The fastest-growing American city with more than half a million people is Ft. Worth, Texas, Dallas’ next-door neighbor. This city added more than 20 percent to its population from July 2000 through July 2006, according to the latest estimates from the U.S. Census Bureau. A trend that has been going on for many years, many of the older cities are only losing population from their core areas while the suburbs around them are still growing.

Another trend is the US population moving to warmer climates. The newer sunbelt cities are growing at a quicker pace than older, industrial towns. As the population ages, more are seeking more hospitable climates. If one believes in the argument that the sun affects  our climate and not green house emissions as stated by other climatologists, they predict that the next ice age will start in 2020.

If this theory holds true, the trend of the population moving south will only accelerate. People will want to relocate to regions where the weather is warm and stable. Not surprisingly, states like Arizona, Nevada and Texas will only get bigger. That house in Cleveland just got cheaper.

Regarded as a blow to the Detroit Big 3, the Senate voted 65-27 to approve fuel economy regulations that the automakers said could cripple the industry. The numbers being floated around is increasing Corporate Average Fuel Economy requirements to a fleetwide average of 35 mpg by 2020.

There are various reasons for Detroit’s impotence in Washington. The auto industry lost credibility by opposing even modest fuel measures during the past decade with the sky-is-falling rhetoric, the Big Three are losing the fight with foreign automakers, slashing jobs and closing factories in states where they once held influence over members of Congress. Global warming and America’s dependence on foreign oil have become hot topics that no politician can afford to ignore.

For too long, the Big 3 had produced inferior products that few buyers want. But there are finally evidence that the Big 3 is finally getting it. Just look at GM’s line up of new vehicles.  Instead of pummeling the Big 3, politicians should work with them to stabilize the situation. These companies do generate a lot of high paying jobs. It’s in the interest of all Americans that the Big 3 continues to thrive and prosper.

Private Equity Firm Blackstone sold 133.3 million of its new units to a group of underwriters at $31 per unit, raising $4.13 billion. Based on the offer price, the value of the entire firm is $33.6 billion. One of the arguments why stock prices have appreciated is that private equity firms have been taking a lot of these public companies private. If more of these firms go public, does it signal an end to the bull run in stocks? Why would these firms want to share their massive profits with the public? Do they see a market top and now is the time to cash out? Furthermore, with this much supply coming into the market, it could depress overall prices for stocks.

For now, the equity markets are humming along. Despite the hysteria about the 10 year treasury crossing 5.00%, long term rates are still historically low. Corporate balance sheets are flushed with cash, enabling companies to buy back stock. Many countries, particularly the oil producers and net exporters, need to deploy their massive cash reserves. As long as the global economy hums along, there will still be lots of liquidity supporting the capital markets.

To diversify our nation’s unquenchable thirst for gasoline, the Bush Administration announced programs to produce more ethanol. It is meant to break our addiction to oil. Because corn is used to produce ethanol, food prices have surged. Due to much greater demand for corn, its prices have gone up. The price for beef, milk, eggs, chicken and even wheat have surged. The feed producers must now compete with the ethanol producers for the same corn supply.

If a government can no longer feed their population, riots can occur. This what has happened in China. The price for pork, a coveted Chinese staple, has risen significantly. The pork producers were competing with the ethanol producers for corn, pushing up the price of the commodity. As a result, the Chinese government canceled their ethanol program. In the end, food is more important than fuel. If food prices here continue to go up at the same rate as they did in the past, expect the very badly thought out ethanol program to be shut down.

The real estate market in London, England shows that a favorable tax environment for business does indeed boost overall economic activity. The market for luxury homes in London exploded thanks to strong demand from overseas investors and investment professionals. The average price of London’s priciest houses and apartments will likely climb about 20 percent this year after an almost 29 percent increase in 2006.

Thanks to British laws permitting overseas investors to reside in Britain while domiciling themselves overseas for tax purposes to avoid paying levies on their global assets to the U.K., many wealthy entrepreneurs from all over the world have relocated to London. With all the money flowing into the country, it has only solidified London as the financial center of the world. Not surprisingly, its financial services industry has been prospering.

Across the English Channel, France is in a different situation. Their economy is barely growing and unemployment is hovering near double digits. High taxes, too much government red tape and a strong union culture are turning off investors. Money goes to countries where the opportunity for profit is plentiful. With the French voting in the right wing Nicolas Sarkozy as their President, they are acknowledging that drastic changes are needed. They only need to look at their English neighbors for answers to their economic malaise.

There are reports that Ford is looking into selling their luxury brands Jaguar and Land Rover, as a single entity. For now, Volvo is not part of the plan. The reason for the sale is quite simple. Ford’s own main business is under siege due to changing consumer preferences for more fuel efficient vehicles and intense Japanese competition. To have enough funds to survive the restructuring period and fund much needed new product development, Ford needs to focus on its core business.

Their product mix is heavily skewed towards the gas guzzling trucks. As a result of higher fuel prices, consumers are shifting towards smaller and more fuel efficient vehicles. Ford sales are down while competitors such as Toyota are registering higher sales. Ford simply does not have the vehicles that the market wants right now. Furthermore, the blue oval is saddled with legacy costs such as iron clad labor agreements and medical costs liabilities.

In order to have a successful turnaround, Ford needs to focus all its energies and resources on its core business. The sooner it sells its European luxury divisions, the quicker it can go ahead with its restructuring.

Last week, the pivotal 10 year treasury passed 5.00% to 5.10%, breaking the 20 year trend line of decreasing interest rates. Given the strong global economy, tight labor markets and higher commodity prices, it should not really be a surprise. The higher bond yields suggest that inflation is going up. Most of the market experts believe that inflation will be nudging upwards. Nobody really expects to see the runaway inflation of the 70’s.

So, what does one do in the current environment? For bond investors, one would go for shorter duration. Paper is generally less desirable and real assets will be in demand. They include commodities such as oil. Financial and utility stocks have performed well during the last 20 years. They should do okay thanks to a strong global economy. But higher interest rates will be a drag on stock performance. Look for companies whose products or services have pricing power.

Pretty soon, especially with an active hurricane season, the price of gasoline will hit $4. Higher gasoline prices is the simple result of more demand than supply. The oil refiners are making good spreads at the current prices. So why isn’t more new refineries being built? Are the oil companies in collusion to keep supply tight so they can continue raking in the profits at the expense of the consumer? Not likely.

People forget that the oil refining business is extremely cyclical. Historically, returns has not being sufficiently high enough to justify the capital investment. It is only recently that the refinery business has been profitable. Thus, oil companies are extremely reluctant to commit billions of dollars to build new refineries. Furthermore, the recent announcment by the Bush administration on producing more ethanol has made oil companies question whether there will be a long term market for gasoline. 

The process of getting an oil refinery built is long and very expensive. Environmental studies will need to be done and permits acquired before the ground is strucked. In the current environment, the costs of building a refinery has soared due to higher material and labor costs. You’re not talking millions but billions of dollars to get a refinery up and running. So, get used to the era of high gasoline prices.  

Asia’s third largest economy,South Korea, intends to invest 5.2 trillion won ($5.6 billion) developing resource projects overseas to secure supplies amid higher prices and competition. South Korea imports almost all its energy and mineral needs. Can Jimmy Rogers be right? That we are in a commodities super cycle.

To keep its heavily industrialized economy humming along, South Korea needs a steady supply of natural resources. Probably concerned that China has been actively investing in various natural resource projects all over the world, South Korea felt it better act now or risk being locked out.

Unless we see the world’s biggest economies drop into a recession, there will be support for natural resource commodities and the companies that produce it. Thanks to a rise in global trade and strong demand for resources, countries and businesses are awash in cash. That money has to go somewhere; some will go towards commodities.

For commodity bulls, the South Korean announcement can only justify their positive view on the sector. The shorts at this point are probably being squeezed out. As they say, don’t fight the market. Be ready to buy this sector on dips.