ExxonMobil and Paul McCartney

They're few and far between, but some great bargains are out there. Barron's says ExxonMobil is selling for just eight times forward earnings. Jeff Clark thinks ExxonMobil bottomed last week. I have my own thoughts on the stock, which Extreme Value readers got a look at on Friday. Suffice it to say, I think ExxonMobil today is like Paul McCartney back when Sergeant Pepper's Lonely Hearts Club Band first came out: His demise was reported a tad prematurely.

You hear a lot about how Warren Buffett's favorite economic indicator is rail traffic, which has been on the rise lately. But rail traffic is local. The Baltic Dry Index is global.

 As poor emerging economies grow wealthier, one of the first ways people spend their extra money is by eating more and better food.

AgBank has more than 23,000 branches and the largest customer base in the world, according to the Wall Street Journal, with 2.6 million corporate customers and 320 million retail customers – more customers than the entire U.S. population.

I have to wonder about AgBank... or any other bank that grew lending 70% last year... faster than the other three big state-owned banks in China. If the bank weren't located in China, where the government controls everything – including how much its banks will lend – would AgBank have grown that much last year?

I've yet to put a single penny to work in that country, but it seems like some folks just can't get enough risk exposure in China. Meanwhile, Chinese banks are getting more exposure to the United States...

In September of last year, we noted how crazy it was that the U.S. government was financing China's purchase of U.S. commercial real estate...

Just when you think American finance can't possibly get any more bizarre... Our government is now proposing to finance large-scale Chinese government purchases of U.S. real estate. No, I'm not making it up.

China Investment Corp. (CIC), China's $300 billion sovereign wealth fund, is considering buying huge swaths of distressed U.S. real estate, via the U.S. government-sponsored Public-Private Investment Program (PPIP). PPIP, you may recall, was created to rid banks of toxic mortgage assets by luring private investors to buy the assets with financing from the U.S. government. CIC is in talks with BlackRock, Invesco, and Lone Star Funds about buying real estate assets – including commercial mortgage-backed securities. Because most of the equity in these buildings has disappeared, buying the debt and foreclosing is the easiest way to gain control of the real estate.

Just take a minute and think about this... First, for the last 20 years, we've filled China's coffers with our paper receipts (dollars). In exchange for several future generations of savings, we got cheap furniture, children's toys, and electronics we didn't deserve. Now, we're going to finance – with future generations of taxes – China's purchases of our trophy properties. What can I tell you? I often feel like I'm the only sane man in a world gone mad. My wife tells me I'm the crazy one. But this? How will I possibly explain this to my children and grandchildren? – September 9, 2009, Digest

CIC is still working with U.S. money managers to invest in real estate. But Industrial & Commercial Bank of China (ICBC), China's largest bank, is lending directly to U.S. commercial real estate owners. ICBC, which is 70% owned by the Chinese government, is starting a "large loan" program for property owners in need of loans over $100 million (most U.S. banks are avoiding these large loans).

ICBC believes U.S. property values have fallen enough to limit lending risks... "The market is very close to the bottom," said Wu Bin, general manager of ICBC's New York Branch. ICBC's new program should also see huge demand as property owners face over $1 trillion of maturing debt over the next five years. Wu says the bank will reduce risk by only lending to buildings with solid, existing cash flows and lending to developers with good track records. The bank will also only make loans of up to 65% of a property's value (compared to over 80% during boom times).

To put that in perspective, a friend of mine is the lender of last resort to homeowners in Florida. He lends a maximum of 60% of value. And the loan is based on his own conservative appraisal. Essentially, China is running the same business... real estate pawnbroking.

As we said in the excerpt above, because most of the equity in these buildings is gone, buying debt and foreclosing is the easiest way to take control of a property. ICBC closed its first loan earlier this month. The bank contributed $150 million to a $355 million loan made to a partnership led by private-equity firm Carlyle Group. The venture used the money to refinance the $325 million mortgage on 650 Madison Ave., a 27-story office and retail building in Manhattan.

ICBC is initiating its program with U.S. commercial vacancies at the highest level in 17 years. In the last quarter, the U.S. lost 1.8 million square feet of occupied space, pushing the vacancy rate to 17.4%, the highest since 1993. Though the pace of loss is slowing, the U.S. has still seen occupied space drop 133 million square feet since early 2008 (the size of 2,300 football fields).

New highs: none.

In the mailbag… a different take on opening a bank account in Canada. If anyone else wants to chime in, send it here: feedback@stansberryresearch.com.

"I had a completely different experience than the subscriber you quote on 7/1. I was in Montreal in May, staying at the Queen Elizabeth Fairmont. I walked across the street to the local RBC office and asked to open an account. After showing my passport and photo ID and filling out some paperwork, 30 minutes later I had a savings account there. Twenty minutes after that I had rented a safe deposit box. No muss, no fuss, no problem. RBC welcomed this U.S. citizen (and my money).

"I had conducted an interesting experiment on the way to Montreal. I had heard that the airport security machines wouldn't bleep if you were carrying gold, so I put two Buffalos in my pocket and walked right through. Nothing happened. I don't know if I would have had the same experience on my return flight, because I left them in my new safe deposit box." – Anonymous

"In the 1920's my husband's grandfather paid the debt on their small farm with 50 bushels of corn. The price of corn was so high, they had to carry the money to the bank in suitcases. That same year a neighbouring farmer decided to sell his land because the price of land was so high. A year later the man could not buy food for his family because his money was all gone." – Paid-up subscriber Jo-Anne

"With regard to SEVERAL of your recent short sales recommendations (BKS for example) an attempt to do so results is a notice that it can only be done for a $50,000 minimum. WHY do you recommend things like this that the average subscriber can't even do? IT'S VERY FRUSTRATING." – Paid-up subscriber Wayne Starr