The Daily Reckoning
Weekend Edition
March 19-20, 2005
Baltimore, Maryland
By Addison Wiggin and Tom Dyson

MARKET REVIEW: BRAND NAME CITIES

Today's issue is about cities…the most expensive cities
in the world. Or 'brand name cities' as your Paris-based
correspondent, Bill Bonner, labeled them last week.

"Cities have become like cars and watches," he said, "They
are status symbols. People do not live in the heart of
London in order to work in factories. They do not move to
New York to save money. They do not relocate to the central
cities for the job opportunities. Instead, a Manhattan
address…or a pied-a-terre in Paris signals 'I've made
it.' Major cities have cachet. Class. Style."

It didn't used to be this way. Cities were centers of
production. Smoke-belching hellholes insulated by slums and
ghetto. They were magnets for the poor and unemployed who
couldn't make a living in the countryside any more. Now
they are home to "the rich, the hip, the footloose and
fancy free - as well as fashionable, upmarket, good-paying
industries such as media, banking and finance."

"Is it any wonder [property] prices have been soaring?"
asks Bonner.

Your Paris-based correspondent was in London last week. And
once again, he was discussing big city prices…

"Maria and I went out for breakfast in London yesterday. We
went into a cheap, unpretentious diner. Two cups of tea,
two pieces of toast, two fried eggs, and two glasses of
orange juice - $17. We'd expect to pay that, and more, had
we gone into the Savoy or the Connaught. But this was one
of those dives run by people who don't speak English, where
they only clean the counter once every other week."

While Bill was in London, your other Baltimore-based
editor, Addison Wiggin was in Paris. "Yesterday Jennifer,
Meritt, August and I paid $78 for a steak and frites, a
pizza, two beers and an Orangina," he said. "Paris has got
really expensive."

Eric Fry, the Rude Awakening's man on Wall St., completed
the 'triple-witching.' In Wednesday's edition, Eric was
presented with a bill for $64 after ordering two glasses of
house wine and a bottle of Budweiser in a Manhattan chain
restaurant. "Fortunately, a generous companion promptly
tossed four 20s toward the barman," wrote Fry, "thereby
obviating the need for your editor to satisfy the bill. UN-
fortunately, because we all continued drinking our pricey
libations, your editor found himself tossing SIX 20s on the
bar to close out the tab."

This coincidence of emails from your three senior
globetrotting DR columnists prompted us to look up the
annual survey by Mercer Human Resources Consulting of the
world's most expensive cities, last published in June 2004.

Tokyo tops the list. It's followed by London, Moscow, and
Osaka. Hong Kong is in fifth place, then Geneva, Seoul,
Copenhagen, Zurich, and St. Petersburg make up the top ten.
The biggest surprise is Beijing. It's in at number 11,
ahead of New York at number 12. Paris is in 17th position.

Any number of observations can be made from this list. For
instance, look at the currencies this list represents. The
yen, the pound, the ruble, the Hong Kong dollar and the
Swiss franc are all in the top ten, but no euro-based
cities make it.

Or what about Beijing? We thought China would be cheap, but
it looks as though Beijing is about to become the world's
most expensive city. Given that currencies movements are an
important factor in this list - the compilers acknowledge
this themselves - and that China's currency, with its
dollar peg, has become relatively cheaper these past few
years, it's amazing that Beijing is so high.

We hesitate to draw any conclusions from this research…it
was designed for use by the human resource departments of
multi-national corporations as they decide compensation for
ex-pat employees. A similar survey from the point of view
of a blue-collar worker or a peasant farmer would probably
yield different results…

Instead, we'll sign off now and head down to the local pub
for a little research on global inflation of our own…

Regards,

Tom Dyson
The Daily Reckoning

P.S. Canada featured highly in Mercer's 2005 list of cities
that offer the highest quality of life…Vancouver scored
the #3 spot, and other Canadian cities weren't far behind.
And we believe it too. Canada is a wealthy country…the
people, the scenery and of course, the oil. And they must
be shrewd businessmen, because now they are signing long-
term oil supply contracts with the Chinese…

Backstabbed
http://www.agora-inc.com/reports/OST/WOSTF306

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THIS WEEK in THE DAILY RECKONING: For technical reasons,
Thursday's DR never got mailed. It was called Clash of the
Titans. Just follow the link below for the full
edition…and all the other DRs from last week:

DEFICIT DISORDER 03/18/05
By Bill Bonner
"There is much debate over the U.S trade deficit - some see
it as a sign of the 'decline of America;' others insist
that it reflects our country's strength. We look at why
seeing this deficit as an asset is America's downfall…"
http://www.dailyreckoning.com/Issues/2005/DR031805.html

CLASH OF THE TITANS 03/17/05
By Justice Litle
"To learn about the future of economics, you must be well
aware of the past. Justice Litle shares some observations
to help us get through, and possible even profit from these
'interesting times' between the U.S and China…"
http://www.dailyreckoning.com/Issues/2005/DR031705.html

FUELING ECONOMIC GROWTH 03/16/05
By Lord Rees-Mogg
"With the price of oil heading up rapidly, the only logical
step would be to consider other sources of power… and in
China and Japan they have been developing two new
technologies that could change the world…"
http://www.dailyreckoning.com/Issues/2005/DR031605.html

BARRELS OF OIL, MILES OF MUD 03/15/05
By Byron King
"We look at the stir caused by Edwin Drake, the man who
drilled the world's first commercial oil well. It's
interesting to see what a look into history can tell us
about the present-day oil frenzy…"
http://www.dailyreckoning.com/Issues/2005/DR031505.html

HOLLYWOOD ECONOMICS 03/14/2005
By The Mogambo Guru
"The basics of economics prove too difficult for some to
understand… realizing this, and not wanting anyone to
miss out in the joy that is the story of the U.S economy,
The Mogambo explains it in way that we can all grasp…"
http://www.dailyreckoning.com/Issues/2005/DR031405.html

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HEADLINE, NEWS And INSIGHT: Bernie Ebbers was convicted
this week. Let's kick a man while he's down…an excellent
piece by Byron king:

RICHES TO RAGS 03/15/05
By Byron King

"With a bit of luck and some hard work, but without the
credit bubble let loose by the Fed, Bernie Ebbers would
have lived like many other successful business-owning
suits."
http://www.dailyreckoning.com/Featured/richestorags.html

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FLOTSAM AND JETSAM: There She Blows! Oil Surges Past $57 to
Make Another New Record… Plus, Tips on Playing Both Sides
of a Volatile Market…

By Kevin Kerr

Another stunning week in the energy patch, as oil snapped
through $57 and left the bears in the dust, shaking their
heads. The fact of the matter is that crude oil is a bit
overpriced for the short term. That in no way means that
this rally is just on hype and speculation, as some would
have you think. It does, however, mean that the front-month
prices simply can't be supported at these levels without
some retracement at some point.

I imagine that point is near at hand. Justice and I see
things much the same way. In Outstanding Investments, we
have a great combination of long-term energy plays, and
some have had stellar returns. Under no circumstances is
that run over with. However, from time to time, it's a good
idea to take profits on some of the highfliers and then buy
them again when they pull back a bit - we call that "buying
the dips."

There is another way to play this, and I will tell you
about that next. But first…
 
*** Playing Both Sides of a Volatile Market

When a market is as volatile as the crude oil and gasoline
markets are now, you have to think out of the box. To rush
in at this point and try to get in on the bull run is sheer
suicide for many investors. The inevitable pullback is
bound to happen, and when it does, you want to be a buyer
ready to snatch up bargains. Justice is working on some
other plays right now that the average trader is not even
considering. It's imperative to approach the sector this
way during these extremely volatile times.

Another way to play it can be confusing to some "equity-
only" traders. You're solidly long on the energy sector
with Outstanding Investments. You've got drillers,
transport companies, exploration companies, even energy
funds. Viva la energy bulls! Now, how do we hedge ourselves
during the inevitable oil profit-taking and retracement?
Simple: put options on crude oil.

"Oh no," you're saying. "Kevin, I don't like futures.
Commodities are too dangerous." Nonsense. Put options
simply give you the right - but not the obligation - to own
crude oil within a certain time frame. Your risk is
completely limited, but your profit potential is unlimited.

So you're asking yourself, "If it's so easy, why doesn't
everyone do it?" Answer: They are afraid to. At the end of
the day, trading options is easy and eliminates almost all
of the concerns that come with trading futures, like
margins, unlimited risk, etc. Again, I want to stress that
you know your total risk of loss upfront, and it can't ever
be more than what you put into the option.

So why do we buy puts if we say oil is going to keep going
higher? The reason is clear: Our equities in Outstanding
Investments give us a long-term approach to the rising oil
price. Meanwhile, by using trades like those we recommend
in Resource Trader Alert, we can catch the faster-paced
corrective moves that always come. If you aren't using this
type of trading service, you are missing out on a whole
other segment of profits.

It's important to take your trading to the next level -- to
never get emotionally attached to one direction in the
market. Sure, I am a die-hard bull on the energies, as I'm
sure you're well aware of by now. However, I make just as
much money playing the short-term bearish market as well,
and so should you. I will be happy to help you understand
it better in Resource Trade Alert. Together, OI and RTA
help you have all your bases covered in the energy
sector… and sometimes, a single trade can cover the cost
of both subscriptions.

Justice is busy working on the next OI issue, and I am
working on my submission, too. So don't ever think I am not
in touch. Justice has some great ideas for next month, and
I know he is going to take things to a whole new level.
Also, Justice will be sending you a hot line early in the
week from now on, and I will continue to send you our
Friday hot line as always. With the resource markets so red
hot, we need to be in touch with you even more frequently.

Have a great weekend. And if you would like more
information on how to join RTA, please visit
http://www.agora-inc.com/reports/RTA/WRTAF347

Yours for resource profits,

Kevin S. Kerr

P.S. If you'd like more information on Outstanding
Investments, please visit:

http://www.agora-inc.com/reports/OST/WOSTF316

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AND THE MARKETS…(Courtesy of the Rude Awakening)

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