US subprime fallout

Credit rating agencies seem on the brink of downgrading CDOs, according to last week's New York Times; GE has dumped its subprime portfolio, accepting $160 million losses; the Wall Street Journal reports on the exposure of mutual funds to subprime lending; Fannie Mae and Freddie Mac are getting choosier; official guidance is being issued to brokers; borrowers are starting to sue lenders; the dollar is dropping against the Euro, in advance of expected bad figures on consumer spending and borrowing; builders are quitting, going to law or offering special financing deals.

Among loan arrangers, 15,000 of 500,000 jobs (3%) have gone; Guardian Loan Company has escaped collapse by the skin of its teeth, because eager new firms were squeezing it out of the niche market and back towards standard mortgages - but like General MacArthur, chief executive Stuart Schultz promises a return: "If I were a rich man, I would buy the largest subprime business in the country, because it will be back."

Puplava on the commodities bull market

Jim Puplava's Financial Sense Newshour, July 7: having discussed what he sees as a long bull market in energy, Puplava turns to other commodities such as gold and silver: "the best protection in inflation has always been gold and silver, which represents real money". He sees a new "leg up" in the market within 3 to 6 months, because of the continuing inflationary expansion of money and credit. Another factor will be A&M - "junior producers" being acquired or merged to achieve economies of scale.

So as a hedge against inflation for the small investor, he recommends regular savings into a mutual fund in energy and precious metals, or even commodity ETFs (exchange traded funds) in energy and food.

ETFs vs Mutual Funds (aka unit trusts, OEICS etc)

The Motley Fool challenges the view that Exchange Traded Funds are preferable to conventional collective investments.