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Those who have been reading my weblog know that I follow developments in South America. I have written about Argentina, Bolivia, and Venezuela. I have discussed how the continent is becoming more left of center.

Today in Street Insight (an expensive subscription site), Doug Kass (General Partner for Seabreeze Partners Short L.P.) wrote his list of 25 possible surprises for 2006. His surprises are not predictions, but rather potential events that you should put on your radar screen. His first possible surprise concerns South America.

1. Anti-American rhetoric in South and Central America becomes kinetic in 2006 and has broad market and economic implications. A plethora of left-wing presidents (creating another anathema to the Bush administration) are elected in this volatile and important economic area of the world as elections of leaders in nine countries from Nicaragua to Chile are staged next year. Most importantly, with the recent election of Evo Morales in Bolivia, a projected victory of anti-American Nicaraguan leader Daniel Ortega, a surprisingly easy victory in Mexico of Andres Manuel Loez Obrador (an anti-President Vincente Fox candidate) coupled with more aggressive nationalistic moves by Venezuela's Hugo Chavez turn into an epidemic of anti-American policy. This new wave of socialism and left-wing presidents contributes to a series of moves to nationalize certain industries, and supply disruptions in certain countries in South America are destabilizing, resulting in much higher commodity prices during the year (including oil, natural gas, copper, tin and grain). The CRB Index approaches 375 (now at 326). Fears of stagflation befall economies and markets dependent on imports of goods from South America like the U.S. Crude climbs to over $80/barrel, and the Dow Jones Industrial Average bottoms at 9000-9250 during the early summer (and closes the year at the 10,000 level). Gold trades above $675/ounce sometime during the year.

Keep South America on your radar screen. Most of us pay little or no attention to South America.

As I have mentioned in the past, Street Insight (a sister site to TheStreet.com) is a valuable service. Those serious about the markets should consider subscribing.

Overstock.com (OSTK) CEO Patrick Byrne dissappointed the market with news of the company's fourth quarter results. According to its press release:

"We've had a nice holiday season, just not as nice a season as we've had in the past or as I'd hoped for," said Byrne. "We have become the go-to shop for smart, savvy shoppers interested in high quality products at discount prices, and I made the determination that this holiday season would be critical for solidifying our brand in our customers' eyes. To get above the noise, we spent a few dollars more than we had hoped, but in my experience, over time, those dollars will pay large dividends. So I decided to do what is smart for the company in the long run, rather than focus on just the quarter's results -- because I plan to be around next season as well, and to be bigger than ever."

Yeah, yeah, whatever. The press release contains more information about the lawsuit, for those that are interested. My own simple thoughts are that this company and its stock are in trouble—maybe not today, but soon.

In terms of disclosure, I have no positions in OSTK, either in stock or options.

Update:

You should also read Jeff Matthews's article A Necessary Correction.

Bernard Simon in Toronto wrote a good article in the Financial Times Analysts cool on Detroit's healthcare deals (subscription might be required).

Securities analysts have issued a new flurry of warnings about the financial health of General Motors and Ford Motor, in spite of recent deals by the two Detroit-based carmakers with the United Auto Workers union to bring down healthcare costs.

Robert Barry of Goldman Sachs described the benefits of the healthcare pacts as "more bark than bite". Peter Nesvold at Bear Stearns added that savings were less than expected.

GM estimates that its deal with the UAW will save $1bn a year in cash, while Ford has projected savings of $200m.

I do not have much time for the analysts. If you look at Yahoo!'s financial site for General Motors Corporation (GM), you see that three months ago 11 of 17 analysts had a hold, buy, or strong buy on the stock. To those that held or bought GM or Ford, that decision has been costly. I expect that the analysts will continue to follow the stock downwards. I believe analysts are stilll conflicted. They are conflicted because they do not want to jeopardize their firm's participation in any massive restructuring that might be required. So the game continues.

One other interesting quote from the Financial Times article is the following:

Sales of cars are expected to exceed light trucks this year for the first time since 1981.

That is telling. GM and Ford make their money from trucks and SUVs. Both companies have long ceded the car market to the foreign competition.

I remain short GM stock.

There are two article that I recommend reading today, both of which concern energy. The first article is from the Wall Street Journal by Guy Chazan, staff reporter, Russia Lifts Curbs On Foreign Buying Of Gazprom Stock (subscription required).

MOSCOW -- Russian President Vladimir Putin signed a long-awaited decree removing all curbs on foreign ownership of shares of OAO Gazprom, the world's biggest natural-gas company, a move that will turn it into one of the world's leading emerging-market stocks.

This event, which investors have been anticipating for years, provided a fitting climax to a bullish year that has seen Russia's main share index soar by 80%, beating most other markets. Under the old rules, foreigners could buy only London-listed American depositary shares in the state-run gas monopoly. Those traded at a premium to shares traded in Moscow, and foreign ownership of Gazprom was capped at 20%.

And the second article is in Barron's. Sandra Ward interviewed Kur Wulff, founder of McDep Associates, in Bullish and Fully Fueled (subscription required).

Barron's: Have the prospects for energy changed since we spoke a year ago?

Wulff: It has been a great year for the stocks, so automatically you have to be a little cautious about anticipating another great year. But the long-term outlook is still pretty powerful. Demand is strong, and higher energy demand means more economic activity. The supply picture, obviously, has changed. Last year we learned Saudi Arabia could no longer produce additional light oil. That hasn't changed. We were happy when oil prices dropped back to $55 a barrel because they had gone up a little too much too soon, but they are in an upward trend. We think $60 a barrel is close to the 40-week moving average. Maybe the higher limit for now might be $80 a barrel rather than $60. We don't ever know what is going to happen in the future, but the momentum is good: Oil prices are above the 200-day moving average, the gas price is above the 200-day moving average, refining margins are above the 200-day moving average and the underlying long-term expectation is that oil could still be a lot higher. So it is better to bet on it going higher than not going higher. My vision for oil is $150 a barrel by 2010. We've only gone up threefold so far this decade and we went up 10 times in the 'Seventies, so who knows what's ahead for us? The upside is still pretty powerful.

As part of the interview, Wulff makes reference to the Gazprom situation, saying that Gazprom stock is undervalued at its current price of about $77 when it should be valued at $120.

You know my views: I do not believe that the public at large has fully comprehended the sea change in fossil fuel energy availability and pricing as well as the consequent implication that it will have in the economic and political spheres.

I have written in the past about Overstock.com (OSTK) and its CEO Patrick Byrne. Recently a favorite blogger Jeff Matthews has written two additional articles on Patrick Byrne: Weekend Reading: Conspiracy of the Jews? and Conspiracy of the Jews?—Part II. And recently another two of my favorite bloggers Paul Kedrosky and Mark Cuban have written more about Patrick Byrne with the two following respective articles: Sith Lords, Mobsters, & Patrick Byrne and This will make a good movie someday… overstock.com.

Dr. Patrick Byrne provided a Schedule 13D filing to the SEC in early December 2005 that states the following:

As set forth herein, Dr. Byrne beneficially owns 6,810,716 Shares, which represent 35.3% of the outstanding Shares, based upon the number of Shares outstanding as of the most recent practicable date, and calculated in accordance with Rule 13d-3. Dr. Byrne shares voting and dispositive power over 5,592,127 Shares with High Plains Investments LLC and Haverford Valley L.C. Dr. Byrne disclaims beneficial ownership of the Shares held by High Plains Investments LLC, Haverford Valley L.C. and all other persons except to the extent of his pecuniary interest in each entity, respectively. Dr. Byrne has sole voting and dispositive power over 1,218,589 Shares, including 132,817 Shares subject to unexercised options.

On November 30, 2005 and December 1, 2005, Dr. Byrne purchased an aggregate of 60,000 Shares in the open market. As previously reported, on August 15, 2005, Dr. Byrne purchased 20,000 Shares in the open market. On September 12, 2005, an entity wholly owned by High Plains Investments LLC exercised warrants to acquire 330,396 Shares. Dr. Byrne, High Plains Investments LLC and Haverford Valley L.C. had previously reported beneficial ownership of such 330,396 Shares, and the exercise did not change the beneficial ownership of any of them. On October 5, 2005, High Meadows Finance, L.C. distributed 201,693 Shares pro rata to its owners, including 66,559 shares to High Plains Investments LLC. No transactions in the Shares were effected by any of the reporting persons in the last sixty days except as described herein.

I find this whole situation weird and bizarre. Too weird and bizarre for me to even want to be involved. But it does make good entertainment.

For the record, I am not part of any conspiracy or vendetta against Dr. Patrick M. Byrne. I have not held any Overstock.com stock long or short, nor any derivatives of the stock. I am like most or all of you—merely a spectator watching the steel caged match between the longs and the shorts.