• February foreclosures fall from January heights… but a foreboding trend remains
• The typically overlooked data point that’s moving markets today
• Record highs for commodities across the board… why you should expect a pullback, and when
• U.S. bank guesses SWFs will soon have greater spending power than global governments
• A surprising knock-on effect of the U.S. water crisis
• Plus, did we touch a nerve? Unusually angry reader mail, plus our response below

Foreclosure filings spiked another 60% in February, RealtyTrac reported this morning. Over 223,650 American homeowners filed for some form of foreclosure last month, 25% of whom lost their home to the bank.

On the bright side, filings were down a bit from January. But looking at the one-year chart… a sharp eye might be able to spot the trend:

Retail sales fell 0.6% in February, three times what analysts predicted. While this data point is typically insignificant, today, it’s moving markets. The Dow dropped nearly 2% on the Commerce Department’s release.

Yesterday’s market action was less than confidence inspiring; 24 hours after the Dow’s best day in five years, markets in the U.S. spent the whole day fighting to hold onto Tuesday’s gains.

In the end, the Dow and Nasdaq shed about 0.5%, while the S&P 500 fell just short of 1%.

The dollar fell to new record lows last night… a trend still under way this morning. So far, the dollar index has fallen as low as 71.8. We can only assume the word in the pits is a U.S. recession, more rate cuts and liquidity injections from the Fed.

The euro found itself at another record high, breaching $1.56 for a split second before “retreating” to very high $1.55. The European currency is up 10 full cents in less than a month.

The pound has regained $2.03… up 3 cents since Tuesday. And the yen — the currency of a nation that’s essentially been in recession for the past decade — has reached 100, a 13-year high versus the greenback.

Thus, it should come as no surprise that oil marched to another record high, too. Light, sweet crude prices rose as high as $111 on the wave of dollar weakness. The U.S. Energy Department’s weekly supply report showed U.S. stockpiles at 6.2 million barrels, more than three times the 1.6 million expected. Traders, clearly, couldn’t care less.

Gasoline inched up another penny, to $3.26, at your average national pump.

Gas is still priced lower than its inflation-adjusted all-time high. According to the Energy Information Administration, gas in March 1981 cost $3.40 in today’s greenbacks.

You can expect that price by this summer, if not sooner.

Gold snuck briefly past the mythical $1,000 mark while we were scribbling away this morning. But it has since retreated to $991. Stay tuned. This is likely to be the 00:00 headline story in tomorrow’s 5.

“The soaring commodities markets are not immune to a sharp, sudden sell-off,” warns Eric Fry. “In fact, a sell-off is exactly what the nearby chart seems to be anticipating. Investor sentiment has become quite extreme in both the grain and precious metals markets. The ‘dumb money’ has been buying aggressively in both sectors, while the ‘smart money’ has been selling.

“In general, the ‘large speculators’ buy into markets as they are topping out and sell into markets as they are bottoming out. The ‘commercial traders (commercials) tend to do the exact opposite. Hence, simplistically, the ‘large speculators’ represent the ‘dumb money’ and the commercials represent the ‘smart money.’ Obviously, this characterization is neither exactly fair, nor exactly helpful. But when either category of futures trader is amassing a record-high position on one side of the market or the other, prudent investors should probably pay attention.

“Over in the gold pits, the commercials have amassed their largest ever net short position. This large bearish bet by the ‘smart money’ does not guarantee a sell-off in the gold market, but it does raise the possibility.

“Your editors have been vocal, longtime fans of gold and most other commodities… and so we remain. We anticipate much higher gold prices and oil prices and grain prices… eventually. But we’d rather be a buyer on weakness than on strength… So if the current signals from the commodity markets are valid, we long-term commodity bulls might soon receive a fresh short-term buying opportunity.”

“The year ends for Japan (fiscal year ends for companies) are at the end of March,” adds our friend Frank Holmes, hinting at when that short-term buying opportunity might reveal itself. “It’s basically our (North America) December, and we get a lot of disclosure.

“We’ve not heard much negative news about the subprime in Japanese banks. So odds favor that if there’s any type of news that comes negative out of Japan, that currency would all of a sudden go through a correction, the dollar would rally, gold would correct and then you get on with this wonderful bull market in gold.”

Frank, by the way, is a perennial favorite at our Vancouver Investment Symposium. This year, he’ll be just one of many esteemed speakers joining us for A View From the Peak. Mr. Holmes’ five-star hedge fund, the U.S. Global Investors Global Resources Fund, has risen over 680% since 2002. If you’d like to join us in Vancouver, please call Barb Perriello at 1-800-926-6575.

Sovereign wealth fund assets could soon be greater than the entire official foreign reserves held by central banks of the world.

Morgan Stanley analysts recently estimated SWFs control some $2.8 trillion in assets. According to their growth models, SWFs could easily become larger than the $12 trillion total net value of national holdings in the world — by 2015.

“The rate of growth is impressive,” said Morgan Stanley managing director Stephen Jen. “We are talking here of about $1 trillion per year in their asset pool, generated mainly by a boom in oil prices and other commodities.”

Jen later told Reuters that he expects most of this growth to come from Asia. Good old I.O.U.S.A. is still raising funds for its SWF… when checked this morning, it was looking like we’re at negative $9.4 trillion. Good start…

The Chilean sovereign wealth fund, one of the year’s many newcomers, will soon begin purchasing stocks. According to an announcement by the county’s international finance coordinator, Chile’s SWF will soon begin committing 15% of its $17 billion war chest to stocks and bonds around the globe.

Our Christopher Hancock is convinced that this wave of sovereign wealth investment might be just the ticket you need to ensure the safety of your own retirement. To find out more, read this report.

A surprising knock-on effect of the growing U.S. water crisis… stocks of Pacific salmon are at record lows. According to this morning’s New York Times, government officials will likely shut down salmon fisheries all over the West Coast in an effort to abate rapidly dwindling supply.

“The Central Valley fall Chinook salmon are in the worst condition since records began to be kept,” Robert Lohn, regional administrator for the National Marine Fisheries Service, told the paper. “This is the largest collapse of salmon stocks in 40 years.”

Such “central valley runs” are mostly surrounding the Sacramento River… “the focus of a water struggle between farmers and irrigation districts on one hand and environmental groups and fishermen on the other,” said the NYT.

In advance of our reader mail section this morning, let us give you this little nugget of information: The U.S. Treasury Department announced a current fiscal year budget deficit of $263 billion yesterday — an all-time high.

Clearly following Bush’s straight-as-an-arrow path to balancing the budget by 2012, the U.S. government’s current deficit since the start of the fiscal year (Oct. 1) is up 60% from the same period last year.

Not surprisingly, this nation managed to tally an all-time deficit while also raking in record high revenues for the period. The U.S. government increased earnings by 1.3%, to an impressive $967 billion since October.

Too bad government spending is up 10% in the same time, to $1.2 trillion.

And now to your ire:

“Literally speaking,” writes a reader, “baby boomers ages range from ages 50-62, not 44-wherever, as you indicated. Those six years in between are the represented ‘cohorts’ in Washington that you are unknowingly referring to, not the boomers. Boomers are going on entitlement rolls now, and no one in D.C. wants to do anything for the ‘Now Generation’ now that we will no longer contribute to the GDP, except on the debit side of the column.”

The 5 responds: If you want to get literal, the U.S. Census Bureau calls a baby boomer anyone born between 1946-1964. That would place them between 44-62, as we stated. And from a short smattering of officials in the current administration, it’s not hard to see that the boomers are the most highly represented demographic group in the U.S. government. For example:

George W Bush: 61 years old
Condi Rice: 53
Hank Paulson: 61
Robert Gates: 64
Ben Bernanke: 54
Average age of a U.S. senator as of January 2008: 62
Average age of a U.S. House member as of January 2008: 58

The government is dripping with baby boomers, and not even the younger ones in those ‘six years in between.’

But you’re right. The “first boomer” started collecting benefits this year. You’re heading into the period in your lives when you need health care and retirement programs more than ever. But your timing couldn’t be worse. The coming retirement of the baby boom generation is, in the words of David Walker, “a tsunami that threatens to swamp the ship of state.”

The government is already faced with exploding budget deficits and a rapidly compounding national debt. The public is bereft of savings. The economy has been hollowed out from the inside. We suspect there will be lots of blame being thrown around before we recognize the real crisis… and, unfortunately, not a lot of solutions.

“I am not a baby boomer,” writes another reader, “having been prewar issue, i.e., prior to World War II. However, I am constrained to deliver comment on your response to the reader who wrote in defense of his (baby boomer) generation.

“I am sure what he was reacting to was your acid comment, ‘God forbid the baby boomers ever take responsibility for their own actions.’ This was a totally irresponsible and insulting assertion that has little basis in fact. Further, you do not present evidence, even of the scantiest sort, to back up your statement — which amounts to an accusation — no doubt because there is none. You were further disdainful of your reader’s commentary which rang truer than not. After he took the trouble to write a thoughtful and courteous letter to you, you blew him off in a fit of arrogance and defensive rhetoric.

“Mr. Wiggin, I have bought and read every book of yours, including those co-authored. I enjoy your dry wit and satirical barbs at those who would divest us of our freedom and fortunes. But when you turn this persiflage upon one of your faithful, you have stepped over the edge of responsible authorship. I must say that you have disappointed me very much.”

The 5 Responds: Thank you for the kind rebuke. We’re impressed with your use of the word “persiflage” and apologize if we’ve disappointed you. We do, however, appreciate your restraint. You could have responded like this gentleman:

“The 5 is the most stupid group of idiots around,” he writes. “I worked hard, paid my debts and neither party represents my interests. And as for insurance, I paid out over $800 per month for insurance with high copayments and limited coverage. Now that I am 65 my coverage is no more and Medicare is a joke.

“Mr. Addison ‘Whoever’ is an educated idiot. All I can say is you will need more than money to survive. I would suggest a .357 Magnum… if you have the guts. You had better stay behind your high-priced gated prison. While the rest of us who do not know what instant gratification may be…

“My 2000 Express van has nearly 170,000 miles on it, because I cannot afford a new one. I know that all of your high-priced special services are for individuals with six-figure incomes. As for me, I have slow-speed dial-up service and rabbit ears on the old TV, which, as I understand, will be obsolete in 2009.

“So please do a little research for the rest of the country. The most I ever made in one year was $34,000, and that was the last year of my work. I usually read your 5 with respect, but Mr. Addison is a jerk of all jerks. After tonight I am blocking all e-mail from the stupid 5 group.

“The 5 makes me sick.”

The 5: Emotional subject, this one, eh? It’s only going to get worse.

“Ironically,” Ian writes by IM this morning, “this next bit comes from a Money magazine interview with Ben Stein published this morning:”

“Q. Are you totally sanguine about the outlook for the economy?

“A. A shortage of intelligent behavior. We’re a lazy, undisciplined generation. I don’t exempt myself: I spend way too much, even though I make a good income.”

Best regards,

Mr. Addison, “jerk of all jerks”
The 5 Min. Forecast

P.S. Don’t forget… our special offer on the Resource Reserve ends tonight. Click here for your last chance to get all our commodity letters for a heavily discounted fee.

• U.S. service sector’s monumental plunge… well past typical recession levels
• Latest poll shows economic concerns as No. 1 issue heading into Super Tuesday
• Are Democrats bad for business? Top Wall Street contributors give surprising answer
• Hedge fund financing flees Japan… Chris Mayer on the opportunities that still remain
• China’s winter weather worsens… how this harsh storm is quickly becoming China’s “Katrina”

The U.S. service sector, savior of American consumerism, and roughly 90% of the American GDP, plunged into contraction during January for the first time in five years. The Institute for Supply Management reported early this morning its nonmanufacturing index dropped from 54 in December to 41 in January. That’s a monumental change. A score of 49 or lower represents “contraction” within the sector. January’s score of 41 is the first below 50 since March 2003. And the lowest reading since 2001.

The number is so bad, in fact, the ISM released its data at 9 a.m. EST this morning, an hour and change ahead of schedule, in an effort to quell any leaks that might spook the stock market. In spite of an early release, the Dow opened down over 200 points.

The average reader of The Washington Post has a more pessimistic view of the American economy today than at any time over the past 15 years, says the Post this morning.

80% of the people selected for the poll rated the economy as “not so good” or “poor.”

30% are bearish about their investments and financial prospects in 2008

60% believe America is already in a recession.

39% of those polled cite the “economy and jobs” as the No. 1 issue in the current presidential campaign, up 10% in the past three weeks alone, and more than double those who call the war in Iraq the No. 1 concern.

Only 19% view the economy in a positive light — the lowest level since June 1993.

These numbers come out just in time for Super Tuesday. More than 1,700 delegates are up for grabs in Democratic primaries and caucuses around the country today. Over 1,000 will stand up and be counted for Republican candidates.

Yawn.

Conventional wisdom will tell you “Democrats are bad for business.” Looking at the top campaign contributions so far during this primary season, Corporate Americans are gluttons for punishment:

Oil has declined steadily this week. Light sweet crude is down around $88 this morning. The market appears to be waiting and wondering if a U.S. or global slowdown will affect consumption. Or… if the Fed is willing to crush the dollar enough to hike the price past $100.

The dollar posted some big gains this morning on news that eurozone service industries have themselves shrunk to three-year lows. The dollar index rallied over half a point, to 76, this morning, sending the euro back down to $1.46.

“$1.4684 is a far cry from 82 cents, eight years ago!” comments Chuck Butler in a reminiscing frame of mind.

The euro could “experience a problem when the European Central Bank (ECB) finally gets around to cutting rates this spring,” Mr. Butler speculates. “The dent could take the euro to 1.40. But after getting past the initial blow of having lower rates, calmer heads will prevail and use this lower level as a springboard to push the euro higher. This is when I believe we will see 1.50, but not before suffering some rough times.”

Gold continued to fall in overnight trading, too. New York opened at $888 this morning… still a fair shot higher than the $253 we remember back in 1999. Buy.

Hedge fund investors yanked $7.7 billion out of Japanese funds in 2007 – over 20% of the nation’s total hedge fund industry.

Given the poor performance of the Nikkei et al., Nipponese hedge funds shed nearly $11 billion last year. Investors in such funds are no strangers to losing money. Japan’s 2006 performance was equally disappointing.

“All that pessimism creates some nice prices,” Chris Mayer comments. “I was in Manhattan on Friday attending an investment conference. One of the speakers was Jean-Marie Eveillard, a legendary investor who runs the First Eagle Global Fund. His favorite idea was to invest in Japan. He likes the ‘world-class manufacturers’ — some of them trading for cash on the books.

“Let’s face it — people in Japan live well,” Mayer adds. “They are relatively rich and live long lives. Unemployment is 3.8%. Crime is low. Japan is still the second largest economy in the world. It’s still home to many world-class companies. Infrastructure is good. There is a large and comfortable middle class.

“For the first time in a long while, Japanese real estate is rising. Plus, in Tokyo, the real estate market is strong. There are few vacancies. The prospect for increases in earnings looks good as old leases roll off.”

For Chris’ favorite Japanese real estate play, see your latest Mayer’s Special Situations alert.

Moody’s proposed a new rating system for CDOs and other complex debt securities today. Good timing there.

The new system would distinguish these securities from more legitimate bonds by rating them with a system of 21 numbers — not the traditional 21 letter system of AAA, AAA-, AA and so on.

Yeah… like it’s going to make a difference now.

Congress passed a bill yesterday making the words “In God We Trust” more prominent on the nation’s new dollar coin.

The motto was formerly etched on the narrow edges of the new coin — a creative touch meant to dissuade counterfeiters and provide more room for art on the face. Now, by law, it will return to the fronts and backs of the coins.

The provision was earmarked to a $555 billion spending bill.

Hmmn. Let’s see. The dollar index is down over 10%. And by the government’s own calculations, U.S. inflation jumped 4.1% in 2007 — the largest rise in 17 years. Fourth-quarter inflation soared past 6%. Seems like Congress ought to be a little less concerned with what’s written on the darn thing… and a little more concerned with what it’s worth. Yeah?

As we reported Friday, China is dealing with a nasty squall of winter weather. But just how bad is it? Probably worse than you think… check this out:

“I cannot help but say the media are out of control,” writes a reader. “They announce that Exxon Mobil, the second largest corporation in the land, made obscene profits of $1,300 per second, or about $78,000 per minute.

“How can they not make the dramatic announcement that the federal government deficit-spent at a rate 12 times as high, or over $1 million per minute? Or that the 2007 federal spending of $2.8 trillion is over $5 million per minute?

“Talk about obscene.

“We should remember the wise words of Cicero when he said: ‘The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.’”

“The actual deficit for 2008 will be about $500 billion more,” writes another, “than the projected deficit of $410 billion. Please take a look at the table below from the U.S. budget Web site. The Bush administration’s projection of the 2008 budget deficit of $410 billion is off by about $500 billion — if the budget shenanigans of the past few years are any guide.

“Before you write me off as another nut, look at the bottom line in the table in the column ‘Debt at start of year.’ You will see that at the start of fiscal 2007, the debt was $8.451 trillion and that the debt at the end of the year was $8.949 trillion. The difference — that is, the real deficit — was $497.1 billion.

“Yet the government announced late last year that the deficit in fiscal 2007 was $162 billion. The difference between the actual $497 billion and the announced $162 billion is $335 billion. Remember, these numbers come from the official government Web site.

“The $335 billion credit to the budget was something you might find in Oz-land: the interest on the total obligation of the government to the Social Security Trust Fund, which is about $4 trillion (the interest rate was apparently something like 8%). The government’s own stats (below) show that the actual deficits have been $498-594 billion per year since 2003, far higher than the announced deficits.

“Please tell your readers that the government includes nonexistent credits in its numbers every time it announces the budget deficit. We are in even deeper doo-doo than we thought. I thank you, and so will your readers.”

U.S. federal deficits versus increases in the federal debt

“Regarding the ins and outs of the distribution of I.O.U.S.A.,” writes a reader, “I think you should take it that your loyal fans — and I’m one of them — won’t mind how you distribute your new movie, just so long as they can view or buy/download a copy ASAP.

“This story is a universal one: As you and Bill Bonner keep reminding us, there are people in every country (just about) who’ve been spending way ‘too much money they don’t have, on stuff they don’t need.’ Here in Ireland, we’ve raised this notion to a fine art and achieved (sic) a personal income-to-debt ratio in the region of 165% — which far exceeds the borrow-and-spend orgy that’s gone on in the U.S. or U.K. Most of this debt is tied up in housing (though we’ve built up prodigious amounts on credit cards, too) that is now sharply falling in value.

“There’s a much-quoted expression here that in regard to both our style of capitalism and our social attitudes, the Irish are ‘closer to Boston than Berlin.’ I don’t think Irish audiences will have any difficulty ‘getting the point’ of your movie or applying its lessons.”

The 5 responds: Slainte! We’re working on it. We’ll keep you posted.

Best,

Addison Wiggin,
The 5 Min. Forecast

P.S. As we write to you this morning, the Dow is down well over 200 points…today’s ISM reading has brought recession woes back to full force. While U.S. investors seem to spend every trading day “waiting for the other shoe to drop,” our international investing adviser Chris Hancock has found a global niche immune from the credit crisis… one that he thinks “could be the most persistent and reliable market boom in a decade.” You can learn about it here.

 

• Markets end January with a bang… why 2008’s first month was still a record bust
• Gold creeps back to record highs… Frank Holmes on why gold remains an “attractive investment”
• OPEC denies output boost, U.S. government prepares for $225 oil
• Russia launches SWF… how baby boomers could learn a lesson from Mother Russia
• Jobs report falls negative, far below expectations… why the latest BLS reading is even worse that it seems

U.S. markets capped off January with a nice rally yesterday. The Dow, S&P and Nasdaq all shot up 1.7%.

It must have been the huge loss posted by MBIA…or perhaps the worst consumer spending number in over a year… or maybe even the warning issued by S&P that it plans to cut its ratings on $534 billion more in CDOs and mortgage-backed securities.

One of these bits of cheery news surely lured “investors” back into stocks.

Alas, even with yesterday’s rally, January will go in the books as one of the worst in history. The Nasdaq finished the month down 10%, the worst January in the 37-year history of the exchange.

Microsoft offered up a $45 billion hostile takeover bid for Yahoo this morning. That ought to be fun to watch.

Gold has been the real story this month. After falling from Wednesday night’s all-time high of $936 per ounce, gold has crept back up to $934 this morning.

Last night, OPEC ministers chose to keep oil output at present levels. The group decided to maintain its 29.6 million barrels per day flow until March 5, citing concerns that a global slowdown — particularly in the U.S. — will stunt demand.

Meanwhile, the U.S. government is pricing oil at $225 per barrel in the not-too-distant future. “No less an oil-burning institution than the Department of Defense,” says our oilman Byron King, “is planning for a future of $225, and higher, oil.

Exxon Mobil announced earnings of $40.6 billion for 2007 this morning — the largest income for any company, ever. Exxon income rose 14%, to $11.6 billion, in the fourth quarter, another all-time high for any U.S. company.

Shell reported earnings of $27 billion in 2007, a new all-time high for any British company. We’re sure Shell employees and shareholders were delighted… but the rest of Great Britain seems, well… pissed.

Yesterday, we reported Japan’s intention to open a multibillion sovereign wealth fund. Today comes word the Russkies are right on their tail.

Thus, now over 40 international SWFs are up and running, with a net worth of over $2.5 trillion. Chris Hancock has assembled a report on the matter… a must-read for any long-term investor. Check it out here.

In the currency world, the dollar whipsawed through some big ups and downs overnight, but this morning trades a skosh away from yesterday’s familiar lows. The euro is still at $1.48, the pound at $1.99 and the yen at 106.

Mexico cut its 2008 economic growth forecast this week. The Mexican Finance Ministry now expects 2.8% GDP growth this year, down from its previous forecast of 3.7%. Ministry officials specifically cited recessionary woes in the U.S. — the country’s No. 1 trading partner — as the largest driver behind the lower forecast.

Back here, north of the border, jobs fell by 17,000 in January – a number far below the 70,000-plus jobs analysts’ expected to see. Unemployment fell slightly, down to 4.9%, which makes perfect sense… only the U.S. government can report an unexpected loss of jobs and lower unemployment in the same breath.

And much as we hate to rain on your Friday, the jobs number is far worse than it seems. The number of long-term unemployed — those seeking a job for more than six months — now stands at over 1.3 million — up 22% from this time last year.

“Yes, I totally agree,” responds a reader — facetiously, we think, “it is an outrage, those Chinese coming into America, and buying the place up. How dare they?

The 5: Heh. No doubt she’ll be soliciting advice from Charlie Rangel. Lord help us.

“Regarding the suggestion,” adds another, this one a little more seriously, “that the U.S. government should contract with American companies to build a renewable energy economy… We could pay for it by closing several foreign military bases each year.

“That money could be used to subsidize investment in these technologies. It’s time to take care of numero uno and let the rest of the world take care of itself. I’m tired of paying to protect the world’s oil supply. Let China and India step up for a change.”

P.S. Maybe the U.S. government should open its own sovereign wealth fund to invest in resources around the world and then dedicate the proceeds to Social Security, Medicare and to pay down the national debt. Oh, wait, that would mean the guv’ment would actually have to have some money to fund the darn thing. Right.

Mr. Hancock can help.

• Mighty American consumer shows new signs of strain
• Markets react to 1.25% rate cut in a week: “Is that all?”
• Tales from the credit crunch: MBIA gets bailout, S&P cuts ratings
• Senate’s stimulus: Costs more, puts less in your pocket
• Putting a price tag on China’s “Storm of the Century”
• Retailers’ own Super Bowl bet set to pay off big
  

Consumer spending in December rose 0.2% from the month before — the lowest rise since it fell a tenth of a percent in September 2006. Personal income rose half a percent. Adjusted for inflation, spending went nowhere… zilcho. And income increased two-tenths of a percent.

As expected, the Fed cut its lending rate again yesterday… by 50 basis points. That’s 125 points in a week.

Likewise, the U.S. dollar got creamed just as Eli Manning will on Sunday. Nearly stagnant GDP growth and the Fed’s 50 points whipped traders into a frenzy. When the dust cleared, the dollar index had fallen to 75 even, about half a point short of its all-time low.

Gold buyers rejoiced en force on the rate cut news, too. The yellow metal surged to a record $942. Overnight in Asian trading, gold settled back to a respectable $926.

The Senate Finance Committee approved its version of the “stimulus” package yesterday. It’s already $12 billion heavier than when it left the House… now weighing in at over $150 billion. Despite the extra funding, the average American will actually get less than they would had the House’s $146 package gone straight to law.

Bond insurer MBIA announced a $2.3 billion quarterly loss this morning, thanks mostly to a $3.5 billion write-down due to its credit derivatives portfolio. Big surprise, there. MBIA also announced it has received a $500 million shot in the arm from private equity group Warburg Pincus. Heh, it was either private equity or a sovereign wealth fund (SWF).

Japan is taking steps to create its first sovereign wealth fund. Japan’s financial services minister, the U.K. newspaper the Times says, is touring other SWFs of the world, and Japan is well into the design phase of its own state-controlled investment body.

Japan is the world’s largest holder of U.S. Treasuries. Of the country’s $973 billion in reserves, $580 billion are U.S. bonds. That investment, versus the value of the yen, is down about 13% over the past year alone. If and when Japan launches its SWF, it could easily become the world’s second largest (behind Abu Dhabi’s massive $1.3 trillion fund). Our Chris Hancock has put together a special report on how such funds could save your retirement nest egg… read it here.

Ratings agency Standard & Poor’s said it has begun cutting ratings of as much as $534 billion in additional mortgage backed securities and CDOs.

According to S&P officials, the downgrades could cost the world’s holders of such securities more than $265 billion in losses. Such losses would have a “ripple impact” on broader financial markets, a release from the agency said. That would be shocking.

The Chinese are currently suffering through their worst winter in over 50 years.

What was a bitter nuisance is quickly becoming nothing short of a national crisis. A particularly nasty storm struck China this week on the verge of the Chinese New Year… the biggest annual human migration in the world.

Some 178 million Chinese — more than the entire population of Russia — are attempting to travel throughout the week to celebrate the New Year with families. All over China, the winter weather has shut down the majority of airports and railroads, and now tens of millions of Chinese travelers are stranded.

What fun: Just a few of the 500,000 people stuck at the Guangzhou Railway Station.

BusinessWeek estimated the railroad crisis has already cost the Chinese government over $3 billion in damages. Protestors are taking to the streets. If anything, it’s an incredible testament to the multitudes and groupthink at play in China… where else would 178 million people try to get up and go somewhere at the same time?

Despite recession and personal income fears, this weekend’s Super Bowl is expected to be one of the most lucrative of all time. The National Retail Federation estimates the average American will spend $59 dollars on Super Bowl-related goods, up 3 bucks from last year.

“I found your take on the buying of Jaguar and Land Rover by Tata interesting,” writes a reader. “These cars have about as much ‘Americana’ symbolism as cricket and kidney pie.”

The 5: Touche. We heard from a number of readers on our misuse of the term “Americana.” Apart from the fact that one of your editors drives a Land Rover and loves it, we only meant to show that now they’ll no longer have anything to do with the American economy.

“I felt a never-before numbing chill,” writes a reader, “when I read about the Chinese establishing manufacturing plants in the U.S. by buying up land and buildings and hiring local workers. The word that leaped to mind wasn’t “slavery.” It was “serfdom.”

“What ought to be done is for the government to invest $400 billion in our infrastructure,” writes another reader. “The government can contract (with American companies and employees only) to build all the renewable energy (wind, solar, wave and geothermal) systems needed to replace all the coal and natural gas systems, and get ourselves started on an electrical transportation system in the process.

“This would stimulate the economy, as opposed to squandering more dollars and devaluing the dollar, which only leads to more inflation. Our country would then have the cheapest and most reliable power in the world — one great asset when it comes to being competitive on the world market. Be one healthy place to live, too.”

The 5 responds: Amen.

“Now that you are an experienced media exec, how about putting The 5 Min. Forecast on video downloadable through the Web?” asks our last reader. “A 20-30 minute show should do it. I suspect 90% of your readership is male, so good-looking female presenters would be a plus. Once the masses understand that they can make 3 times the money watching your show instead of CNBC, advertisers will beat down your door.”

The 5: Hmnn… maybe we should. But do you really think the world needs 30 more minutes of us each day? We were thinking five minutes is a stretch.

P.S. I.O.U.S.A. continues its post Sundance “buzz” online. Yesterday, Zoom In Online, a local Webzine that covers Sundance, posted some audience member comments after they saw the movie… and Patrick, Dave and Bob did an interview with Federal News Radio, here.