and reached New York by 3 in the afternoon.

“We will know we’re really making progress,” our friend Ajit quipped as we enjoyed a final glass of wine on Friday evening, “when we can set the flight times of our own airlines heading to the West.”

Demographics and the Capitalist Meme originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

He took us around to his office… a four-floor building that looked every bit third-world from the outside, but as nice as any office in Baltimore, New York or London within. We meet his technical analysts… his stock traders… his tech team… and finally his commodities guys.

The room was full of 20-something men in high trading spirit; standing, sitting, lurching about their terminals shouting, etc. Jayesh, our host, introduced us to the head trader… about 28 or so… in Hindi.

“Ahhh…” he immediately asked, in English: “Why are you shutting down the Rude Awakening?”… first question. No hello. Nothing. No kidding.

The gentleman, Chirag, turned out to be the gold trader for our friend Ajit Dayal’s Quantum Fund. They’ve developed an ETF in which each segment you buy is backed by 10 grams of gold. Unfortunately for U.S. investors, the ETF is available only to Indians here in country or those of Indian origin investing worldwide.

“It’s an auspicious day to buy gold,” Chirag told us. Yesterday, the Hindu festival of lights known as Diwali commenced. By tradition, this is the day when Indians buy gold and property and open stock trading accounts. They believe the festival will bring them good luck throughout the year. In the office here at equitymaster.com, a pandit (local spiritual leader) set up shop with some candles and blessed each member of the staff, along with a curio from that person’s profession. On the shrine in front of the ceremony, Rahul, the firm’s CEO, has a copy of the Stock Market Yearbook 2009 — the flagship publication for the group. (Got some good video footage that I’ll be converting into some documentary shorts over the next few weeks.)

Chirag then took us to see the largest market maker in physical gold in the country. We had to go down to the part of town where all the open-air jewelers display their wares. The streets were so crowded with foot traffic, merchants, beggars, fruit and fabric vendors we could barely get the car through to our destination. In through a tiny, dank and grungy side alley we went, up a 100-year-old iron elevator… through a couple locked doors through which we had to be buzzed… and into a room the size of a good walk-in closet, where sat four young guys trading bullion at computer terminals.

The market maker entered, a big man wearing lots of gold himself, and explained for half an hour or so how his business works. India imports anywhere between 550-700 tons of gold per year. The big man sitting in front of us does the lion’s share of that business.

“Where do you expect gold prices to go over the next year?” we asked him.

He couched his answer very carefully but gave us an upside potential of $1,300 an ounce.

Notes from Mumbai originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

The 4-lane Sheik Zayed road stretching between Dubai and Abu Dhabi is, at best, a competition for speed; at worst it’s a death trap. Among the UAE’s claim to world’s largest shopping mall, world’s tallest building and world’s longest metro built in “one go”, is this highways claim: to one of the world’s biggest automobile pile-ups.

On March 12, 2008, 25 cars traveling along the route burst into flames after piling into one another as a band of fog rolled in from the Gulf. Nearly 60 cars were in the accident altogether… 347 people were injured in the crash, 6 lost their lives.

“The crash happened because everyone was speeding despite the severe weather conditions,” an Abu Dhabi traffic police officer said at the crash site, as reported by the Gulf News. “Drivers weren’t leaving a safe distance between cars and this resulted in everyone hitting each other after the first crash.”

A documentary short posted on YouTube capturing the 911 calls placed from motorists describes ‘Foggy Tuesday’ as a morning devoid of “human caution.” The film also heralds the obvious bravery of the men who arrived from the Abu Dhabi fire, police and rescue crews to save those who’d become entangled in the brouhaha.

We will not hold you in suspense any longer…the metaphor suggested by this fantastic auto accident is a perfect fit for those studying the Dubai property bust. And like the writer of a Hollywood script, we cannot help by bring it to your attention.

Yesterday, on the recommendation of our new friend Moe, we traveled the same stretch of Sheik Zayed highway where the accident had taken place. Mohammad “Moe” Fathi Al Abrozani a Bahrainian-Qtari whose mother was an Iranian-American. Moe was born in Abu Dhabi, educated in California, lived briefly in New York and Chicago, then spent seven years in Germany. (His German is so fluent our German friends, Andre and Vereena, here in Dubai did not expect him to be Arabic when they first met him in person.)

Moe had returned to the Middle East to take part in the expansive boom attracting so much attention around the globe. He’s now an executive with TwoFour54 Media, a firm set up by the government in Abu Dhabi to woo Western firms into establishing their Middle East operations in the new Media City in the UAE’s capitol city. The rulers of Abu Dhabi had witnessed the efforts, successes and failures of their fellow emirate, Dubai, and have since vowed to create a modern media communications hub greater than anything now in existence.

“Why mess with visas, permits and expatriate contracts down in Dubai?” Moe asked us at dinner the other night, “when you can come to Abu Dhabi and get them all from the government free…?” One foggy morning in the year 2008, the reckless speculation that spurned much of the outrageous development projects in Dubai began to pile up on each other. Now the motionless construction sites lay in wait for assistance. In a scene familiar across the West, Abu Dhabi, the company line suggests, has “come to the rescue” of Dubai; with low cost loans; paper money and the sincerity of an assassin.

When we met up with Moe and Andre at Shakespeare’s a brand-new bar in the all-new Souk Al Bahar, they were quietly puffing from sisha – the traditional water pipes bubbling with aromatic smoke. Our mission in the region was and is simple. We want to establish a presence on the ground from which we can monitor the developments and assess investment opportunities in Dubai, the UAE and across the Middle East unfiltered by the mainstream press. But here we were being asked to consider moving the infrastructure of our publishing business, our families, our lives, half way around the world to the desert. Bloomberg, CNN, Forbes are all moving and or expanding their operations in either Dubai or Abu Dhabi.

Why shouldn’t we? Our friends in Abu Dhabi are apparently ready and willing to help.

Dubai and Abu Dhabi, the two leading Emirates of the UAE are relatively new to the global finance and trade… but they want you to know they have arrived in high style. This weekend, Formula One racing makes its debut in Abu Dhabi. The government had to pull workers from several of its five star seaside resort project to complete the track and facilities on time. Ferrari World, a massive theme park dedicated to the sport sits nearby. Yesterday, the Emirates Palace Hotel – the world’s first seven-star hotel – Demi Moore, Hilary Swank, and last year’s Oscar winner, Freida Pinto (Slumdog Millionaire) graced the opening ceremonies of the Middle East Film Festival. The Abu Dhabi sovereign wealth fund has famously leveraged their way into both of the leading football franchises in the world – FCBarcelona and Manchester United.

Still, our friend Peter Cooper recalls a time in his own family history when Dubai was nothing but a backwater of the British Empire, a port full of smugglers, nomads and thieves. His great uncle had been stationed here during World War II. At the time, the strife caused by the war left the ragtag bunch group of 7,000 residents on the edge of starvation.

Sheik Rashid, the father of modern Dubai, dredged the Creek in the 1950s establishing Dubai as a free trade port. At the time, too, the Creek dredging project was roundly criticized, as it should have been. The project cost nearly 3 times Dubai’s annual GDP. But it also established Dubai as the trading center for goods coming into the Middle East. If you go down by the creek today there are Iranian Dhows – the Middle East’s answer to the Chinese Junk – bringing rice, rugs and refrigerators back and forth across the Persian Gulf. Iran’s ports are about a two-day drift away for these wooden ships. Kuwait and Iraq a day or two more. Bahrain, Qtar, Oman closer still. Without the fantastic success of that initial dredging project, we wouldn’t be writing to you from the desert today.

“Dubai the hot spot…” has been a center of trade, smuggling and the rougher trades ever since. As the back jacket copy on a 1970s novel about gold smugglers in Dubai written by the French Connection author Robin Moore indicates: “Dubai, where adventurers play the world’s most dangerous games…gold, sex, oil and war. Cold- blooded adventurers in a blistering Mideast empire where life is cheap and no price too high for pleasure.” The novel is still banned here because the sheiks don’t like the image it portrays.

The promise of riches, however, is part of the region’s allure and what has attracted those expatriates who chosen to ride out the bust and continue to live here to this day.

The most recent gold rush, the boom in Dubai property, came on the heels of the terrorist attacks on September 11, 2001 and the same policy response that spawned a housing and consumption bubble across the United States, London and much of the West. Arabs flush with energy and trading capital brought much of that money home to the Middle East fearing a Western clamp down. At the same time, investors in dirham backed assets – the local currency which has enjoyed a US-dollar peg since November 1997 – benefited from the same era of low interest rates that soccer moms in Montgomery County, Maryland or gamblers in Las Vegas, Nevada did.

And like all booms, the property in Dubai witnessed its excess and its pathos. An article in this week’s Asian edition of Time Magazine laments the manmade island project meant to mimic all the countries on the planet. “The World is one of many architectural fantasies in Dubai that now appear to be shimmering mirages. The emirate boasts the 818m Burj Dubai, the world’s tallest skyscraper; a manmade island shaped like a giant palm; a ski slope in a shopping mall; an 18-hole golf course in the middle of the desert that will slurp down 3.8 million liters of water a day. But the dozens of giant cranes that once littered the skyline are beginning to migrate elsewhere. Dubai today has the feel of a futuristic, five star ghost town blasted by sandstorms.”

“The fools!” we can hear readers of Time Asia chuckle with superiority. Everyone likes to kick a gambler when he’s down.

But the story remains. On our way to Abu Dhabi yesterday we passed by the free zone surrounding the new deepwater global trading port at Jebel Ali. Business Bay near Jebel Ali is the home to many of the Bubble Era development projects, 30-story towers standing side-by-side, dark windowed and tenantless.

We suspect many of these nutty projects – like the City of Arabia, which had boasted an amusement park full of life size animatronic dinosaurs as its calling card during the boom – will never find the funding to finish. More sober projects that are or are nearing completion will likely take years to find tenants. And those “investors” who bet big and large on Dubai property in 2003-08 are no doubt already wishing they never had.

But the free zone near Jebel Ali also the site of Dubai’s real potential; banking and trade. Corporate tax rates in are effectively zero. You name a multinational and Moe can point to their local subsidiary. The Dubai Mall, for example, is reported to need 10,000 shoppers a day to break even but now only sports around 7,000. Why do the world’s most famous brand names all have shops open and spiffy already, we couldn’t help but wonder. It has to be for those fine tax rates, we couldn’t help but conclude.

Among other racy themes we heard this week, Dubai is supposed to now be the world capitol of the flesh trade. And the gold price hit an all-time high early in the week after we arrived sparked by rumors the GCC would back a unified currency with gold and provide oil traders an alternative pricing unit than the US dollar…

We suspect this fantastic wreck in the desert is only one scene in a long, exhilarating drama. We’re not “long” Dubai in any real investment sense. Not now anyway. But, like most onlookers to the spectacle, we struggle to avert our eyes. The story promises more exciting car chases, more steamy sex scenes and political intrigue to come…and we’d be lying if we didn’t admit we’re suckers for a good story. And, who knows, we may open an office of our own there.

Regards,

Addison Wiggin
for The Daily Reckoning

Arabian Money: Gold, Sex, Oil and War originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

Not content with one giant archipelago of manmade islands in the shape of a palm tree…they built three. But even that wasn’t enough; they built a replica of the Earth in islands…surrounded by the sun, the planets and the universe, three hundred high-end real estate islands. The only trouble? They’ve run out of money and investors. Two of the palm islands are washing away in the waves…to say nothing of the Earth, the sun, solar system and universe. But that doesn’t stop the dreamers from trying to fund new projects.

We’ve spent the week essentially living in an ultra chic mall. Our hotel is connected on one end to the largest mall in the world. In this part of the city, New Dubai, everyone – the expats, the imported workers, the Emeratis and their guests – basically live inside because it’s too hot to go out. It’s quite literally the desert. The whole new city is comprised of tall buildings with dusty constructions zones in between. Each parchment of land that isn’t under construction is a patch of shifting sand. Yet, something like three out of five building projects have stalled completely…the contractors have just walked off the job.

The mall we’re attached to has every high-end store in the world. They have a Galeries Lafayette bigger than the one in Paris. Then every brand name you can imagine. BCBG Maxazria. Versace. Bloomingdales is opening a 4-story store in January. Armani has a cat walk right in the middle of the mall. There’s an ice rink and aquarium in it, too. Outside sits a faux lake surrounding the Burj – the world’s tallest building. Every night there are fountain displays choreographed to Arabic, Indian and African music. The fountain shoots water 50 stories in the air. Boats will be installed to help you move around the lake, like a water taxi in the Inner Harbor in Baltimore. It’s a fantastic design, in the pejorative sense.

While meandering about the place it’s hard to stop asking basic questions: who will be sitting in the French, Italian, South African, Lebanese restaurants being opened along the shores of this new paradise? Who will be shopping in these “fashion forward” boutiques? Who will occupy all the thousands of units of office space and what kinds of business will they be engaged in? Who will live in the hundreds of tall dark glass towers?

Each of the expats we’ve run into have been scratching their heads wondering what the fate of their business or job is going to be. The locals don’t seem to care one way or the other. Still, there’s zero unemployment, because once you don’t have a job… you get exported. The laborers who’ve been imported from India, Nepal, Thailand, Vietnam and Pakistan are on two-year visas. Once they’re jobs are up…out they go.

Yesterday, after wandering around the immense real estate expo for several hours – replete with expansive models of future fairy tale development projects yet to find financing – we walked into the stock market. It is housed conveniently in the building next door, which itself was the first high rise built in the city back in the 1970s. I was asked by a young man near the door to leave my camera, but there was no security to speak of. We just walked out on the floor where the Emeratis were trading stocks, all wearing their white dishdashas. Despite the fact that we were there half an hour before the close, many of the stocks listed on the board reflected zero trades had been made during the session.

Still, last night, while having martinis in a bar on the 63rd floor of the Address hotel in the shadows of the nearly kilometer-high Burj, our friend Peter Cooper, a British expat who has been a witness to the Dubai experiment for 14 years, helped put the whole city into context. The Sheiks used to invest all their money in the West, he explained. But after 9/11, the Patriot Act, the wars in Iraq and Afghanistan, they were afraid their money wasn’t safe anymore. They feared it was in danger of being confiscated.

At the time, they didn’t really have anywhere to invest it…so following the precedent set by Hong Kong in the ’50s and ’60s and Singapore in the ’70s and ’80s, they set out to build a world class financial center overnight. It has caused several booms and busts and all kinds of crazy property development plans, because they had way more money to work with when building the city out. And it’s even weirder right now because they’re only a few months off the bottom of the latest bust. Still, the city is still full of Russians, Iranians, and Pakistanis with money, all looking for somewhere to invest safely, too. The city is a bit like Switzerland in World War II; there is war and political intrigue all around them, but for the time being, they’re putting up a stoic front and seeking to provide a tax friendly haven to all. At least, we believe that’s what they’d like you to think.

Peter was encouraged by the number of people at the real estate expo. Last year the convention center was a ghost town. In the years before they’d been packed with investors from all over the world. Michael Douglas, Catherine Zeta Jones and Michael Jackson lived here and helped promote some of the local investments. The number one tennis player in the world, Roger Federer, famously moved to, and trains in, Dubai.

But after the bust…no one comes around anymore. This year, the construction on key projects like Burj has started up again. So the feeling and hope is that the bottom is in and a new sense of reality has brought back “bargain hunters”. Two years ago Donald Trump gave the keynote address at the expo, this year he sent his son, Don Jr., to do the honors.

The sheiks and property developers, with their remote heir of superiority, don’t lament the bust. Inshallah is a local term meaning, more or less, “god willing” or “we don’t really know how these things will work out, but we have faith they will.” And in some cases they have – phenomenally well. The Burj is a perfect example. As the story goes, when the design for the tower was first being shown to the Sheik, it was meant to be the second tallest building in the world. To which the sheik responded, “Why not the tallest?” It seemed preposterous…and yet there it is, towering just outside the window to my hotel. All of the units in the building were sold before building even began.

The five-star Atlantis Hotel at the tip of the first Palm Island is said to have only taken 18 months to start turning a profit. In that light, some of the fantastic plans at City Scape almost sound like good business. Provided, of course, investors continue to answer the beckoning call of Dubai from the far reaches of the earth.

Further, there is a sense that booms and busts are the best way to build the infrastructure for their new world-class city overnight. The government in Dubai is spending nearly half of its annual budget on roads, bridges and modern energy and communications systems. One gets the sense that if these busts persist, the national government in Abu Dhabi will just throw money down the pot until the next boom begins – even if that’s years away. Here in Dubai, there is little money from oil or gas, it’s mostly trade, Western conglomerates setting up shop in a low tax jurisdiction and real estate. And, since the bust…debt.

We are, in fact, off to Abu Dhabi today. According to our German-born Australian friend Dr. Andre Homberg, Dubai is like the call girl beckoning the world to take notice of the capitalist miracle burgeoning here in the desert, but Abu Dhabi is like the queen – regal, relaxed and rich. The GDP per capita in Abu Dhabi is reputed to be $60 million. The real estate projects in Abu Dhabi exhibited at the expo were more highly visible than at previous affairs. Many of them are more subdued than the fantasyland projects of Dubai – they target the world’s richest. They promise to bring the green revolution to the desert…and to assuage an over-the-top fascination with Formula 1 racecars and Arabian horses.

Abu Dhabi is the only of the Emirates in the UAE to “earn” their money from oil. Businesses there open at 10 AM and close at 3 PM – “Abu Dhabi” time, they call it. But they, too, are afraid of Peak Oil and emissions regulations clamping down on the era of cheap oil. So in the newspapers and around the shisha bars you hear discussion of the UAE’s entrance into the nuclear era. The government is buying French technology and planning to build nuclear reactors under the sand, then pipelines for wires extending all the way to Europe. They expect to be able to sell energy to European consumers for $0.05 a kilowatt, thereby maintaining their position as low cost energy providers to the West.

The other night, Andre introduced us to a Bahrainian-Qtari whose mother was an Iranian-American. His name is Mo. Mo works for a state-owned media company in the capitol city. Today, Mo is prepared to show us all the amenities Abu Dhabi has to offer if we’re interested in moving our publishing operations to his great city… The same amenities he apparently wooed Forbes publishing with. They’re opening a new office in Abu Dhabi in the spring. If Dubai is a bastion of low-tax speculation, booms and busts, Abu Dhabi appears to be a well-oiled (sic) government-sponsored machine. We’ll have to let you know how our meeting with Mo goes.

Regards,

Addison Wiggin
The Daily Reckoning

Inshallah, Build it and They Will Come originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

Addison Wiggin: Economically oriented? Well, my parents bought, renovated and sold old colonials in New England while I was growing up. I lived in nine different houses in the same town before leaving for college. I can remember one winter moving into a farmhouse that didn’t have running water. We had to use an outhouse in the middle of February.

For a time, too, they tried to live off the land in one of the old farms we’d purchased. We grew all our own food, raised chickens and rented some land to a local dairy farmer. My dad had a building supply company, but was forced to shut it down during the oil shock of 1973. He was an early believer in sustainable living… to say the least.

During one episode of my misspent youth, I followed the rock band, The Grateful Dead, around the country, earning my way in the black market economy that had grown up around this curious collection of derelict hippies. All of these early life experiences helped me gain respect for “economics” in the real human sense – saving, investing and speculating. At the same time, I became suspicious of the data-crunching econometric theory that passes for intelligent analysis and forecasting on TV and in government today.

Daily Bell: What did you do in college?

Addison Wiggin: In college, I studied the classics – languages, history, philosophy and religion. I never believed any of it would give me the skills I needed to get a job one day, but those were the subjects that interested me. Ironically, today, I don’t believe I could do the writing or publishing of ideas that we do at Agora without the language skills or the increasingly unique perspective a classical education brings.

Daily Bell: Where did you go after college? Tell us how you got to Agora.

Addison Wiggin: I got to Agora, purely by chance. I was studying for a Masters degree at St. John’s College in Annapolis, MD. As most graduate students are, we were dead broke. I responded to a 3X5 card on the “jobs bulletin board” in the student union. Some guy named Bill Bonner in Baltimore was looking for new writers to train for his publishing company. I knew then I was interested in a career in publishing, but had no idea what a fortuitous occasion finding that card would turn out to be. That was about 17 years ago. I’ve worked odd jobs on golf courses, as a carpenter and a painter, in liquor stores, drove a supply snow cat one winter in Telluride Colorado, even worked in the private kitchen of Prince Bendar of Saudi Arabia, but the only “real” job I’ve ever had is with Agora.

Daily Bell: What are your responsibilities now?

Addison Wiggin: Today, I’m the executive publisher of Agora Financial, one of the subsidiaries of Agora Inc. We publish, among other letters, The Daily Reckoning, and some of the leading financial newsletters in the business, including Outstanding Investments, which has earned a #1 ranking by Hulbert’s Financial Digest for its coverage of natural resources, energy and precious metals markets; and Capital & Crisis, one of my favorites, covering deep value and long-term investments from a top-down macro perspective. We’ve also just founded the Richebacher Society in an effort to continue the work of the late Dr. Kurt Richebacher, a classical European economist. And this fall we’re assembling a new service with partners in Mumbai covering the BRIC – Brazil, Russia, India and China – economies from the ground up, offering opportunities to investors who are increasingly worried about the deficit spending and recklessness of government policy here in the West.

To read the rest of Addison’s interview, click here.

The Daily Bell Interviews Addison Wiggin originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

This morning’s Commerce Department release of +2.7% places August retail sales well ahead of the 1.9% “expert” consensus.

Great. Now that they’ve “pulled forward” car sales for the next 12 months…what’s next? How about… Appliances!?

Later this fall, Uncle Sam will being doling out up to $200 a pop (in borrowed money) to anyone who wants to replace an old appliance. Yeah, that’ll keep retail and GDP stats humming along.

Wholesales prices rose last month twice as much as forecast…thanks largely to rising gasoline prices. The 1.7% jump in August followed a 0.9% decline in July.

“Core” PPI excluding food and energy rose a more modest 0.2%. But that was also double analysts’ expectations. Turns out a good amount of that was driven by higher prices for cars and trucks, too. Whaddya know… “Cash for Clunkers” gave automakers an excuse to cut back on factory-to-dealer incentives.

Dealers don’t experience a squeeze without passing the costs along to customers. Which should make tomorrow’s release of the consumer price index (CPI), well, interesting too. The consensus says a 0.3% increase. We’ll see what tomorrow brings.

Cash for Clunky Appliances? originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

Years of debt and securitization finally caught up to the FIRE (finance-insurance-real estate) sector of the economy. The titans of finance refused to come clean about the real value of the ‘assets’ they sat on…and finally it came time to pay the piper.

Dan Amoss, whose recommendation of Lehman put options generated 462% gains earlier that summer, wrote in this space a year ago, “Think about how much better off Lehman Brothers would be if its management hadn’t put off the process of reporting losses, dumping impaired assets and raising new capital. Would its stock be 26 cents today? Probably not.”

So the heavy-hitters of the finance sector have surely learned their lessons and proceeded to mark down their “assets” to realistic levels over the last year, right?

You wish. Even mainstream economists like the Nobel laureate Joseph Stiglitz say we’re in a worse pickle now. “In the US and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz told Bloomberg over the weekend. “The problems are worse than they were in 2007 before the crisis. It’s an outrage.”

And how do ordinary people feel about the response their government leaders have made to the crisis? Americans are, as our friend Doug Casey would put it, ‘a bunch of whipped dogs.’ Rather, they’re supremely sanguine, compared to much of the rest of the world.

For all the honeymoon-is-over talk surrounding Obama, we’re struck by how much grumpier people seem to be elsewhere. Americans are as satisfied with the actions of Obama and Congress to the same extent Russians are satisfied with those of the Putinocracy.

We should note here that Russian GDP contracted at a breathtaking 10.9% last quarter, while consumer prices are rising at a better-than-10% clip.

Have the Titans of Finance Learned Their Lesson? originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

When Social Security was founded, the typical US worker at age 65 could expect to live another 11.9 years. But if today’s official projections are right, by the year 2040 the typical 65-year-old worker can expect to live at least another 19.2 years. If the normal retirement age had been indexed to longevity since 1935, today’s worker would be waiting until age 73 to receive full benefits and tomorrow’s workers even longer.

In a report called “Demographics and Capital Markets Returns,” Robert Arnott and Anne Casscells argue that the crisis is not in Social Security, but in demographics. “When an entire society ages,” suggest Arnott and Casscells, “…the thing that matters most is the ratio between the workers to retirees. Unfortunately, the aging of the baby boom generation, which is a significant bulge in population, will cause a dramatic increase in the ratio between workers to retirees, one that will put enormous strain on society and cause friction between generations.”

In the United States, as in other developed countries, the unfunded benefit liability for public pensions amounts to 100 percent to 250 percent of GDP. It is a “ hidden debt “ far greater than official public debt. Unlike in the private sector, these debts are not amortized as expenses over 30 to 40 years. And it may be worth pointing out that under normal conditions economies do not run such crushing deficits. They only do so in crisis mode.

The annual cost of Social Security benefits represented 4.4 percent of GDP in 2008 and is projected to increase to 6.2 percent of GDP in 2034, and then decline to about 5.8 percent of GDP by 2050 and remain at about that level.

And to the retiring boomers’ other doubts and insecurities, we might add that US health care costs are expected to rise by 7 percent of GDP over the next 40 years – a rate that is more than twice as fast as other developing nations. The “old old,” – those aged 80 and over – are predicted to rise sharply through 2050 and will dramatically increase long – term care costs as well as disability, dependence, and health care expenses.

In fact, by official projections, in 2030, the US government will be spending more on nursing homes than it spends on Social Security today. “Although people justifiably worry about Social Security,” says Victor Fuchs, an economist who studies the health care industry, “paying for old folks’ health care is the real 800-pound gorilla facing the US economy.” Adding projections for Medicare and Medicaid ‘s expenditures to those of Social Security could raise the total cost to more than 50 percent of payroll taxes.

The fiscal kickers of health cost inflation and political demand for more long-term care benefits threaten to raise public spending dramatically in the United States. Between 2005 and the fall of 2008, we spent two and a half years chronicling the efforts of David Walker, the former comptroller general of the United States, and Bob Bixby, executive director of the Concord Coalition, to reign in reform and shore up the Social Security and Medicare systems. The project yielded a feature length documentary film, which earned us a trip to the Sundance Film Festival in January of 2008 and another to the Critic’s Choice Awards in Los Angeles a year later. We published a best-selling companion book of the same title in late 2008. You’re encouraged to delve into the numbers we presented in the film and book. They’re truly mindboggling. But in many ways the project was dated the moment we released it to the public.

The credit crisis that reached a fever pitch developed in 2008 pushed the date of insolvency of these programs ever closer. On May 13, 2009, the Medicare Trustees warned that the fund they tap to pay for beneficiaries’ hospital care will be insolvent by 2017 – two years earlier than trustees had predicted the year before. The program has been paying out more than it collects in taxes and interest since last year, in part due to a recession well underway. Medicare would have to deposit $ 13.4 trillion – $ 1 trillion higher than last year’s estimate – into an interest-earning account today in order for the hospital fund to pay its scheduled benefits over the next 75 years. The program’s total unfunded obligation, which includes doctor and prescription drug benefits, is $37.8 trillion. The trustees estimated that in coming years, Medicare spending will rise faster than workers’ earnings or the economy as a whole.

Trustees say that while the financial standing of Social Security decreased more sharply than Medicare last year, the health program remains at greater risk of insolvency. The financial difficulties facing Social Security and Medicare pose serious challenges, the report concluded.

For Social Security, the reform options are relatively well understood but the choices are difficult. Medicare is a bigger challenge. Its cost growth can be contained without sacrificing quality of care only if health care cost growth more generally is contained. But despite the difficulties – indeed, because of the difficulties – it is essential that action be taken soon, particularly to control health care costs.

After the revised Social Security and Medicare announcement the world began to wonder: Can the US hold onto its AAA credit rating?

“The US government has had a triple-A credit rating since 1917,” David Walker, now president and CEO of the Peterson G. Peterson Foundation, commented in the Financial Time s following the release of the Trustees report, “ but it is unclear how long this will continue to be the case. In my view, either one of two developments could be enough to cause us to lose our top rating.

“First, while comprehensive health care reform is needed, it must not further harm our nation ‘ s financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country’s future.

“Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us.”

Of course, we must note that the whole credit rating biz is…well…corrupt. The agencies that are responsible for dishing out sovereign credit ratings (S&P, Fitch, and Moody’s) are the same ones that left us all out to dry in 2007. (Of course, mortgage – backed securities get a AAA…housing prices never fall!) Rest assured, if Wall Street can buy its way into AAA, Uncle Sam surely can, too.

But even Moody’s is starting to hedge their bets. They’ve since created three subdivisions within their AAA rating: resistant, resilient, and vulnerable…a corporate way of saying the good, the bad, and the ugly. While the United States isn’t in the worst of the bunch, it’s certainly not the best.

Regards,

Bill Bonner and Addison Wiggin
for The Daily Reckoning

Social Security? Not Exactly originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.

“If you have gains, book ’em,” suggests Byron King. “I’m not issuing any official sell recommendations to my Outstanding Investments readers this week. But if you have gains in your holdings, now is the time to sell and book ’em. Even if you’re down a little bit, you should consider absorbing a small loss and avoiding a larger loss later on.

“Take gains on the industrial and infrastructure stocks. Even if everything were going great for the economy — which it’s not — the industrials and infrastructure guys would need another couple of quarters to get well.

“Be careful about selling out of energy and energy service companies. Yes, they could drift down a bit more, but not as badly as the industrials. I foresee oil in the $50s per barrel, and we’re almost there. Below that price? OPEC will tighten up. So it’s late in the game to sell down your oils and service companies. These stocks could, of course, go lower, but they’ll also recover faster. We could see $100 oil by the end of 2010.

“I’ve seen articles forecasting oil plummeting in price to the $20s per barrel. I doubt it. Why? Well, where will $20 oil come from? There’s a phenomenon called depletion. Most of the world’s daily oil comes from fields that were discovered 30 and more years ago, and those fields are coming to the end of their days. Even at reduced demand, the world is pumping out far more oil than the energy industry is finding. That can’t go on for much longer.”

Time to Book Gains originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a "uniquely refreshing" perspective on the global economy, investing, and today's markets.