OPEC nations had their most profitable half-a-year ever. According to the FT, "Members of the Saudi ­Arabia-led oil exporters' cartel took home $645bn (£335bn, €430bn) between January and June." That number could get even better in the second half.

OPEC may be doing exceedingly well and it may be building huge sovereign funds to invest in crippled financial companies in the US and EU, but it is taking on a substantial risk.

OPEC has kept is production fairly flat. The organization has done very little to abate the run-up in oil prices. That run-up has been the one of the two or three largest contributors to a slowdown of economies in the West.

A full-blown and deep economic recession is likely to spread from the West to China and India. If the US consumer cannot afford much beyond his mortgage, gas, and food, imports will suffer, perhaps substantially. Falling demand for imports in the US could spread to the energy-hungry countries of the developing world. In other words, demand for crude could collapse as demand for exports falters.

A sharp drop in oil demand could do terrific harm to the pace at which OPEC takes in cash. Record income may seem good for now, but it could drive very unpleasant and unintended consequences.

Douglas A. McIntyre is an editor at 247wallst.com.

You have to admit there's something ironic, almost comical, about this, but it's true: General Motors Corp. (NYSE: GM), whose domestic sales are in a major slump, said it plans to sell hybrid vehicles in the Persian Gulf. The Persian Gulf, where gasoline sells for anywhere between $0.78-$1.57 a gallon! Sell hybrids there. That almost sounds like a joke.

Well, it ain't no joke at all. The strategy, it seems, is to allow Middle Eastern buyers the choice of a bigger car. It's a plan cooked up by Terry Johnsson, president of GM's Middle East unit. Perhaps he's got a point. With their economies booming as a result of record-high oil prices, the region was responsible for 50% more GM SUV sales in May, the opposite of the trend seen in the company's U.S. sales.

So despite the Middle East being a small market in terms of global sales, GM plans to capitalize on its wealth. If the concept of hybrids in Bahrain (starting in the fourth quarter) still strikes you as odd, you may want to consider that the region is becoming increasingly environmentally friendly, says Johnsson. Considering that most countries in the Gulf rely on oil as a source of revenue and income, that's ironic too, isn't it?

While the American consumer for years preferred the bigger car, ignoring environmental and oil supply concerns, oil-rich countries have planned for the day it runs out, trying to get into other industries, such as tourism. Not to mention that the consumers there are also considering the environment. So in one more twist of the fate, GM, who has been pushing the big cars, is now feeling the consequences. How can so many have suffered from such poor foresight?

It seems a bit odd, but Toyota Motor Corporation (NYSE: TM) is an American auto exporter. It has been sending U.S.-made Avalon sedans to the Middle East for about a year. And now comes news via our pals at Autoblog that it will start shipping Sienna minivans and gigantic, American-style Sequoia SUVs to the Middle East as well.

No doubt this comes as good news to Toyota's American employees. Unlike competitors Ford Motor Company (NYSE: F), General Motors Corporation (NYSE: GM) and Chrysler, Toyota has avoided laying off employees, but it has slowed production in recent months. With the new export plan, production is being increased at its state-of-the-art plant in Princeton, Indiana. That's pretty impressive, given that the American domestic car market will likely shrink by a million cars this year.

More interestingly, though, this raises the always tricky question of the national identity of global manufacturers. Is a Toyota Avalon made by American labor in Indiana an American car? How about a Buick made in Canada? Or a BMW produced in South Carolina? Not easy questions to answer. Profits end up in one country, wages in another -- and capital investment perhaps in a third.

Whatever your answer, the issue serves as a useful reminder of two things: 1) the global economy is extremely complex, and 2) Toyota is beating the American automakers at their own game.

Just a year ago, if you mentioned "sovereign wealth funds," you probably would have gotten a blank stare. But, of course, this is now the hot thing in finance. More importantly, it looks like sovereign wealth funds are poised for strong long-term growth. In fact, Lehman Brothers (NYSE: LEH) recently set up a division to capitalize on the mega trend.

Sovereign wealth funds are found in many countries in Asia, Africa, Europe and the Middle East. It's the inevitable consequence of some major forces: strong economic growth in emerging economies, the fall in the US dollar and spikes in commodities prices, especially oil.

Global Insight, a research firm, estimates that sovereign wealth funds have grown an average of 24% per year for the past three years. They have about $3.5 trillion in assets, which is more than private equity and hedge funds combined.

No doubt, sovereign wealth funds have become a key element in global finance. For example, they contributed to about 28% of M&A deals (in January 2008) and about 10% of private equity transactions.

Global Insight forecasts that – by 2015 – sovereign wealth funds will exceed the value of the GDP of the US economy. And, I'm sure, the funds will also own a big chunk of it as well.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

As Joseph Lazzaro wrote earlier today, oil prices were surging once again in today's market, and traders set a new record, pushing prices up as high as $114.08 today.

Fueling today's rally were concerns over global supply, as news spread that Russian oil production has fallen this year. This is the first time in a decade that Russia is seeing a decline in its production.

Russia is not the only country making headlines. We were also given the news that China had a massive jump in its diesel oil imports last month of a remarkable 49%. So, we are being given both the news that Russia is producing less, while China is demanding more; the perfect recipe for a strong day for oil prices. Other oil producers, Mexico and Nigeria, announced that they had temporarily shut down some of their production as well.

After yesterday's big jump in oil prices, it looked as though we might see the precious crude break through the psychological $110 barrier today, but that has not been the case. Oil hit a high of $109.64 earlier in the session, but is currently trading in the red at $108.38, down $0.71.

Yesterday's move was more a result of traders betting on future interest rate cuts that it was fundamentals justifying oil trading around the $110 mark. As recession fears continue to linger, you can be sure that interest in commodities will remain high, and oil prices will keep trading at near record levels for at least a little while longer.

Also, as I noted last week, we are quickly approaching the summer driving months. As we see gasoline prices at record levels, we have to expect to see prices creeping even a bit higher as demand starts to build this summer. In fact, last week we were given data that gasoline inventories were falling and demand was increasing. This was the first time since back in January that gasoline demand rose.

Readers of this space know that one of my preferred sectors is agriculture due to the boom in food consumption created by emerging market economic growth. Real incomes are rising in nations in Asia, Latin America and the Middle East, and with it, per capita food consumption is increasing, a trend that benefits Archer Daniels Midland.

Archer Daniels Midland (NYSE: ADM) is one of the world's largest processors of oilseeds, corn and wheat.

The frenzy that accompanied the financial world's realization that bio could represent a renewable energy form, for some energy users, appears to be tapering (thankfully). Still, although the bloom is off the biofuel rose, the key driver here remains in-place: commodities for food use. Demand for wheat, corn, soybean and other food basics is likely to remain strong through at least the end of 2009, propelled by the aforementioned emerging market growth.

Most analysts see accelerating earnings growth on strong corn and soybean demand, with pricing power. Further, given the vagaries of the energy business, it's worth underscoring that ADM is foremost a large, vertically-integrated food commodity company (wheat, corn, soybeans). The Reuters F2008/F2009 EPS consensus estimates for ADM are $2.84/$3.24.

The risks? Declining disposable income is expected to pressure U.S. consumer food budgets in 2008, and analysts expect a slowdown in U.S. revenue from food sources, something that will hurt ADM's domestic results, offset by a superior international performance.

The First Call mean rating for ADM is: Buy [10 firms]. Mean 2008 target: $48 [high: $60, low: $39].

Stock Analysis: Archer Daniels Midland is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ADM's shares. I'd consider a Sell / Stop Loss at $31.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Oil prices are off to a strong start this week, as traders are pushing prices higher in reaction to multiple concerns stemming out of the Middle East.

The first factor that is weighing on traders mind's is the Turkish invasion to Iraq. Tension between Turkey and the Kurds in Northern Iraq is nothing new to the area (and violence between the two goes all the way back to 1984), but the current activity is the first confirmed operation by Turkey since the United States began its Iraqi campaign in 2003.

Over the weekend, Turkey announced that one of its helicopters had gone down in Northern Iraq, killing 8 Turkish soldiers. In reaction to that news, Turkey stepped up its force by firing in excess of 40 salvos of artillery into the territory.

In a development likely to be warmly-received by international finance and stock markets, Russia announced Thursday it will buy Fannie Mae and Freddie Mac bonds through its sovereign wealth funds, Russia's Finance Ministry said and Bloomberg News reported.

Russia will invest money from its Reserve Fund and National Wellbeing Fund into 15 government bond funds in Europe and the United States, including those in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Russia will also purchase government bonds in the U.K., Germany, France, Austria, Canada, and the Netherlands, Bloomberg News reported.

Both Fannie, down 56 cents $29.27, and Freddie, down 80 cents to $27.94, moved lower Thursday afternoon; however it should be noted that the declines occurred during a broad market sell-off, with the Dow down 159 points to 12,267.

The economic landscape -- particularly for the United States -- certainly looks different than it did 30 or 40 years ago.

Globalization, the internet, and the rise of a second major economic power in Asia are all developments that would look rather odd to someone in, say, 1973-74. The world in 2008 is one characterized by economic change -- one that may usher-in even more historic political change in the months ahead.

But there has been one constant between the two eras (overlooking cyclicality): the price of oil. It was high, in real terms, in 1973-74, and it's high now. And one thing economists like Glen Langan know regarding economic conditions when oil's price is high -- it simply makes the cost of moving things, the cost of doing pretty much everything, more expensive. Whether it's dropping the kids off at little league baseball or at soccer practice, or transporting a supply chain order of refrigerators across the country, a high oil price "simply increases the cost of motion," he said. And there are few positives for the U.S. economy. Further, it takes dollars that could create spin-off economic effects -- disposable income that could be spent somewhere else -- and simply removes them from the economy.

The trade deficit declined 6.9% to $58.8 billion in December 2007, as exports rose and imports fell, the U.S. Commerce Department announced Thursday. The figure was below the $61.6 trade deficit estimate.

For 2007, the trade deficit fell 6.2% to $711.6 billion, down from the record $758.5 billion recorded in 2006.

Monthly export record

December 2007 exports rose to a record $144.3 billion while imports declined for the first time in four months to $203.1 billion. Export activity remained strong to China, the Asia region, and South America. Exports of industrial supplies, civilian aircraft, capital goods, and consumer goods were particularly strong.

Economist Steve Affinito told BloggingStocks Thursday that in addition to a weaker dollar, which makes U.S. exports cheaper, the nation's exporters are demonstrating that they can find ways to maintain / increase international sales, even amid more-challenging economic conditions.

Trade: U.S. bright spot

"Across the board, companies are performing well on the export front, as U.S. goods, particularly high-value added items like aircraft, remain very competitive," Affinito said. "For the longest time trade had been a drag on U.S. GDP, but now it's starting to be a positive, which is good news for U.S. companies, employees, and the U.S. economy. The improving trade deficit picture is one of the few bright spots regarding the U.S. economy right now."

Confidence in the global economy fell for the third straight month in February 2008, as North Americans became more pessimistic about the slowing U.S. economy and its impact on global growth, Bloomberg News reported Wednesday.

The Bloomberg Professional Global Confidence Index fell to 14.3 in February 2008 from 21.0 in January 2008, Bloomberg News reported. Further, although North America respondents were the most pessimistic about economic conditions in their region, Asia respondents were the most pessimistic about the global economy.

Global equity markets have lost more than $6 trillion this year as investors fled financial and cyclical stocks on fears mortgage and mortgage-asset defaults will continue to slow both U.S. economic growth and also restrict access to credit that corporations need to conduct business and expand operations.

Global oil demand in 2008 will total 87.6 million barrels per day, about 200,000 barrels less than an initial 2008 estimate, due to slowing global economic growth, the International Energy Agency announced Wednesday.

The IEA said demand for transportation fuels in the eastern U.S. and other developed nations is slowing. However, the IEA added that projections for robust economic growth in China and the Middle East will continue to help support oil prices in 2008.

Oil fell 42 cents to $92.36 per barrel in mid-day Wednesday trading.

"Weaker projections for global economic growth are offset by low stocks, forecast cold weather in the U.S. and parts of Asia, supply disruptions (Nigeria/North Sea) and concern about Venezuelan supplies. Products have underperformed crude, leading to weak refining margins," the IEA stated.

President Bush recently submitted a $3.1 trillion dollar budget to congress with the biggest proposed increases in defense spending, and homeland security. The Pentagon would get a $35 billion increase to $515 billion for core programs, about 7% with war costs additional (but how much is additional?) This further supports my investment posture for this year and next that the defense sector is the place to be as I posted earlier today and many times over the past few months -- the BIG BUYS.

Some of our big defense contractors, all of which should benefit to some degree include: Boeing (NYSE: BA), General Dynamics (NYSE: GD), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Company (NYSE: RTN), and United Technologies (NYSE: UTX). I am not suggesting that you jump into these stocks immediately, but you should add them to your watch list. Perhaps, for some investors dollar cost averaging into them over six months would make sense. Each has a varying degree of exposure to defense spending. For example, United Technologies is the parent of Sikorsky helicopters which makes the Black Hawk. Lockheed Martin and Boeing make fighter jets. Raytheon makes defense electronics and missile while General Dynamics and Northrop Grumman supply warships to the US Navy. Northrop also makes aerial vehicles that are being used in the Iraq War.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Terex is worth an evaluation.

Terex Corporation (NYSE: TEX) manufactures equipment for use in the construction, infrastructure, and surface mining industries.

Analysts like TEX's international crane business, which should register strong revenue growth, due to the ongoing infrastructure boom in Asia and the Middle East. Analysts also see solid demand for material processing and mining equipment in the immediate years ahead.