Yet the stock is down 4%, year to date. And commodities are coming off a horrible month in which they lost nearly 10%. This doesn’t seem to have deterred Marius Kloppers at BHP. He’s hitched the company’s wagon to China’s growth and plans on spending $85 billion to expand production. He is going on the offensive, which is not something you do if you think the war is clearly over and that you’ve lost.

So what does the BHP Billiton result tell us? It tells us that iron ore and coal are the most firmly entrenched of the commodities in the resource market. They will be hard to dislodge and appear to give investors a kind of refuge amongst the greater gloom. While base metals and energy have suffered severe setbacks and the hands of liquidating speculators, coal and iron ore producers should (and we repeat should because these things can change) continue to ride high export prices to profits.

One thing to watch for? A slowdown in Chinese steel production. It doesn’t matter why it would happen. But if it does happen, the coal and ore stocks could suffer casualties.

Dan Denning
The Daily Reckoning Australia

Source: BHP Billiton (ASX: BHP) to Report Second Half Results Today

Crude prices jumped on Monday in electronic trading as news of the attack broke, but analysts said the impact on prices spilled over into Tuesday, when exchanges on both side of the Atlantic re-opened after the long weekend.

“Is it demand? Is it speculation? Is it OPEC punishing George Bush for the war in Iraq?” asks Dan Denning in The Daily Reckoning Australia. “OPEC thinks there’s plenty of oil. It’s the declining U.S. dollar that’s to blame. OPEC says that for every one percent decline in the dollar oil rises by US$4, and vice versa.

“The solution to high oil prices, then, is not increased supply or reduced demand, but a stronger U.S. dollar! Well, there is certainly some truth to that, but it is not likely to happen any time soon. As a tangible good whose supply cannot be increased by a central banker, the oil price (a little like the gold price) tells you there’s too much paper money chasing too little stuff.”

Alexander Green in Investment U has identified a new, highly profitable oil source: “Alberta’s oil sands are the largest known reserve of oil on earth, containing between 1.7 and 2.5 trillion barrels. (Saudi Arabia, by comparison, has only 262 billion barrels of proven reserves. In fact, all OPEC nations combined have less than 900 billion barrels.) For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractible at prevailing prices using then-current technology.

“But times have changed… And the new gold rush is on.

“In Alberta’s oil sands, energy companies don’t drill for oil. They dig it up. After excavation, giant trucks three stories high – carrying up to 400 tons of oil sands – carry it off to a processing plant.”

Read on here to find out how to cash in on the tar-sands “black gold” rush with this oil mining company.

Even as the Fed battled in almost unprecedented fashion to stem a widening credit and housing slump, some members fretted over the possibility of a “prolonged and severe” economic downturn. It was in that environment that they voted — with two dissents — to cut its most important interest rate by three-quarters of a percentage point to 2.25 percent. That action capped the most aggressive Fed intervention in a quarter-century.

Meanwhile, former Fed chief Alan Greenspan has been busy defending his part in the housing bubble.

“I find it interesting that Big Al is getting testy about all the fingers being pointed at him for this mess,” says Dan Denning in The Daily Reckoning Australia.

“I believe I may have been one of the first to point a finger at him when the housing bubble was getting bigger and bigger, and no one would admit we had a bubble.

“But just for the record… Here’s the blame I believe he should bear… First, I believe the Fed was too lax during the stock market bubble. Raising Fed requirements on margin, in my opinion would have gone a long way toward slowing that bubble, and maybe preventing trillions of dollars in losses.

“Second, I believe he fueled the housing bubble and then all the awful stuff that happened as a result of the housing bubble, by cutting rates too low back in 2001 and then keeping them too low for too long (through 2003).”

Although he denied that the US economy is in a recession, speaking before a congressional committee yesterday he admitted that a “recession is possible” in the US.

He also said that the US economy could shrink over the first half of this year.

“It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,” he said.

Read on at Bloomberg.com.

What Bernanke didn’t mention to his congressional inquisitors is that financial markets would work better without the central planning interventions of the Fed.

“Only by appropriate economic reward to the cautious, when they are right and everyone else is wrong, will caution sit well beside risk-taking in the financial system,” says Paul Tustain, writing in the The Daily Reckoning Australia.

“The real threat to New York’s and London’s continued dominance of the world’s future financial system is government regulation itself [...] Top down rules remove society’s flexibility until one day we all wake up in a paralyzed ‘command’ economy, where nothing can be done without official sanction.”