1) We are now six months and 22 days into the global stock market rally, and what a rally its been! The move off the bottom has been the largest in history, and Q3 was the best in 11 years. The crash took world stock market capitalization down from a peak of $63 trillion, down to $25 trillion, lopping off some $38 trillion in equity value. The US alone cut $11 trillion, plunging from $19 trillion to $8 trillion. This is wealth destruction of a truly Biblical proportions. Since March, the world has recovered $18 trillion, and the US $5 trillion, giving investors, portfolio managers, and brokers a definite spring in their step. If you like to track this kind of big macro data, visit my friends at the Bespoke Investment Group at http://bespokepremium.com/.? Keep that Kool-Ade coming, Ben!

2) Damn! I missed getting on the Forbes 400 list of the richest people in the world again. Microsoft?s (MSFT) bridge playing Bill Gates beat me out once more, coming in at $50 billion, down $7 billion from last year. He was followed by his bridge partner, Berkshire Hathaway?s (BRK/A) Omaha Oracle, Warren Buffet, at $40 billion, and Oracle?s (ORCL), Larry Ellison, at $27 billion, who miraculously saw no change in his net worth. Of the three, Bill?s MSFT shares were far and away the best performer, soaring some 82% from the $14.50 low to $26.50, its cash mountain intact and Yahoo free. The total for the 400 plunged by a staggering $300 billion, from $1.57 trillion to $1.27 trillion.?? Thanks to the market meltdown, the price of admission to the exclusive club has cratered from $1.3 billion to a only $950 million, mere pennies when you think about it. The biggest gainer was Beal Bank?s Andy Beal of Dallas, the noted high stakes poker player who astutely hoovered up distressed assets when everyone else was puking them out. Now there?s a man after my own heart. What?s the secret to becoming an American billionaire? Have a rich dad. Four out of the top ten were the children of Walmart?s (WMT) Sam Walton. Oh well. There?s always next year. Since I can?t be reborn as a Walmart offspring, I guess I?ll just have to work harder.

3) Armed with a pass from Chevron (CVX) CEO, Dave O?Reilly, I drove out to the company?s Richmond, California refinery to see how bad the crude storage situation really is. This is where tankers unload crude from Alaska?s Aleyaska Pipeline for refining into gasoline and other products. What do I find, but mile upon mile of full tank cars, the firm?s storage facilities already loaded to the gills. The industry?s central delivery facility at Cushing, Oklahoma is nearly full, the Strategic Petroleum Reserve is full, and if any more crude is imported, it will have to be stored in left over milk bottles. The filling of the last bit of storage in the US is no doubt what?s behind the stalling in the price of crude around $70 for the past four months, now that contango driven traders can less profitably buy spot, sell forward, and store in the interim. Owners are choking on the stuff. Investor buying of crude as the new reserve currency is what caused it to double this year, not demand by end users. I?m sorry, but I?m an old school hedge fund manager, and I?m from Missouri (philosophically).? If a company tells me something, I have to go out to the storage facility, mine, well, pit, warehouse, and see it for myself.

4) I get e-mails everyday from readers out there informing me of conditions in the real world.?? Dixie is an American active in the expat community in Guadalajara, Mexico, who says that restaurants are deserted, sales are ubiquitous, and the prices of everything are negotiable. Home prices are down 20% YOY, and this is in a land where lack of mortgages required most to pay cash. One antique store owner says conditions are the worst since 1994, when Mexico last suffered and economic crisis. Food prices are soaring, with the price of bananas doubling since June. Working Mexicans are in trouble, and the crime rate is soaring. Yu can analyze a Cray mainframe?s worth of economic data, and still not get the insights provided by one report from the field like this. Muchas Gracias, Dixie.

1) The one absolute, take it to the bank, bet the ranch fact you can count on right now is that there is no value in the stock market. We are at a lofty 20 X earnings, and historically, when the market sported such a rich valuation, a 7% drop ensued in the following year. But what is history, but the ravings of an angry, frustrated old trader? Maybe having seen the best bargains in a century only six months ago, I?m spoiled. I have always been a tightwad. I must be the only guy around who flies his own private plane to garage sales for the sheer love of the deal (where else can one find Dean Martin records in decent playable condition for 25 cents each?). I just reviewed all of the stocks and sectors I liked at the beginning of the year, and a more picked over field you never saw. (Click here for my New Year list ) The list of big winners is long: FCX, FXI, BYDFF, BIDU, X, gold, silver, copper, crude, oil services, junk bonds (JNK), (HYG), emerging markets (EEM), BRIC?s, Korea (EWY), with shorts in long dated Treasuries (TBT), volatility (VIX),?? and the dollar (UDN), (ULE). Even tax exempt munis have been on a tear. Many of my core positions are up over 400%. When everything in your portfolio has done so well, it?s time to go hide. The problem is that my more loyal, even fanatical followers have taken out paid subscriptions for up to two years, so I must keep dancing. Hence, the recent increase in book reviews, political pieces, or just outright frivolous stories. What you do here is deep research and list building, so when the window opens you can jump through with both feet, and without any reservations. I hate being out of the market. But I hate losing money even more.

2)For an iconoclastic, myth shattering, eye opening view of the true competitive threat posed by Asia, read the piece in the August issue of Foreign Policy magazine by Minxin Pei, a scholar at the Carnegie Endowment for International Peace. Power is not shifting from West to East; Asia is just lifting itself off the mat, with per capita GDP only at $5,800, compared to $48,000 in the US. We are simply moving from a unipolar to a multipolar world. China is not going to dominate the world, or even Asia, where there is a long history of regional rivalries and wars. China can?t even control China, where recessions lead to revolutions, and 30% of the country, Tibet and the Uighurs, want to secede. All of Asia?s progress to date has been built on selling to the US market. Take us out, and they?re nowhere. With enormous resource, environmental, and demographic challenges constraining growth, Asia is not replacing the US anytime soon. There is no miracle form of Asian capitalism; impoverished, younger populations are simply forced to save more because there is no social safety net. Ever heard of a Chinese unemployment office? Nor are benevolent dictatorships the answer, with the despots in Burma, Cambodia, North Korea, and Laos thoroughly trashing their countries. The press often touts the 600,000 engineers that China graduates, joined by 350,000 in India. In fact, 90% of these are only educated to a trade school standard. Asia only has one world class school, the University of Tokyo. As much as we despise ourselves and wallow in our failures, Asians see us as a bright, shining example for the world. After all, it was our open trade policies and innovation that lifted them out of poverty and destitution. Walk the streets of China, as I have done for nearly four decades, and you feel this. To read the story in its entirety, click here . I think I?ll reread it next time I think about doubling up my FXI and EEM positions.

3) America?s economy was powered by personal computers in the eighties, the Internet in the nineties, and credit cards and subprime loans in this decade. So what is America?s next gig? I think conversion of the global energy grid to alternative sources is the best candidate. If you took this out of the realm of geeky engineering graduate students and high school science projects and made this a national priority and a defense issue, it could become a major GDP driver for decades. Using the broadest possible definitions, the number of green jobs could grow from one million today to 37 million in 20 years, or 17% of the total work force. Since many of these jobs are in local construction and installation they can?t be exported. Last year, 8,000 megawatts of wind power was built, the equivalent of seven large coal fired plants, accounting for 42% of all new power generation. If the US develops cost competitive clean energy while China is still stuck using the expensive dirty stuff, it will have a competitive advantage that could reverse the terms of trade with the Middle Kingdom. The US would also have superior technology that it could sell to the rest of the world. I can tell you that green energy is one of the few themes that gets a hearing with venture capitalists these days, and this will be a major stock market driver down the road. I know this is all long term stuff, but remember buying Apple (AAPL) at $4 in the early eighties?

1) Peabody Energy?s (BTU) CEO, Gregory Boyce, says that the Chinese buying of coal is real, not stockpiling, and expects to see a 7.5% annual growth in sales for the next five years (click here for their website ).?? The big demand is for metallurgical coal used to make steel, which the Middle Kingdom is importing at a record rate. Investors have already figured this out, taking the company?s stock up 400% in a year. Coal has been the fastest growing energy source in the US for the last six years, and now accounts for 50% of our electricity supply and 85% of energy generation. The problem is that the industry is target numero uno with the environmental movement, which now holds significant sway in Washington. Thanks to a 150 year lobbying effort, the coal industry has already carved out preferential treatment in the upcoming cap & trade wars at the expense of other fossil fuels.?? They are also pushing hard for carbon capture & sequestration (CCS), which strips the CO2 out of emissions and pumps it down to 8,200 feet underground. All eyes are now on the first such plant to come online this week in New Haven, West Virginia (click here for link to the full New York Times story ). Industry analysts say it will cost $1 trillion to convert the country?s 400 plants to generate power 30% more expensive than we are currently paying.?? You might also get polluted ground water and earthquakes as part of the deal. Sounds like a high price to pay to save a few union mining jobs. I vote for a natural gas based solution, which is currently coming out of our ears.

2) I met with my next Congressman, John Garamendi, who will be replacing Ellen Tauscher, after Hillary bumped her up to an Asst. Secretary of State job. John comes to the seat via UC Berkeley, the Harvard Business School, a Peace Corps stint in Ethiopia, the California State Assembly and Senate, Deputy Secretary of the Interior under Clinton, and state Lieutenant Governor. While the general election is not until November, his win is assured by the 18% lead the Dems have over the Republicans in California?s 10th Congressional district. The timing for Garamendi is unfortunate, as his 15 years as the Golden State?s first elected insurance commissioner would come in handy in the health care debate, which will be decided by then. One of the most gerrymandered districts in the country, on the map it looks like either a butterfly flipped over on its side, or a giant Rorschach test. This is not an easy area to represent. It includes big helpings of liberal San Francisco suburbanites balanced with conservative Central Valley farmers, and includes the worst Berkeley radicals, sizeable minority groups, cattle ranchers, and foaming at the mouth fruit farmers. Garamendi has taken the traditional liberal tack, supporting public single payer health care, the environment, education, jobs programs, infrastructure spending, and a pro-Israel foreign policy.?? The insight he gave me is that Obama is assuming he will have control of both houses of Congress for only four years, so it will be pedal to the metal to get his reforms programs through quickly. Every session on the Hill will be extended to the max, and there will be no rest for the wicked. If you think this year?s donnybrook over health care was tough, wait until you see the battles over tax reform, cap & trade, and financial regulatory reform in 2010. In my world this means that politics will become a much larger factor in the markets than it ever has in the past. Better go short more dollars.

3) After nearly four decades in the industry, I can tell you that stocks can be snarly, bad tempered beasts that would as soon as bite you as give you rabies. So it is a rare pleasure when I get to trade securities like the Chinese Internet companies, which have been purring away like domesticated kittens. If you need further proof of where the future growth in the global economy is coming from, take a look at Baidu (BIDU), the Google of China, which I strongly recommended on March 6. It has quadrupled from the lows to $400, and has been one of the best calls of my career. Look at the chart below, which is probably the most bullish one you will ever see.?? In the meantime, our Google (GOOG) only doubled. These hedge fund darlings are best of breed companies, but the Chinese one outperformed the American counterpart by a factor of 2:1. This is the consequence of the US economy making a permanent shift from a 5% growth rate to 1.5%-2%, and is a pattern you can expect to see repeated around the world for the next decade. The cruel truth here is that American companies, with the twin drags of a mature economy and staggering debt, will never command the same multiples of Chinese ones. When looking for long equity exposure, always look for Chinese ones first. Expect huge growth of the four horsemen of the Chinese Internet sector-Netease (NTES), Sina (SINA), and Sohu (SOHU), and of course, BIDU- who are going to eat our lunch.

QUOTE OF THE DAY

?Coal is the drug of choice of a major industry with a lot of political power,? said David H. Holtz, head of Progress Michigan, and environmental group.

1) The autumnal equinox is tomorrow. That is the day when the sun crosses the equator headed South, and daylight equals darkness. I know this because I am so old that celestial navigation with a sextant was a requirement to get a commercial pilot?s license. That means that I can shoot an angle off of the North Star and tell you your latitude, the same method used by Christopher Columbus to first cross the Atlantic. Now that?s old! Moving on to navigation of the financial sort, many long in the tooth, grizzled old veterans insist the movement of the sun, moon, and stars, as well as sun spots, have a major impact on the markets. History is certainly replete with financial disasters this time of year, most recently in 2008 when Lehman went under, almost dragging the entire banking system with it. These were easily explainable a century ago when 50% of our GDP came from agriculture, and the harvesting of the fall crop placed huge trains on a then nascent financial system. But today, less than 2% of the economy comes from Green Acres. So maybe history is not repeating itself, but rhyming, or reverberating. Certainly everything good, from currencies and commodities, to energy, emerging markets, and private and public debt, need a rest and are overdue for a pull back. The short term risk/reward for everything is not good here. Watch the run up to end Q3, when the fireworks may begin.

2) India has been one of my stellar picks this year, the ?I? in BRIC, rocketing 112% from the March lows (click here for my initial report ).? Although it appears overheated for the short term, I believe it has much further to run over the long haul. You want to buy countries that have yet to build infrastructure and a middle class, and China has already done that. India?s per capita GDP came in at a sparse $1,016 last year, compared to $6,100 for the Middle Kingdom. China?s economy today is about on the same level that Japan experienced during the late fifties, while India is still in the late twenties, with large parts effectively mired in the 16th century. India?s recent election of a more pro-business government was the trigger for improved growth, which is expected to exceed 6% for the rest of the year. India?s economy is entirely domestic, and is so far outside the world economic system that the global financial crisis was barely felt there. While we were melting down with a minus 6% GDP rate, India continued to bask in a plus 5.8% growth rate. No subprime debt, toxic portfolios, foreclosure crisis, government bailouts, or AIG, GM, or Chrysler. With 1.2 billion consumers, some 70% of GDP there accounted for by consumer spending, so retail figures large in the country?s future. Even Harley Davidson (HOG) has big expansion plans in the world?s largest user of motorcycles.? For those of the ETF persuasion, look at Wisdom tree?s earnings based offering (EPI) or the one from PowerShares (PIN). Better start checking your share prices in rupees.

3) With the collapse in employment, it is all about ?location, location, location.? No surprise then that Michigan leads the country with a 15.2% jobless rate caused by the implosion of the auto industry. Detroit is suffering a horrific 17.3% rate. Nevada came next at 13.2%, blasted by both barrels of a shotgun by simultaneous layoffs in housing and hotels. Rhode Island at 12.8% took big hits in health care services and tourism. My home state of the ?Land of Fruits and Nuts,? California, now has a 12.2% jobless rate, the worst in 70 years. Housing was the grim reaper here, and now 20,000 teachers have started collecting unemployment checks, thanks to our bankrupt state government. Who has the lowest unemployment rate in the nation? Sunny North Dakota at 4.3 %, where healthy agriculture and energy industries kept people in work, and ranking 48th in population, have almost no people to fire anyway. It also helps that the ?Roughrider State? was completely bypassed by the subprime boom, and for many years was the cheapest place in the country in which to own a home. To get unemployment back to a normal 5% rate, Obama has to create 20 million jobs by the next election in 1012, one tall order.

?If you have been playing poker for a half an hour, and you don?t know who the patsy is, it?s you,? said Warren Buffet.