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Friday, April 28, 2006

Yu Yongding Is No Ding Dong on the Dollar

Yu Yongding – and I dare you to say that name with a straight face – the only non-government member of the Chinese central bank monetary committee and an economist with the Chinese Academy of Social Sciences, says that China's current management of the foreign exchange reserves, by investing heavily in US treasuries, is neither profitable nor safe.

"We are actually exporting capital to fulfill the saving-investment gap in the US, and we are sacrificing lucrative investment returns for low-yielding returns in US treasury bonds," said Yu.

Yu said that China faces huge risks from a possible US dollar decline and said that China must take "urgent" measures.

Read all about it here:
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Gold and Silver Rally Fuel

Yesterday saw gold and silver reverse off their earlier lows. Silver pushed higher due to the news that the SEC cleared Barclays' silver ETF for launch. It should start trading today under the symbol SLV.

Gold rallied because Ben Bernanke pushed the dollar down a flight of stairs, giggling like Richard Widmark in Kiss of Death (the brilliant 1947 version, not the David Caruso remake). As my friend and co-worker Jack Crooks noted in his Black Swan Currency Currents today ...
Fed Chairman Gentle Ben Bernanke hit the dollar pretty hard yesterday during his
testimony before the Joint Economic Committee of Congress:
1) The Fed may pause no matter what the data says
2) China should let its currency run
3) The deficit is a danger

Jack concluded that "Gentle Ben handed the dollar bears plenty of ammunition."

Since gold and the dollar sit on opposite ends of the See-Saw of Pain, when the dollar tumbles, gold heads higher. Gold had its head stuck in the toilet earlier in the morning, but it recovered nicely as the dollar suffered a swirly at the hands of currency bullies.

So are gold and silver out of the woods? Ah, if it were that simple, amigos. True, I gave my Red-Hot Canadian Small-Caps subscribers a silver recommendation late yesterday, which they'll be able to act on today. But that was a particularly strong stock. Most silver stocks are still in a downtrend, so we're still in "wait-and-see" mode.
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Wednesday, April 26, 2006

Money and Markets column on Oil and Silver

I wrote a column for Money and Markets today on silver; too bad Martin wanted one on oil. LOL! Anyway, it's never a problem for me to write more stuff, so I added a new top and bottom on oil. See what you think of "Oil and Metals Going Wild"
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Iran-Venezuela Tag Team Targets Uncle Sam

Marketwatch contacted me for some quotes today. I gave the reporter way too much to use, so I've collected my thoughts here...

The phrase “axis of oil” is over-used, but that’s the only way to describe what’s happening right under Uncle Sam’s nose, as Venezuela and Iran form an alliance.

In December of 2005, Venezuela's state-owned oil company Petroleos de Venezuela SA (PDVSA) signed a deal with Iran's state company Petropars to explore the heavy oil deposits in Venezuela's Orinoco River basin. There’s over a trillion barrels of crude locked up in the tar-sands sands there, in a deposit called the Orinoco Belt. But as with any tar sand deposit, the question is how much oil can be recovered.

Venezuela's proven oil reserves are around 81 billion barrels, but the government believes that some 235 billion barrels of recoverable deposits are lying, undocumented, in the Orinoco belt. If it can get that crude reclassified, that will raise Venezuela’s standing in OPEC and make it a real power in the global oil markets.

PDVSA and British Petroleum developed a simple technology to transform Orinoco bitumen into useable crude, known as Orimulsion. In this proprietary process the bitumen is mixed with water and a surfactant chemical in order to produce a stable emulsion which can be transported by pipeline and by ship. Venezuela needs partners to help it develop Orimulsion production. But it’s chasing out all the multinationals by raising taxes or outright nationalization of oil properties and equipment.

So there are two things here – 1) Venezuela needs the Orinoco Belt tar sands reclassified and 2) it needs strategic partners to help it develop those deposits and bring them to market. Iran can help on both counts – and is quite willing to do so, especially if it is a chance to kick (tar) sand in the face of Uncle Sam. Thus we have the Iran-Venezuela Axis of Oil.

And an eager customer has appeared on the scene: China. China will buy all the oil that Venezuela can sell it, from conventional oil or tar sands. As I explain in today’s Money and Markets, China’s economy is booming, kicking its energy consumption into overdrive. Its 10.2% GDP growth in the first quarter also boosted China’s oil imports by over 25% at the same time.

Since America’s oil demands are also growing, this is an unfortunate series of events. The Iran-Venezuela Axis of Oil is aimed right at our soft underbelly, and with our resources already committed in Iraq, we can’t even make threats.

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What the mainstream media are not telling you about the run up in oil prices

Here's an important article by Jeffrey Brown on Energy Bulletin that talks about a reason why oil and gas prices are rising even while we have high crude oil inventories. Mr. Brown says that rising geopolitical tensions may be a red herring. The real reason, he says, may be that those "high" crude oil inventories may consist mostly of heavy, sour crude -- not easily used in light, sweet crude refineries.

The extrapolation being that there is a shortage of light, sweet crude. Considering that Nigeria, one of our sources of light sweet crude, is dissolving into chaos, he might be right.

Mr. Brown then goes on to postulate why the MainStream Media is not covering this aspect of the story.

It's a story worth reading. Here's the link:
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Tuesday, April 25, 2006

Seeking Silver -- What Happens Next

I have to say that today's chart of silver isn't the most bullish I've ever seen...

It looks like silver is finding support on the 20-day moving average (the reddish line). But the body of today's bullish candlestick is contained entirely within the body of yesterday's bearish candlestick. This augers more weakness ahead, perhaps with a trip to the bottom Bollinger Band at 10.60 (which, as you'll remember from a previous post, is right where Fibonacci retracement lines up).

Silver is already volatile. Now, to add some nitroglycerine to the chili sauce, we have this from one Reuters...

NEW YORK, April 25 (Reuters) - The first ever investment fund backed by silver to be traded on a major stock exchange may obtain U.S. regulatory approval within days, a source close to the matter said on Tuesday.

When the silver ETF debuts, what happens then? I'd expect a bunch of people will buy it. But I'd also expect a bunch of people would sell silver, because they bought it in anticipation of the silver ETF making its debut. So, after a quick bounce, silver prices could go down.

Perhaps that's what the market is waiting for to drive silver to the bottom of its Bollinger Band. Perhaps it will go lower. Fine with me -- I consider a good pullback a buying opportunity, and if silver gets back to $10 an ounce, I'll probably buy with both hands.

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The Hottest Metal In the World?

For those of you jumping up and down and shouting: “I know! I know! It’s Tungsten!” Sorry … I’m not talking about the industrial metal with the highest melting point. Though that was a good guess. I’m talking about a metal that has seen its price DOUBLE in the last year and demand should exceed production this year by 466,000 tons.

Give up? I’m talking about zinc! Demand for it and other base metals is being driven by ravenous demand from China, which needs all the metal it can get its hands on to build its 21st century economic powerhouse.

My Red-Hot Asian Tigers subscribers got a recommendation in zinc today. And I’m looking for more recommendations in what I consider the “Fantastic Five” of base metals for both of my services.
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Hurricane Hugo

Hugo Chavez, President of Venezuela, continues to endear himself to the big oil companies. The Wall Street Journal reports today(subscription required)...

Venezuela's Congress, made up entirely of Mr. Chávez's allies, is considering sharply raising taxes and royalties on foreign companies' operations in the Orinoco River basin, the country's richest oil deposit. Major oil companies like Exxon Mobil Corp. and ConocoPhillips of the U.S. and Total SA of France have invested billions of dollars there to turn the basin's characteristically tar-like oil into some 600,000 barrels a day of lighter, synthetic crude
The stakes are high because Venezuela, the world's fifth-largest oil exporter, holds the world's biggest oil reserves outside the Middle East and is the third-biggest supplier of crude to the U.S.
So we have two kinds of fallout from this. One is that big multinational oil companies working in Venezuela will see lower profits. Don't weep for them; it's not like they can't afford it. The other, more serious issue is that this could slow down development of Venezuela's heavy oil resources. An oil-hungry world might take issue with that.

But it's difficult to pressure Chavez. He's a populist, and he doesn't seem interested in landing a job with the Carlyle Group when/if he retires. And the Bush Whitehouse has already tried to overthrow him twice, to no avail.

Still, Chavez needs that heavy oil developed to pay for his grand plans. How will he do it if Big Oil goes home? Well, I beleive that's why he's becoming best buddies with Iran.

See links

As the second story linked above explains: "Iranian oil companies are taking part in joint projects to develop Venezuela’s oil rich areas such as the Orinoco belt."It would really, really suck if Venezuela and Iran form an anti-US alliance. More bad news: Both countries are really chummy with China, too.
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Friday, April 21, 2006

Texans Pawning for Gasoline

I don't have to tell you that gasoline prices are high. But here's an interesting story out of Texas. It talks about how the gas crunch is squeezing poor working folks so hard they have to pawn their worldy goods to keep driving.

Here's a few excerpts...
"We just have customers come in and have to tell us that they need money ‘till the end of the week, for gas to get back and forth to work," said pawn shop owner, Gerald Costner.

Everything from high end jewelry, to name brand purses, and televisions… pawn shop owners say they are seeing it all come in. They say customers are frustrated and have no place to go to get extra cash for gas.

"Some of the construction people tell us they are having to pawn their tools to buy gas, but when they pawn their tools they can't go out and work in the construction business ‘cause their tools are in pawn. So it kind of a catch-22,” Costner said.

Mary Rodriguez has worked at the Casa View Pawn Shop for five years. She says she's seen people of all ages coming in looking for help.

“We've always had a clientele of the young kids, or middle age kids, and now we’re getting an older generation. Which, it just seems wrong that they have to pawn things just to get gas, or ya know, to make ends meet on things like that."

My heart goes out to those poor folks. They're stretched to the breaking point. One thing that struck me was the phrase "it just seems wrong." And you know, I bet a lot of those people thought the war in Iraq meant we'd get lots of cheap oil/gas from the Middle East. A lot of things seem to be going wrong.

Imagine if we'd taken the money we've spent (and keep spending) to shove democracy down the throats of ungrateful Iraqis and used that to make the transition to alternative fuels. We spent $85 billion in Iraq in 2005 and the total cost of the war is expected to run over a TRILLION dollars.

Just something to think about as you pawn your TV for gas money.

Here's the link to the story:
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Half Empty or Half Full

Greetings from Washington, D.C. I thought I'd post the following chart of silver with the question, is the glass half-empty, or half-full?

I think it's hard to say. Thursday was a brutally bearish day. Friday was very bullish. Those horizontal lines I've put on the chart are "Fibonacci Retracement" lines -- they show where silver is likely to end up in a pullback.

You can see that 11.50 and 10.60 are likely levels. And that's what many traders were betting on after Thursday's action. But 12.58 -- right around where silver settled on Thursday -- is a .25% Fib retracement.

If that's all the pullback we're going to see, silver is even hotter than I expected.

Then again, let's see how things go over the weekend. I'd like to see one more test close to the lows before I'm ready to turn off the yellow caution light.
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Wednesday, April 19, 2006

The Great Gold Rush of 2006

I'm limited in how I can respond to emails or phone calls. That's because Weiss is a publisher, not a trading house (i.e., we can't give individual advice). However, I'd like to deal (hopefully helpfully) with a recent phone call right here...

If you bought the "Great Gold Rush of 2006" report, you should already have received one update and I'll be sending another one soon. You don't have to buy anything with/from Red-Hot Asian Tigers to get the rest of your updates.

I checked the positions in the report last night. Everything depends on when you bought the report and what positions you bought, and how much you bought of each one. Even if you took no action recommended in the first update, as of last night, I show...

All positions including mutual funds and the gold tracking stock are up an average 19.7% from the initial recommendation (that's before commissions, of course).

The stocks alone are up about 20.5% from the initial recommendation on January 18, with a combined dollar gain of about $3,627 on an initial entry cost of $17,640.

Some stocks are up 32% ... 66% ... 71.5% since January 18. Nice!

Again, your individual gains will differ. Still, not bad.

Look for the next update at the end of next week or beginning of the week after that. I'm flying to Washington D.C. today (business, not pleasure), and I'll be gone for nearly a week, but update #2 is on my to-do list when I get back.
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Hi-Ho, Silver! Go, Go, Gold!

My latest column at is up. It's about silver (with a little gold thrown in)
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Let the Great China Acquisition Boom Begin!

The Chinese have opened the Pandora's box of currencies (see story here, and I'm not sure how it's going to play out. I'll explain...

Just a few days ago, China relaxed the capital controls it imposes on individuals and companies. Now, it is much, much easier for these individuals and companies to hold foreign currencies and invest abroad.

China is doing this to create more demand for dollars (companies will in effect be "buying" dollars). Beijing hopes this will take pressure off it to revalue its currency, the renminbi (also known as the yuan).

"An outflow of foreign currencies can ease pressure for further yuan appreciation. This offers a good argument before President Hu's U.S. visit to show the Americans China's commitment to further currency reform and ease the U.S clamor for a firmer yuan," said economist Yi Xianrong.
That's the theory, anyway. One problem is that the yuan is widely seen as undervalued. This could have the perverse effect of putting internal pressure on China to revalue the renminbi.

The big opportunity I see is that now Chinese companies can easily accumulate the foreign currencies they need to buy the natural resource companies they covet. We could be looking at a massive tsunami of Chinese investment in Canada, Latin America, and Australia.

So, also perversely, the currencies that get the biggest boost could be those that need it least -- the Canadian and Australian dollars.

What an exciting time to be investing in Canada, Australia and Latin America. Maybe Chinese investment won't increase rapidly -- it's hard to game a country where ALL the economists in the world get its GDP growth wrong.

But the potential ... ah, the potential is ENORMOUS.
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The Dollar and Precious Metals

My friend Jack Crooks puts out a free newsletter, Black Swan Currency Currents, which follows the ups and downs of money. It's a great read, and always insightful. I thought I'd pass along a chart that he posted today...

Is the dollar stalling out? I think it's possible. And that would be rocket fuel for gold and silver prices. As I explain in today's Money and Markets, the dollar and precious metals are (usually) on a see-saw of pain. As one falls, the other goes up. The Fed's 14 rate hikes threw the dollar/precious metals relationship out of whack last year; the dollar went up thanks to the rate hikes and precious metals went up for a host of fundamental reasons. Now, if the Fed is done -- and recent minutes from the Fed meetings reveal it is close to done (see link here -- the dollar could fold its wings and fall. And that should catapult gold and silver higher.

My new targets are $780 on gold and $20 on silver. It's going to be a wild ride.
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Monday, April 17, 2006

Another Warning Sign on the Road to Hurricane Season

Port Fourchon is the facility which supports 75% of all the deepwater oil and gas production in the Gulf of Mexico (18% of America's entire energy supply). It supplies all the technology and equipment to keep those offshore rigs and wells running. It also the site of the booster pumps that carry crude from the Lousiana Offshore Oil Port (LOOP) to the salt-dome storage facilities of the Strategic Petroleum Reserve.

And Port Fourchon is connected to the mainland by a strech of Louisiana Highway 1 that is barely (2 to 3 feet) above water.

Hurricanes Katrina and Rita didn't hit the road directly. We might not be so lucky this time.

Bloomberg gives the details here...

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Silver & Gold Are Soaring!

As the Reuters story says...

Gold Storms to new 25-yr high, silver surges

Gold surged to a new 25-year high on Monday, buoyed by concerns over Iran's nuclear ambitions and surges in oil prices, while silver powered to its highest since May 1983 on hopes for the first silver exchange-traded fund.

Hedge funds and operators investing in the short term were anxious about shifting their funds into gold and silver for the purpose to diversify and to raise higher returns.

But as the story goes on to say...

many traders were nervous about chasing gold and silver from current levels as they were unsure whether the current upward trend would be maintained even after participants fully return from the Easter holidays.

Meanwhile, Resource Investor is telling people to grab profits off the table in precious metals and the widely respected Bob Hoye has been calling for a sharp correction in silver since the beginning of April.

And speaking from my view, we're still not seeing silver mining stocks confirm the move in silver. Since we can't buy silver itself in my services, we have to go by what the silver stocks do. Right now, I'm waiting for A) an upside breakout in the mining stocks or B) more bottoming/base-building action. I'm itching to buy -- but it has to be the right stock at the right time.

Last week, I recommended that people take half gains on some positions -- they still have plenty on the table if silver stocks suddenly go parabolic. I was thinking we'd get a pullback and a better buying opportunity. We may not get that, or rather, not get it soon.

It's both exhilarating and nerve-wracking for investors. I'm certainly glad I'm not SHORT silver. Man, those silver shorts must be getting squeezed but good. Hopefully they had stops in -- I can't imagine holding a short position in this market otherwise.

So will the music stop and precious metals suddenly correct? Or will things keep running as rising oil prices and the brewing crapstorm over Iran feeds inflation and geo-political fears? Tune in tomorrow, friends.

And remember, if precious metals are too frothy for you, there are other markets and other metals.

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Sunday, April 16, 2006

Welcome to my Submarine Lair ....

If I was a James Bond villain, I'd build my secret headquarters in a giant deep-sea volcano with a toxic "moat of death." Luckily, such a place really exists.

Here's the link to the story...

Even better, the site is "teeming with eels (see accompanying photo)," who apparently gorge themselves on shrimp that are sucked into a Swirling Vortex of Doom.

Seriously, have you ever heard of such a cool place? If whoever makes the James Bond movies reads this, PLEASE, please please make this the headquarters of your next villain.

And I'd like to be cast in the part. I'll work for scale. And I'll pay to outfit the eels with laser beams.
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Friday, April 14, 2006

Easter Bunny Break

I'm taking Easter off, so here's a big helping of cuteness to get you through...

Well, since it's Easter, and America is the land of indulgence, here's one more...

The Easter Bunny has to be one of the weirdest holiday figures ever invented. Basically, "E.B." as he likes to be called by his peeps, is a fertility figure, and yet he's come to be associated with Jesus, a guy who never got married (or had kids, unless you're going to get all Da Vinci Code on me) If you want to know the Easter Bunny's weird and secret origins, read this.

But things could be worse. Here's a fertility symbol from Japan (don't worry, it's work safe).

Anyway, with $600 gold and $13 silver, commodity bulls have a lot to be thankful for this Easter.

Happy Easter.
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India and Silver

Very interesting story on silver out of India. I'm expecting silver prices to consolidate when the silver ETF makes its debut. Then again, I could be wrong, and silver could hurtle toward $20 like a gleaming metal juggernaut!
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Arguing Gasoline's Summer Fate

I get a few quotes in Marketwatch's latest column on gasoline prices. My predictions weren't as dire as Mister Kerr's so he gets the money shot at the end. Dang! Ah, watch HIM be an optimist, and we're all bicycling by September.
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Worst Gold Headline Ever

DJ PRECIOUS METALS UPDATE: S Africa Gold Output Drop To Slow
Okay, after reading that headline, do you think it means:

A) South African gold output is going to drop, from “fast” to “slow”
B) SA’s gold output is going to slow
C) SA’s gold output is dropping, but it’s not going to drop as fast as it was dropping
D) This is a job for Auric Goldfinger!

The answer is D. Oh wait, it’s C. Still, wouldn’t the headline be easier to understand if it said: “Declining S African Gold Output May Stabilize”?

Anyway, if you click through, you’ll find that South Africa’s gold production which plummeted to 296 metric tons in 2005 from 673 tons in 1980, should slow its rate of decline or even stabilize this year.

I’ve done a chart illustrating the problem…

So if South African gold production stabilizes, that would be bearish for gold prices. Considering how the South African government generally acts like gold miners are a bunch of riff-raff who crashed the party, I’ll believe it when I see it.

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Thursday, April 13, 2006

Copper and Zinc -- Higher, Higher!

Macquarie Bank (Australia's biggest investment bank) is raising its forecasts for copper and zinc as inventories for both metals fall off a cliff...

"We have again been proven too conservative as the improving macroeconomic
backdrop has shored up the demand outlook while ongoing supply disruptions
continue to dampen the supply-side response," the Macquarie analysts said.

Macquarie revised its prediction of a global surplus of refined copper for
this year to a deficit. It raised its copper price forecasts for 2007 to 2010 by
between 8.3% and 48%.

The bank increased its 2006 zinc prices forecasts by 4.7% to $1.23 a
pound, or double last year's average price of 62.6 cents on the London Metal
Exchange, or LME. Zinc is used to galvanize steel.

You know what's in even shorter supply? Aluminum -- there's only a nine-day global supply right now. And I expect hurricane season to stoke aluminum demand like a mighty wind (aluminum is a building material much in demand after hurricanes)
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4 Glow-In-The-Dark Factoids

  1. Today there are 441 operational nuclear power reactors around the world. According to a report by the International Atomic Energy Agency, or IAEA, 130 new nuclear power plants are either being built or are in the planning stages. Some put the number of planned reactors as high as 160!
  2. India and China have highly escalated their nuclear programs and will build between 43 and 60 reactors (between the two of them) over the next 15 years. 43 new reactors would add about 292 million pounds per year to existing global uranium demand.
  3. Total global uranium consumption is estimated at 176.3 million pounds. Of that 176.3 million pounds, only 92.6 million pounds, or 47%, was supplied directly from mining (there are stockpiles, but they are dwindling). By 2015, it will likely hit a whopping 212 million pounds per year.
  4. Each new nuclear reactor requires about 1.6 million pounds of uranium to start production. Each subsequent year of production requires about 500,000 pounds of uranium.

    -- Collected from Bloomberg, DOE and various other sources.
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Wednesday, April 12, 2006

Energy for the Next Billion Years

My new column is up on Money and Markets today. It's called "Energy for the Next Billion Years," and you can find it here: Yes, it's about uranium.
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How High Will Gas Prices Go This Summer?

One of the Marketwatch reporters just asked me for my views on where gasoline prices are going this summer. I gave her a lot of information, and usually she uses just a sentence or two. So here's my analyis...

I’ll give you my price, but first I want to lay out the factors I’m considering:

1) Some refiners are offline for maintenance right now. They’ve been holding things together with duct tape and chewing gum for awhile, but it is maintenance season, and many ran longer and harder than they ordinarily would because some were taken offline for months after Katrina. An offline refinery produces no gasoline, hence, that’s bullish for prices.

2) Just today, the latest report was that gasoline stocks fell by 3.9 million barrels – about twice what was expected. That’s not a good start if you want gas prices to stay under $4 this summer. The switch from MTBE affects how much gasoline can be produced. MTBE was a substantial input into the gasoline pool, and ethanol supplies can't make up the difference. We can expect the EPA to start writing oxygenate waivers to deal with gasoline shortages this summer.

So, if they do that, it would take some momentum out of gas prices. Those waivers probably aren’t being considered by the market right now. Bearish if we get waivers, bullish if we don’t.

3) Global producers can’t keep up with crude demands. Higher crude oil prices will drive up gasoline prices. From Reuters: OPEC will need to pump more oil than previously expected to meet rising world demand and cover a shortfall from other producers such as Russia, the International Energy Agency said on Wednesday. More on Russia, where the crapski is hitting the fan, here. So, that’s bullish. And don’t say we’ll just buy more from Canada. There’s too much Canadian heavy crude for refineries to handle now.

4) More than six months after the 2005 hurricanes, almost 23% of oil output in the Gulf of Mexico (GOM) is still shut down – about 340,000 barrels per day. And about 10% of natural gas output in the GOM is gone, too. Bullish!

5) Hurricane season is right around the corner. I wrote about the severe threat we’re facing from hurricanes this season my blog today. You’ll find that here . Bottom line: We’re so screwed. You can’t accurately predict the weather, but I’d bet on a major disruption of GOM oil and gas production at least once this summer. Probably more than once. Bullish.

I expect that if there are no more than usual problems, we should see
$3.50 per gallon gasoline this summer. If a hurricane hits the Gulf of Mexico hard, gasoline could easily go over $4 a gallon. If a couple refineries are taken out by hurricane damage, we could see $5 a gallon.

Eventually, rising prices will force people to conserve, right? I mean, the big problem is that we use too much oil and drive SUVs that are big enough to have their own time zones. But did you know that many Americans are already changing their driving habits? A recent Gallup poll shows that nearly half of all Americans have cut back "significantly" on their driving due to high gas prices. You’d think that would be bearish. But people are already changing their driving habits and gas prices AREN’T going down. As a consumer, I find that worrisome. As a commodities watcher, I find that bullish.
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Rise in Hurricanes Blamed Squarely on Global Warming

Once upon a time, South Florida used to have a bad hurricane once a decade or so. Well, remember those times fondly, says researcher Kerry Emanuel, because we’ll probably never see that blissful quiet anytime again in our lifetimes.

Kerry makes the case that global warming is more to blame for the rise in hurricanes than the natural hurricane cycle. Since global warming is getting worse, so will hurricane activity.

Now, not everyone agrees. William Gray of Colorado State University says “Emmanuel is just plain wrong.” That’s the pot calling the kettle black. As I pointed out earlier in this blog, Gray’s Colorado State hurricane forecasts are so low-ball as to be worthless.

The National Hurricane Center also poo-poohs Emannuel’s conclusions, but considering how the White House is suppressing science it doesn’t like and muzzling scientists who raise a red flag on global warming, “officially approved” science carries less weight all the time.

Emannuel’s conclusion: If you think you’ve seen a bad hurricane season, just wait, you ain’t seen nuthin’ yet.

What does this mean for commodities? I think it’s bullish for gold, silver, oil, and natural gas, as well as copper and other commodities used in building materials. Naturally, it’s bearish for insurance companies and re-insurers.

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Tuesday, April 11, 2006

Scary Oil Stats for Tuesday

The Wall Street Journal Reports: More than half a year after the 2005 hurricanes, almost 23% of oil output in the U.S. Gulf is still shut down -- about 340,000 barrels a day.

From the same article:

"OPEC looks in pretty bad shape right now." Officials of the Organization of Petroleum Exporting Countries have acknowledged there isn't much they can do right now to boost supply. Led by the Saudis, the cartel is pumping close to flat out.

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Saturday, April 08, 2006

The Land Unknown

Just when you think we know everything there is to know about life on Earth, they find enough new types of animals to cast a new Disney animated movie. In the shadow of Mt. Everest, yet.

Everest Expedition Uncovers New Species

Mt. Everest and the Himalaya mountain range conjure images of llamas and Sherpas loaded with heavy packs. But tucked into the cold shadows of the world's tallest mountain are biologically diverse hotspots filled with poorly known plants and animals found nowhere else on the globe.

You can read all about it at

My favorite is the giant wasp that injects a flesh-disolving venom that can kill humans, even yaks. It reminds me of the giant wasps from "Monster from Green Hell." Minus the cheesy acting and special effects, of course.

What does this have to do with commodities? Nothing. But the discovery of new life forms on "boring old Earth" is one of the things I find most fascinating.
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The World 'cannot meet oil demand'

Interesting story in the Times today...

THE world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade, according to Christophe de Margerie, head of exploration for Total and heir presumptive to the leadership of the French energy multinational.

The world is mistakenly focusing on oil reserves when the problem is capacity to produce oil, M de Margerie said in an interview with The Times. Forecasters, such as the International Energy Agency (IEA), have failed to consider the speed at which new resources can be brought into production, he believes.

“Numbers like 120 million barrels per day will never be reached, never,” he said.

Peak Oilers like myself have been saying this for some time, but whenever someone in the industry says it, it makes you say "whoa." You can read the whole story here:

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Bullish Commodity News -- Saturday Edition

Here's some bullish commodity news...

The American Society of Civil Engineers (ASCE) estimates that $1.6 trillion needs to be invested in the next five years to fix America's crumbling infrastructure.

I don't know about you, but that sounds like huge new demand for building materials -- commodities of all types. And when you fix roads, you use lots of oil (unless you're building your roads out of concrete, Mister Fancypants).

Here's the nationwide report

And here's where you can check on the looming infrastructure crisis in your state

Now the question becomes, where do we get the money. Well, we can either pay for it all on credit, then inflate our way to where $1.6 trillion is what an ice cream cone costs, or maybe we could return to an era of fiscal responsibility.

Bwah-ha-ha! Sorry.
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Such Lovely People

Oil prices fell, retracing this week's strong gains, after Shell said it could soon restart production at its 120,000 bpd EA oil field in Nigeria ...

... BUT ...

Nigerian militants whose attacks have shut a quarter of Nigerian oil output threatened on Friday to execute anyone found on previously attacked oil platforms operated by Royal Dutch Shell.

Really, what kind of money would they have to pay you to work on those Shell platforms right now? I'm thinking Bill Gates-type money.
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'Gold Comes on Us Like a Thunderclap'

My article about the Australian Gold Rush was published at You can read it here.

I've received a bunch of positive feedback on this one from people in Australia. I get the feeling their gold rush is overlooked by the rest of the world.

One Australian reader, Andrew (I'm not using your last name Andy, because of that whole "permissions" thing) wrote to say:

"The picks, shovels and wheelbarows of 1850's have been replaced with ballpoint pens, contracts and computer software.

"Yet the bravery of the people I know, young up and coming mining directors, engineers, geologists and metallurgists, is no different to the people in the previous rush. Since most of the charlatans left the mining industry in 1996-2000 to join the dotcom boom, the only ones left were those committed to mining and their workers. These heroes have put up with pathetic financial returns, governmental incompetence, public apathy. They have been a joy to work with and I celebrate the success that their hard work and persistance has brought."

Kudos to the Australians!
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Friday, April 07, 2006

This Looks Like a Job for "Buzz" Aldrin

Proof that God loves us and wants us to have a drink now and then (unless we're in AA)?

Astronomers say they have spotted a cloud of alcohol in deep space that measures
463 billion kilometres across.

Well, before you get in your truck and burn rubber to the Kennedy Space Center in hopes of catching a ride to the Universe's biggest happy hour, the alcohol cloud is more specifically methanol. Methanol is an organic (carbon-based) molecule and a cousin of ethanol, which is found in alcoholic beverages. But it's not fit to drink.

As Homer Simpson would say: "D'OH!"

Another way of looking at it is that it would put Methanex out of business. Ais it is now, Methanex investors aren't worried. That stock looks like it's breaking out.
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The Most Amazing City In China You Never Heard of


What, you never heard of Chongqing? As the story says: Its population is already bigger than that of Peru or Iraq, with half a million more arriving every year in search of a better life.
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Russia's Global Squeeze on Natural Gas

This story in the Washington Post is revealing...

Russia's Gas Crunch
Looming Shortfall Poses a Tough Choice

Three months ago the Russian energy giant Gazprom forced Ukraine to pay sharply higher prices for natural gas. At the time, the story was portrayed as a political struggle for control in Kiev. But last week Gazprom announced it was tripling gas prices in Belarus, a country that is politically close to the Kremlin. Moldova has been forced to accept a doubling of prices over the next three to four years, and the other former Soviet republics are already paying market prices for Russian gas.

The truth is that these price increases are not political. Rather, they reflect worrisome economic and geological facts about Russian gas fields. The Kremlin is not simply trying to use Gazprom to reassert authority in Belarus, Ukraine or anywhere else. There are in fact deep problems with Gazprom -- problems created by its inefficient management and a looming decline in gas production.

The story goes on to point out a couple of things...

  1. Gazprom (the big Russian state-owned energy agency) won't allow other companies to use its pipeline network. So even if they find gas, they can't sell it.
  2. Gazprom needs cash for investment
  3. Russia has artificially low prices on gas consumed within the country, and ...
  4. This is all leading to a gas shortage that is going to become acute over the next few years.

Russia's looming gas crisis will affect customers in Europe, of course. And then they will be competing with North American conumers for natural gas that is produced here and abroad.

I'd like to make this point: If Russian President Putin wasn't confiscating private oil companies like Yukos in a bid to consolidate power and wealth within his circle of cronies (7 Russians control 40% of Russia's GDP) Russia probably wouldn't be this deep in the hole.

Finally, note the similarity between the consolidation of power and wealth going on in Russia and what's happening in the U.S. Pretty freakin' sad.
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Thursday, April 06, 2006

Zinc and Copper -- Bang, Zoom, To the Moon, Alice!

A couple of stats to spice up your morning oatmeal...

Copper hit a new all-time high yesterday -- $2.60 a pound. Zinc is near its all-time highs. And the momentum is definitely bullish. Why?

Supply squeeze. You have an ongoing strike at Grupo Mexico, Latin America’s second-biggest copper mine. And other once-rich copper mines in South America are now worked out and shutting down. This is squeezing supply even as demand ramps up.

* Demand for copper should rise 5.1% this year to 17.8 million tons, according to a recent survey of analysts. And that’s 100,000 tons MORE than estimated copper production.

Speaking of demand, zinc is so hot that zinc inventories are down by a stunning 30% this year to 276,326 tons. And analysts estimate that demand will exceed production by 466,000 tons.

* Asian economic growth is booming. It’s not just China that’s growing – the International Monetary Fund is raising its growth figures for Japan and the rest of Asia. In fact, it wouldn’t surprise me to see China and the rest of Asia exceed their growth targets.

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Wednesday, April 05, 2006

Hurricanes Part 2: Heaven Help Us, They’re Optimists!

I was intrigued by the note that my co-worker Mike Larson sent me with the University of Colorado’s forecast for the Hurricane season of 2006.

Their prediction was “17 total named storms (canes and tropical storms -- almost twice the long-term average). Canes: 9 (vs. 5.9 LT average) Intense Canes: 5 (more than double the 2.3 average)”

Well, I went back and looked at what they predicted for 2005. It turns out they’re optimists!

This story from CNN in May of 2005 says the Colorado team predicted the 2005 hurricane season would be "very active" with 15 named tropical storms and eight hurricanes. Half of those hurricanes would be intense (Category 3 or above).

Not quite. The official NOAA summary of the 2005 hurricane season reveals ...

“There were a record 27 named storms, of which 14 were hurricanes, exceeding the 1969 record of 12 hurricanes, and 7 were major hurricanes. Of the 7 major hurricanes, an unprecedented 3 reached category 5 status, with a 4th reaching the greatest possible windspeed within category 4 of the Saffir-Simpson scale.”

So if the Colorado boys are low-balling this year the way they did last year ... oh, dang it!

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Streaming Audio -- Saudi Cry for Help

I talk to about my latest MoneyandMarkets, focusing on the Saudis. You can find it here

My interviewer, Tom, and I range all over the map. I really enjoy talking to Tom at -- he lets me ramble and talk about anything. I was interviewed for a radio show in Texas over the weekend, and while it was fun, there was a definite "hurry up" feeling.

Tom and I also get to my "Guru's Corner" piece in The funny thing is, my editor at called me on Tuesday morning and said the column had already received 70,000 hits. I believe the word he used was "stunning." I can't take credit -- I think it's that I wrote about the hot topic right now, uranium.

It was also the most e-mailed story on marketwatch as well (for a time). If you want to read it yourself, follow this link
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Saudis Admit They're Being Overwhelmed By Oil Demand

There's long been a disconnect between what the Saudis are saying about oil and what they do. They've said that they have more oil than we can ever use -- meanwhile, they are adding to their drilling rig fleet at a tremendous pace, and even drilling offshore (it's odd that they would pursue expensive offshore drilling if Saudi sand is soaked in cheap oil).

Well, yesterday, Saudi analysts openly admitted that global oil demand is rising so fast -- by about 2 million barrels per day each year -- that the Saudis "won't be able to cope without drastic help."

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Australia Poised to Take Top Gold Producer Title from South Africa

Australia is poised to become the world’s biggest gold producer, according to West Australian resources minister John Bowler. Australia’s gold production continues to climb, while South Africa’s continues to slump. And new big gold mines are coming online in Australia (Boddington and Telfer). There’s a lot of good reasons not to invest in South African gold companies, and lot of good reasons to head Down Under for value stocks.
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Are You Ready for Hurricane Season? FEMA Isn't

Hurricanes are a big drivers of prices in at least two commodity sectors, energy and precious metals. Building materials like copper probably are influenced as well. A new hurricane season starts in June. In fact, NOW is a good time to take positions in stocks that might be influenced by hurricanes.

Also, those of us who live in Florida tend to obsess about hurricanes. We're all getting prepared now. All of us, that is, except FEMA.

According to CBS, "A former chief of staff says the agency is even worse off today than it was when Katrina stormed ashore late last August. "

Sigh. Why am I not surprised.

And just in case you thought last season's horrific volume of hurricanes was a fluke, think again. I'll publish more another time about how global warming is raising the ocean's surface temperature, therefore making hurricanes more frequent and more intense. For now, I'll quote my co-worker Mike Larson, who writes the Interest Rate Roundup Blog. He knows more about interest rates than anyone you'll ever meet, but he's also a crackerjack hurricane tracker and forecaster.

Mike emailed me yesterday to say:

"The Colorado State University guys just released their hurricane season forecast for 2006. Here is a press release on the subject. The key point - 17 total named storms (canes and tropical storms -- almost twice the long-term average). Canes: 9 (vs. 5.9 LT average) Intense Canes: 5 (more than double the 2.3 average)"

You can read the bad news yourself here...

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Tuesday, April 04, 2006

The Ancient Empire of Oil -- Director's Cut

One bit I loved in the Wednesday MoneyandMarkets I wrote this week was cut out in the editing process. It was about Antony and Cleopatra, and how their doomed love related to the Ancient Empire of Oil. That happens -- we don't all have the same vision, and I'm loquacious to a fault. But since I have a blog I might as well use it to publish the "director's cut" of the missing bit. Here it is ...

I’m a history buff, as anyone who reads my columns in could tell you (
examples here and here). So I love a story I came across about the Nabataeans, aka “the Oilmen of the Dead Sea.” It’s a story of oil, war, greed, and even involves two of the world’s most famous lovers, Antony and Cleopatra. This story has everything!

The Nabataeans built a kingdom in the 4th to 3rd centuries BC that spanned from northwestern Saudi Arabia to Syria. Their trading routes went even farther, More than a thousand years before Columbus went looking for a passage to India, the Nabataeans sailed longer distances – all the way to Southern India. In its day, the Nabataean Empire was famous throughout the world, as far as China.

The Nabataeans’ capital was Petra, ("rock" in Greek), a city carved out of stone that you may remember from the movie “Indiana Jones and the Last Crusade.”

Oil, along with a lock on the lucrative spice trade, made the Nabataeans so wealthy, explains Dr. Zayn Bilkadi, that “they are the only people in history known to have imposed a punitive tax on whomever among them grew poorer instead of richer.”

Oil Wealth Breeds Jealousy

As in present times, oil wealth bred jealousy. The Greeks sent an army to drive the Nabataeans away from their oil patch. The general leading the Greeks was Hieronymus – the famous historian – and he described what he saw on the shore of the Dead Sea. Scores of tribesmen camped on the shore next to reed rafts, waiting for what they called the thawr – the word was Arabic for “bull” – to appear in the middle of the sea.

The “bulls,” Hieronymus discovered, were great iceberg-like mounds of tarry crude oil – bitumen – that floated up from the depths of the Dead Sea. These giant chunks of floating asphalt were found after storms, which dislodged the tar from the bottom of the Dead Sea.

When the thawr reared in the waters, the tribesmen leapt aboard their rafts and paddled furiously after it. They chopped pieces of the tar off with axes, loaded up their rafts, then headed back to shore.

Sprinkled with sand, the tarry mess would then be taken by camel-back to Alexandria Egypt (then the cultural and economic center of the world) for sale. It was used in the Egyptians’ sacred mummification rituals. Bitumen was substituted for the even more expensive myrrh (the ancient words for both are very similar). Since everyone who was anyone in Egypt had to be mummified, demand for the thawr-oil was very high.

Hieronymus and his troops were under orders to drive the Nabataeans away from the oil-strewn shores and secure the prize for the Macedonians. However, Hieronymus was a better historian than a general, and he had his ass handed to him. His army was attacked by 6,000 tribesmen and massacred in a hail of arrows, and Hieronymus himself was forced to flee for his life.

Over the centuries, the immense wealth of the Nabataeans attracted one would-be conqueror after another. For a while, they crushed their enemies, but when the armies attacking them became too large, they started buying off potential adversaries with silver. This only made their enemies eye them more greedily.

A Love Story for the Ages

And this brings us to the love story. The expanding Roman empire wasn’t satisfied with huge ransoms of silver. Roman leader Marc Antony finally annexed the Nabataeans’ kingdom.

However, Marc Antony became smitten with a drop-dead gorgeous Egyptian princess, Cleopatra. She wrapped him around her finger and he gave her the Nabataean thawr-oil monopoly as a gift in 36 BC. Cleopatra had no stomach for running a complex business, so she leased the operation back to Nabataean king Malik in for 200 silver talents a year (roughly $400,000 a year in today’s money). This is history’s first recorded lease-back operation.

That oil wealth allowed Cleopatra to build a fleet which helped Marc Antony temporarily defeat his rival for the Roman throne, Octavian.

But the Nabataeans chafed under the expensive terms of the leaseback and rebelled. Antony sent Judean king Herod to quash the rebellion, and Herod had his ass handed to him. Lacking funds, Antony was then beaten in battle by come-back kid Octavian. It was time for Antony and Cleopatra to get out of Dodge.

Cleopatra had some of her ships dragged overland to the Red Sea in preparation for an escape to India. Holding a grudge, the Nabataeans swooped down on the ships and burned them. Hopelessly trapped in Egypt, Cleopatra had her … ahem … asp handed to her, and she and Antony committed suicide.

It was a lose-lose situation for the Nabataeans as well. When Octavian became emperor, he ended the ancient Egyptian custom of mummification. It was the equivalent of modern-day Saudi Arabia’s customers switching to alternative fuels. The bottom fell out of the bitumen market, and the Nabataeans faded into history. In 747 A.D., what was left of the Nabataean civilization was destroyed in a major earthquake.

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Useful Link of the Day:

This website gives you encapsulated analysis from the major houses on U.S. AND Asian stocks. So, if you want to know if a Chinese railroad is breaking out to a new high because some big name is touting it, you can find out here. Even better, you don't need to know the symbol. Just type in the name.
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Monday, April 03, 2006

White-Hot Profits

My Guru's Corner column for Marketwatch is up ....

Some bullet points from the story....

  • Today there are 441 operational nuclear power reactors around the world. According to a report by the International Atomic Energy Agency, or IAEA, 130 new nuclear power plants are either being built or are in the planning stages. Some put the number of planned reactors as high as 160!
  • China currently has nine reactors in operation at three nuclear plants with total capacity of 6,600 megawatts. That provides just 2.3% of China's power consumption. China set an ambitious goal for 36,000 megawatts of nuclear capacity by 2020.
  • To meet that goal, China plans to build two new 1,000 megawatt nuclear reactors each and every year -- 28 in all. And the World Nuclear Association forecasts that China's annual uranium needs would jump from 3 million pounds per year now to 10 million pounds per year by 2010 -- then 18 million pounds per year by 2020.
  • India, meanwhile, generates about 3.7% of its electricity with nuclear power. India's total nuclear capacity is around 2,700 megawatts, with 14 commercial reactors in operation at six plants. India plans to have 10,000 megawatts of nuclear capacity by 2010 and 20,000 megawatts by 2020.
  • India's uranium requirements should grow from around 1 million pounds per year currently to 2 million pounds per year by 2010 and more than 4 million pounds per year by 2020. India's own uranium production will likely be just 1 million pounds by 2010. That means India is going to be a huge net importer of uranium.
  • China is about to sign a new deal to buy uranium from Australia. India can buy from Russia, but not for long. Last year, Russia's three uranium mines produced 3,657.5 tons -- just one-fifth of the 17,600 tons Russia consumes per year in its reactors, military, and export obligations. In fact, Russia had to draw on reserves (old warheads) to fill its demand for 2005.
  • Just recently, Russian President Vladimir Putin said nuclear power's share of Russia's energy use would increase from 15% to 25% by 2030. To get from here to there, Russia needs to add 40 gigawatts of nuclear energy each and every year -- building 40 new nuclear reactors by 2030.

And I also give a stock pick to play surging uranium prices. Click through on the link to see what it is...

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Sunday, April 02, 2006

Who is China's Top Oil Supplier?

If you guessed Saudi Arabia, you guessed wrong. According to Bloomberg, "Angola passed Saudi Arabia to become China's top oil supplier in February as the world's fourth-largest economy turned to Africa to meet rising demand."

Because China's oil companies have access to deep state pockets, they can go after projects in volatile places like Africa that U.S. companies can't or won't touch. And now it's starting to pay off bigtime.

From the article: "
Production in Angola, sub-Saharan Africa's second-largest exporter behind Nigeria, may reach 2 million barrels a day by 2008 from 1.25 million in 2005 as new fields come on stream, according to a U.S. Energy Information Administration January report."

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Sunday Energy Roundup

Sunday Energy Roundup

#1: The National Bank of Scotland says the U.S. could face gasoline shortages this summer.

Likely U.S. consumer reaction: How can I run out of gas? My 12-mile-per gallon Chevy Tahoe has a 26-gallon tank! (Check out these subversive Chevy Tahoe ads, by the way)

My analysis: It’s too early to predict a U.S. gasoline shortage or no. Hurricanes and the damage they potentially cause are the wild card.

#2: The Sunday Telegraph in the UK has a story about how the US and the UK are holding secret meetings to bomb Iran back to the stone age.

Likely U.S. consumer reaction: Don’t bother me, American Idol is on!

My analysis: Such an attack would only make sense if you’re a member of the far-right wing in Israel or an end-times apocalyptic kook. Sadly, both are over-represented in the White House.

The funny thing is that Iran supplies a lot of natural gas to Europe. For a European nation, this would be a case of cutting off your nose to spite your face.

#3: “major global oil exporters saw their oil revenues rise from less than $300 billion in 2002 to almost $700 billion in 2005. That resulted in a quadrupling of their current account surplus (which includes financial transactions as well as trade in goods and services) to about $400 billion. In turn, the external accounts of the United States and other oil-importing countries have deteriorated, intensifying global economic imbalances and dampening growth in energy-importing countries.”

Likely U.S. consumer reaction: Damn those A-rabs! Now, get out of the way of my Chevy Tahoe!

My analysis: Look at it from a commodity bull point of view. The Middle Eastern oil sheiks are taking some of that surplus money and spending it on gold. Gold and gold jewelry sales in Dubai are up 20% year over year. Imports of raw gold into Dubai only rose 4% in tonnage terms, however – still plenty of room for growth in a country where developers are building 300 man-made islands in the shape of a map of the world as an enclave for the filthy rich. Middle Eastern gold demand helps drive our gold positions higher. That’s pretty much win-win, unless you have children and don’t want to see the world go to heck in a handcart.

#4: Wall Street Journal says Peak Oil is a Shattered Myth

The RigZone tries to keep this at arm’s length by quoting the Wall Street Journal. Apparently, Canada’s oil sands and Venezuela’s oil sands will save us.

Likely U.S. Consumer Reaction: Phew!

My analysis: If anyone really believes oil sands will solve our energy problems, they are either lying to themselves or have undergone a frontal lobotomy. That doesn’t mean the oil sands won’t make some investors rich – especially with bucketloads of government money being thrown at it (Ottawa subsidizes the petroleum sector to the tune of $1.4 billion a year, and allow energy companies to write off 100% of capital expenditures for an oil sands asset in the year it is spent, rather than over the lifetime of the asset) . But it won’t solve the long-term (and worsening) problem.

By the way, did you see that Venezuela's oil minister said Wednesday that Exxon Mobil Corp., the world's second-largest integrated oil company, was no longer welcome in Venezuela, one of the world’s most oil-rich nations? Somebody better send Chavez a fruit basket to kiss and make up.

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The Cassandra of Natural Gas

While I am bullish on natural gas prices in the medium and long terms, the short-term surplus is huge. The U.S. Energy Department reported that stockpiles are 32% higher than a year ago.

But let’s keep a few factors in mind …

Where are we getting all that gas? Canada. Canada’s National Energy Board reports that gas shipments to the U.S. from Canada climbed by 4.3% in 2005 to 3.3 trillion cubic feet, up from 3.2 trillion in 2004. But Canada is using more and more of its natural gas to get oil out of tar sands. It takes 1,000 cubic feet of gas to convert a barrel of bitumen into light crude, according to George Crookshank, chief financial officer of OPTI Canada Inc.

As I have said before, that means we’re using one of our cleanest burning fuels to make one of our dirtiest burning fuels. And the ROEI (return on energy investment) is pathetic. Source for this chart is here.

It’s a good thing Canada is able to send us more natural gas, because production in the Gulf of Mexico dropped by close to 3% last year due to hurricane damage. And go ahead and call me Cassandra, but hurricane season is right around the corner, and this one is supposed to be a doozy.

Our long-term natural gas demand is climbing – up about 7% since 2000. Meanwhile, demand in the U.S. Midwest and Northeast are up 6% and 16% respectively in the last year.

Still, you can’t argue with the fact that mild weather and a surplus in storage point the way south for prices in the short term. I do expect another dip – maybe a sizeable dip -- in natural gas prices. And I think that’s the dip worth buying. That’s my game plan for Red-Hot Canadian Small-Caps. Now as to what stocks you buy to play the potential rally … hmm.

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Saturday, April 01, 2006

"Using 40% of the world's oil .. and LOVIN' it, Baby!"

My latest interview on Howe Tom (my interviewer) and I cover everything from the Australian Gold Rush to Peak Oil.
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Quoted in marketwatch on natural gas

I was also quoted in this story in Marketwatch ...

Maybe my editor was right -- maybe I AM in Marketwatch too much.


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My Marketwatch story on cotton -- stock pick

It's funny how these things happen. A friend of mine couldn't write his column for Marketwatch this week (we're all too damned busy, but he has an excuse -- he's in the hospital). He asked me to write it. The regular editor I talk to was out of the office, so I talk to another editor -- nice guy. I pitch him five ideas, all self-serving. And then I pitch him a sixth, on cotton. For a lot of reasons that I'll show you in a bit, I'm very bullish on cotton.
Guess which one the editor picks? Cotton, of course.
So, I write it the piece. The editor is very pleased with it. But then the other editor comes back. Apparently, I've been writing for Marketwatch too much or something like that. So my cotton story may not run. But ... what the heck ... he'll run it by Marketwatch's commodity reporters and see what they think.
This is on Thursday AM. I don't hear anything the rest of the day. Friday he tells me that Marketwatch's commodity reporters "loved" my cotton story and it was published. But I look on the site and it's not there. If it was on the front of the commentary section, it wasn't there for long.
So here, amigos, is my cotton story ...

Maybe you'll get some use out of it. There is a stock pick in it -- a pretty good one -- and I can guarantee you that almost no one saw it.
Don't think I'm ticked about this -- it's par for the course, and I am too prolific to worry about individual stories. Besides, my editor at Marketwatch gave me the Guru's Corner on Monday, which is pretty spiffy. I guess they DO like me.
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Where Does China Invest Its Money?

I talk to international investors a lot. Many of them have questions about investing in China, a place where they’re eager to put their money to work. So I have a question for them: Where is China investing its money? If I wanted to get rich off China, that’s what I would want to know.
And the answer is that China puts most of its overseas investments (outside of buying U.S. Treasury bonds to prop up the ailing greenback) not in Japan … or Thailand … or anywhere in Asia. It’s Latin America. Some facts ...
Fact #1. Latin America recently surpassed Hong Kong as the largest recipient of overseas investment from China. China invested $889 million in Latin America in the first 11 months of 2004, accounting for more than 49% of China’s total overseas investment. That’s much more than China’s investment in Asia ($515 million) or Europe ($296 million).
Fact #2. Tilting the flow of money in Latin America’s favor is that most of China’s overseas investment (51%) is in the mining industry.
With an economy geared for manufacturing and growing at close to 10%, China is Tony-the-Tiger hungry for resources, and Latin America is a good place to get them.
Fact #3. China’s trade with all of Latin America is booming. In 1975, total trade between China and Latin America was just $200 million. In 1998, it had reached $2.8 billion. By 2004, it climbed to over $36 billion, THIRTEEN times more.
And the best guess is that in 2005, trade between China and Latin America jumped well over $50 billion.
I can attest to this from personal experience. In June of last year I stood at the edge of the Panama Canal and watched one container ship after another parade through, stuffed with Brazilian raw materials on their way to the Far East. China buys huge quantities of Brazilian bauxite, iron, zinc, soy and lumber.
Deals, Deals and More Deals
Trade between China and Latin America was helped along by a 2004 visit to Latin America by China President, Hu Jintao.
He toured Brazil, Argentina, Chile and Cuba, signing 39 bilateral agreements to improve trade, tourism, and more.
Then in 2005, China’s Vice President, Zeng Quinghong, traveled to Venezuela, Mexico, Peru, and a host of other Latin American and Caribbean countries, negotiating new trade and investment agreements every stop along the way.
These are just SOME of the deals China is working on in Latin America right now …
  • China will invest $500 million in a Cuban nickel plant and prospect for nickel throughout Cuba. (Cuba is a big source of nickel, as well as supplying 10% of the world’s cobalt).
  • Minmetals, a Chinese mining company, is making plans to open a huge new copper mine in Chile.
  • Petróleo Brasileiro (Petrobras), Brazil’s state-owned oil company, has inked a deal to sell China 12 million barrels of crude oil. The deal is worth $600 million a year, and Petrobras hopes to expand it to $1 billion a year.
  • Peru signed an $83 million contract with China National Petroleum Corporation allowing the Chinese firm to explore for oil in the country's southeastern rainforests.
The biggest relationship of all?
Two of the world’s largest countries in the world: Brazil and China.
The sign: Their leaders, Luiz Inácio Lula da Silva and Hu Jintao, are coming together like a Roosevelt and Churchill to establish a political, economic and financial alliance to challenge the U.S., Europe, Japan and Russia.
Overall, China’s imports of raw materials from South America are expected to reach the $100 billion-per-year mark by the end of this decade. China is already Brazil’s third-largest overall trading partner and Argentina’s fourth largest.
Speaking of Brazil, during his visit, China President Hu offered $7 billion in port and railway improvements to Brazil. China is also building the world’s second largest dam in the Brazilian Amazon. The energy from that dam will go to power mines that provide raw materials … to China.
Latin America’s economy may have grown by “only” 4.3% in 2005. And that may be below the 5.7% average of all developing countries (and far below China’s 9.8% growth for that matter).
But, heck! Morgan Stanley's weighted measure of regional stocks, the MSCI Latin America index, soared 45% in 2005 in dollar terms. That’s even better than the previous year's increase of 39.4%. And it’s bound to get even better as more China deals spur growth at a faster pace.
Why is money pouring into relatively lackluster economies? Because the smart money knows that these economies have bottomed, they’re going to ride the global commodities boom for many years to come, and a lot of stocks in Latin America are cheap, cheap, cheap!
Now for the good news: There are plenty of small- and mid-cap companies listed in the U.S. and Australia that are making money on the China natural resource story.
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Why China Will Eat the World

There was a report last year about China's economy called "China Eats the World." Let’s crunch some numbers …
  • China has per-capita income of $5,300 per year — about 14% of U.S. per-capita income. China’s economy is growing at over 9% a year — sowing the seeds of a massive consumer economy.
  • More than 4.5 million new cars hit Chinese roads in the past year alone. If China were to have the same number of cars per people as the U.S. — three for every four people — it would have close to a billion cars. Currently, there are only 800 million cars in the entire world.
  • The U.S. burns 2.2 tons of coal per person per year. If China used that same amount of coal per capita, it would use three billion tons of coals per year!
  • China is already the world’s largest consumer of iron ore, steel and copper. It sucks up half of the world's supplies of cement, a third of its coal, more than a third of its steel, and a fourth of its aluminum.
  • And don’t get me started on China and energy. China has accounted for 40% of global growth in the oil demand in the last four years, according to the US Department of Energy, and its consumption over the next 20 years is projected to rise to 12.8 million barrels a day from 5.6 million barrels currently.
Now imagine the same story playing out in India, where an IT and industrial boom is helping to lift millions out of poverty ... in Brazil, where the commodities boom is fueling a rip-roaring economy ... and in virtually every developing country on the planet.
Over 1.3 billion people in China and another billion in India are making the transition from bicycles to scooters to cars. They’re buying new homes, kitchen appliances and electronics. They have more spendable money in their pockets. Many are suddenly taking a giant leap from the 19th century to the 21st.
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