Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Wednesday, May 31, 2006

India's Elephant at Ramming Speed!

Bloomberg has a story on India's red-hot economic growth. Naturally, this means India will need to import more copper, zinc and oil. And with all that extra cash in their pockets, you can bet that Indians will be more inclined to buy gold and silver.

Indian GDP Grows at Fastest Pace in More Than 2 Years

May 31 (Bloomberg) -- India's economy grew at the fastest pace in more than two years last quarter as bumper harvests and hiring at computer-related companies spurred spending on housing and mobile phones.

Asia's fourth-biggest economy expanded 9.3 percent in the three months ended March from a year earlier as growth in farm output almost doubled, the government said in New Delhi. That beat the 7.9 percent forecast of a Bloomberg News survey and is the fastest after China among the world's 20 biggest economies.

There are lots of good stats in this story, in case you're interested. I can think of a few stocks that should benefit; Red-Hot Asian Tigers subscribers already have one in their portfolio (added last week).

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Would Iran Quit OPEC

Another interesting story from RigZone:

A top Iranian lawmaker said Tuesday that Iran should reevaluate its continued membership in the Organization of Petroleum Exporting Countries, in view of the organization's continuing demands for higher production that often overlook the long-term benefits of oil reservoirs, the official Islamic Republic News Agency reported.

The lawmaker in question is Kamal Daneshyar, the head of Iran's Energy Committee. In other words, when he talks, Iran listens.

He said Iran should pay attention to the welfare of the oil wells even if that would mean reduced production. Daneshyar, who has considerable influence on decisions in Iran's oil industry, said last week that the country's oil production has been steadily dropping over a period of decades.

The country's oil production currently stands at around 4 million barrels a day and will most likely drop down to around 2 million b/d if oil wells aren't protected.
You know what this is probably leading up to, don't you? Iran already can't meet its production quotas. I think it's likely Iran will A) cut production even more B) blame Western infidels for being forced to do so which C) gives it cover to cut the social programs that the oil production has been paying for.

After all, who has money to buy cement, water treatment plants, and other basics when you're busy trying to become a nuclear power.
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Bracing for Impact

Rigzone has a story: Energy Industry Fortifying Plans, Equipment in the Gulf of Mexico.

Some excerpts...

Still bloodied from last year's hurricane season, the energy industry is building up its defenses in the Gulf of Mexico for another round with Mother Nature.

Hurricane season begins Thursday, and federal officials report that 22 percent of crude oil production and 13 percent of natural gas production in the Gulf is still derailed.


Though it's impossible to "hurricane-proof" a platform or pipeline, people in the industry appear to be hellbent on trying to do a better job at prepping for the upcoming storm season than they did last year.

They are looking for ways to reduce the enormous amount of lost production that occurred last year and which set off spikes in energy prices.

Companies are scrambling to lock in contracts for tug and helicopter services, and squirrel away extra valves, meters and piping needed to make fast post-hurricane repairs.


Transocean, which owns deepwater drilling rigs, is upgrading the mooring systems that keep the rigs fastened in place in the water. Instead of the traditional eight-point mooring system, Transocean is beefing up to a 12-point mooring system at a cost of about $7 million per rig. But because of difficulties in getting all the necessary parts, that transformation won't be complete until midsummer.

If the oil and gas industry can survive a major hurricane hit in the Gulf of Mexico with little damage, that would be good news. These folks have a can-do attitude, and deep wallets thanks to higher oil prices. I think oil prices are going higher anyway, but I'd be happy if they they don't skyrocket overnight.

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Monday, May 29, 2006

China Eats the World

From the Commodity Research Group:

The Chinese already consume 40% more coal, 68% more meat, and 148% more steel each year than the United States. At the prevailing 8-10% growth rate in China's economy the country could reach US per capita income levels by 2030 to 2040. An expert study recently estimated that China alone would then consume 2/3rds of the entire world's current grain harvest and 4/5ths of current global meat production. Also it would require almost 120% of the present global coal production, and 125% of current global oil production.

My comment: Something has to give. China CAN'T consume 2/3rds of the world's grain harvest (especially when we seem to be turning more and more of it into ethanol). But what is the resolution of this paradox? That's part of what makes commodities so exciting to be in right now.
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Sunday, May 28, 2006

Who's Buying Gold?

Why, it's those oil-rich Arabs! As the story says ...

Value of UAE gold sales climbs in first quarter

Dubai: Gold consumption in the UAE in value terms has risen by Dh200 million, or 10 per cent. It reached Dh2.1 billion during the first quarter of the current year, compared to Dh1.9 billion in the same period last year, according to the World Gold Council (WGC).

However, sales in Kuwait and Egypt are down, and about flat in the rest of the Gulf. And this is in dollar terms -- in actual tonnage terms, the amount is down. However, both Dubai and Kuwait were in mourning, which weighed on gold sales. Dubai actually canceled its "Shopping Festival." I don't know what that is, but it sounds like something that would be wildly popular in Boca Raton.
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Quote for the Day

"The funding for the Iraq War is now in the hundreds of billions of dollars. [Economist] Joseph Stiglitz projects that total costs could go to $2 trillion. What would a trillion dollars have done for research into alternative fuels? I don't know, but something -- something! What do you get for a trillion dollars in Iraq? Nothin'. It's just nuts!"
-- Andrew Bacevich, Drifting down the Path to Perdition

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Cheat Sheets for Talking to a Real Human Being

This is off topic, but I hate how, any time you call customer support for Sony, ATT, etc, corporations make you go through long lists of computerized phone messages to get to speak to a live human operator. Luckily, Paul English of is ticked off about this too, and he's put together a cheat sheet of the numbers you press to get a live operator on support and customer service lines IMMEDIATELY.

A sampling of his list...

ATT Universal
800-950-5114, then press ###
Bank One
877-226-5663, then press 0,0
Capital One Visa, 800-867-0904 then ignore prompts and invalid entry warnings; press #0 four times
800-222-7669, then "When prompted by the automated voice system to answer ANY questions, just say ""Agent"""

You can find Paul's complete list here:
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Friday, May 26, 2006

Shake Your Caracas!

I talked to reporter Myra Picache A LOT for her piece on the OPEC meeting in Caracas Venezuela, which takes place next week. You can read it here:

Marketwatch had a pretty good chart to go with the piece, showing OPEC's spare capacity versus the price of oil. Pretty ominous, I'd say.
The only frustrating thing is that I had so much information for Myra and she could only use so much of it (Marketwatch has severe space restrictions). So, I know what I'm writing about for next Wednesday's Money & Markets.
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Wednesday, May 24, 2006

Mid-Week Oil Roundup

A Marketwatch reporter is using me as a source for a story on the upcoming OPEC meeting in Venezuela. True, I am not Venezuelan, or a member of OPEC, but I did write a piece called "The Axis of Oil," about the alliance of convenience that Iran and Venezuela find themselves in. Strange bedfellows indeed.

Anyway, my story popped up on the radar. Hence, I was called as an "expert." And I can always research. For instance, did you know that Sudan is being invited to join OPEC? Obviously, there's no "humanitarian" requirement for membership. Or how about that U.S Energy Secretary Sam Bodman says OPEC is "powerless" to lower oil prices.

"The Saudis say they have an extra 1 million barrels but I take that with a kind of a grain of salt," Bodman says.

Here are some other interesting stories on the subject ...

#1) The Saudi Oil Minister warns that global oil demand -- and oil prices -- could plummet if there is an economic slowdown.

One way to help the global economy would be to lower oil prices by increasing quotas (which, since the Saudis are the swing producer, means more revenues for the Saudis). Perhaps the Saudis and Venezuelans will be at loggerheads at the meeting in Venezuela.

#2) Alexander's Gas & Oil Connection gives good coverage of the IEA's reclassification of Venezuela's extra-heavy crude:

#3) The Venezuelas say they'll take 60% of those joint ventures in the Orinoco extra-heavy oil deposits, thank you very much. Such lovely people. Oil executives from Exxon, BP (which invented the Orimulsion process that makes Venezuela's extra-heavy crude currently commercially viable) Chevron and more are on a slow simmer, but what are they going to do?

#4) Your field guide to OPEC price hawks and price doves

#5) An interesting story from the IEA about the last time Venezuelan exports of oil to the US plummeted.

This time, amigo, there's no extra Mexican Maya crude to make up the difference.

#6) Late-breaking addition: I forgot to add that Venezuela is calling for OPEC production cuts (again!) and Chavez is talking about pricing oil in something other than dollars (euros?)

#7) And then there's the idea that Venezuela may be running out of conventional crude oil. Oh my!

One source reports that the world's fifth largest oil producer is showing signs of a rapid decrease in production, one of the key tenets of the peak oil theory ... Venezuela is buying oil from Russia in order to avoid defaulting on deliveries to clients. The situation raises serious questions about the country's oil production and the future of PDVSA as a major oil producer, and increases the risk to the U.S. oil supply should the country's oil production suddenly plummet.

[XX Note: updated to add #7 and to change all the urls to tinyurls -- the long urls were messing up the page.]

I gave the reporter lots of quotes, but she'll probably use just a few. Se la vie.

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Tuesday, May 23, 2006

Chart Parade #3 -- Silver Supply Demand Gap

Obviously, some silver stocks can make hay while the sun shines. And personally, I added silver to my portfolio yesterday. But there are some silver stocks you might want to avoid for the time being -- those with a higher than average political risk. I wrote a story about it, which is at now, in the Guru's Corner, in a piece titled "Cloud In The Silver Lining"

Of course, watch those stocks I tag as potential underperformers outlap everybody and make a liar out of me.

LATEBREAKING NEWS: My latest podcast interview on is here:

Please forgive the typos. They were in a bit of a rush.
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Chart Parade #2 -- Silver

Here, you can see that silver has found support in a number of ways...

1) at the bottom of its Bollinger Band

2) at the low set in April.

Silver bounced hard today. At the bottom of the chart is the stochastics oscillator, which measures momentum. It's rising out of "oversold" -- pretty bullish.

So what stocks do you buy now? Ah, that's the million-dollar question...
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Chart Parade #1 -- The TSX-V

Every Monday morning, Weiss Research holds a "Squawk Box," where we put out ideas for the week. This was a chart I presented showing the TSX-Venture Index. If you believe Fibonacci Retracements work sometimes -- and I do -- then you can see that the TSX-V hit its 50% retracement on Friday. That means it's a good place for a bounce.

We need confirmation, of course, and Monday was a holiday in Canada due to Victoria Day (Victoria Principal sends her regards). Well, we got that on Tuesday -- the TSX-V is up 2.3% as I write this.

So, if we're looking for a bounce in Canadian small-caps, which sector do we want to concentrate in? Let's look at my next chart...
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Monday, May 22, 2006

Energy Alternatives

Bloomberg has a nice story on alternative energy programs that are being put in place.

Some excerpts...

Rising demand for low-polluting fuels will aid gas-to-liquids, or GTL, projects, such as one built in Qatar by a Sasol Ltd.-Chevron Corp. joint venture that starts next month.

Other alternatives using similar technology include coal, or CTL, projects, favored by the U.S. and China, which have vast coal reserves.

Chinese companies including Shenhua Group Corp. and U.S. companies including DRKW Energy LLC are planning to build coal-to- liquid or CTL plants to take advantage of their large national coal reserves. DRKW is planning a $1.4 billion project in Medicine Bow, Wyoming, with Arch Coal Inc., Rentech Inc. and General Electric Co.

So will these energies of the future compete with ethanol from corn and oil sands? I hope so, because those last two are energy-inefficient boondoggles (though investors can still get rich on them).

Then again, I don't know enough about coal-to-liquids and gas-to-liquids. What do they do with all the C02 that must be created in the coal-to-liquids process? Well, I'll look into it.

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Friday, May 19, 2006

Ay Carumba! Commodities Suffer Biggest Drop in 25 Years

Listen for the weeping and gnashing of teeth on the trading floors. I'll let Bloomberg break the bad news...

Commodities, Led by Metals, Face Biggest Weekly Drop Since 1980

May 19 (Bloomberg) -- Commodity prices headed for their biggest weekly drop in more than 25 years, led by metals and grains, on speculation that higher interest rates will erode the appeal of copper, gold and silver as alternative investments.


"The speculators are piling out of the metals,'' said James Vail, who manages $700 million in natural-resource stocks at ING Investments LLC in New York. "There's been so much money made in this sector that people are trying to protect themselves. There was skepticism on the upside, and now there's panic on the downside.''


"Because of the volatility in all of the markets in the last week, people are beginning to be concerned about slowing economic growth and inflation picking up,'' said Stephen Briggs, an analyst at Societe Generale in London. "That's not a good combination, notably for industrial metals.''

Well, that all sounds pretty bad. Shall we look at a weekly chart of gold, then?

The horizontal lines are called "Fibonacci Retracements," which give technical levels for the likely extent of pullbacks. That top one the weekly gold chart is sitting on is a 25% Fib retracement. So, gold's next rally could start right here.

Or, if we had a 38% Fib retracement, it could go down to 608 or so.

Or a 50% Fib retracement -- still allowable in a bull market -- would be at 570.90.

If gold gets to $570.90, thank your lucky stars and back up the truck, because it's time to load up with gold.

But we probably won't be that lucky. We might not make it to a 38% retracement -- and if we did, I'd thank my lucky stars for the opportunity.

After all, look at the chart again. Despite this week's sell-off, gold hasn't even broken its recent uptrend, never mind longer-term uptrends that are even stronger.

Sure, all bull markets become bubbles eventually. But this commodity bull market is only five years old; a normal historical cycle should give us another decade to go, AT LEAST. And when you consider that it comes after a brutal, 20-year bear market in commodities, this one should have much further to run.

Then figure in all the demand for commodities like copper, gold and oil from China and India -- demand that is only getting stronger.

And then take the greenback... please. The fundamentals of the U.S. dollar are just terrible. The Fed manufactured a bounce in the last couple days with some doubletalk, but it's fast running out of tricks.

Finally, I'd much rather make long-term investments in a market (commodities) that gets a bit frothy once in a while than invest in some of the Hindenburgs that Wall Street is passing off as "Dow leaders" these days. The weekly chart of the Dow looks bad. You can see the problem even more clearly in the Dow's daily chart, so let's look at that...

Yeah, that's what I'd call breaking an uptrend. If the Dow gets back to 11,330, I'd short the heck out of it.

And put that money in gold or silver. When the market really craps out, those should hold their value.

By the way, I think silver is looking more bullish than gold. Maybe that will lead when the bounce comes.

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Wednesday, May 17, 2006

The Trend In Gold

Gold is bouncing today. Even though stops were hit on several positions, I'm still bullish on gold (and silver too). Let's look at a chart...

You can see that gold's retracement hasn't even broken the recent uptrend. Is gold through consolidating? I don't know. But I know there's a lot of support below it, and the yellow metal looks strong.

I wouldn't mind a deeper pullback, though. That would give us better buying opportunities in metal stocks.

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Friday, May 12, 2006

Friday Energy Roundup

I'm dashing this off before my morning meeting, so excuse any typos or omissions...

1) Bolivia won't compensate oil firms
Evo Morales, the country's new president, says he won't pay three European firms after Bolivia's takeover of operations in May.

My take: Well, that's certainly going to encourage foreign invesment in Bolivia, isn't it? NOT! Stay the hell away from Bolivia, and that includes miners.

2) Oil down on lower global demand forecast
Crude prices fall as International Energy Agency says high prices are seen slowing consumption.

the IEA said high prices were having an impact on use and cut its 2006 forecast for demand growth by 220,000 barrels per day to 1.25 million bpd.

My take: Nice to see that prices are FINALLY having an effect on consumption. But let's look at the things that could affect supply: Iraq ... Iran ... Chad ... Venezuela ... Mexico's Cantarell field peaking ... Kuwait peaking ... fall-off in North Sea production continues to steepen. HURRICANES! Nigeria ... hell, militants in Nigeria threatened to destroy a $13 billion natural gas export plant.

It just makes me want to take the IEA by its collective big, fat, greasy, size 56-neck and shout: "What the hell is wrong with you IEA? What are you smoking? We are careening toward a Peak Oil crisis here. Stop covering your asses and be proactive!"

I tell you what we'll do. Let's look at a chart of oil...

Does that look bearish to you? Do you notice how crude oil has been hugging the top of the Bollinger Band and, even when it pulls back, hasn't been able to touch the bottom Bollinger Band since freakin' February? BULLISH!

Yes, oil is in a short term downtrend since peaking in April. Enjoy it. When the next breakout comes, it will likely be to the upside. My intermediate term target for oil is $88 a barrel. And it could go much higher if hurricanes slam into the Gulf of Mexico.

UPDATE: 200 Feared Dead in Nigeria Oil Blast. I'm not an expert and I'm not on the ground at the scene (good thing, otherwise I'd be dead), but I'd say that pipeline will be out of commission for awhile.

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Thursday, May 11, 2006

China's Metal Reserves & the US Dollar

Hot diggity, it's Christmas in May (if you're a resource investor, that is). I point you to this story in the Wall Street Journal (subscription required)...

SHANGHAI, China -- China says it intends to build strategic reserves of minerals like copper and uranium, in addition to the energy stockpiles it already has said it will amass, in the latest sign of Beijing's concern about ensuring an adequate supply of natural resources.

The Ministry of Land and Resources said in its five-year plan that it will build up reserves over the next four years of uranium, copper, aluminum, manganese and other minerals that the country "urgently needs." The statement follows pledges by Beijing to begin filling four strategic reserves of crude oil as soon as this year.


The Land Resources ministry said it plans to have as many as 10 metal reserves with holdings of 20 million metric tons of copper and 200 million tons of bauxite, which is used to make aluminum. It also said it will have two or three backup stockpiles of oil containing 4.5 billion to five billion metric tons and a similar number of coal reserves with 100 billion tons of stock.

Although analysts said the numbers are high, wording of the ministry's plan suggests some of the reserves will be in proven -- or unmined rather than extracted -- form.


If Beijing attempted to purchase outright the amounts suggested by the Land Resources ministry, "it would drive [prices of] the world's commodities out the roof," said Jim Lennon, an analyst at Macquarie Bank in London. He added, however, that China wants to secure access to these commodities rather than simply stockpile them.

Here's my take: No one knows for sure what the Chinese are going to do. For months, they've been trying to talk the commodities markets down -- particularly oil and copper -- with no success. However, I see this one more bullish force for a very bullish trend in commodities.

But wait -- it gets better. Check out this story (NO subscription required)...

China urged to quadruple gold reserves

BEIJING, May 9 (Reuters) - Some Chinese economists are urging Beijing to quadruple its gold reserves to 2,500 tonnes from the current 600 tonnes because the country foreign exchange reserves had become the world's largest, an official industry newspaper reported on Tuesday.

Oh, if this is true ... well, you can see why gold sailed through $700 without looking back. But here's my question: What if the Chinese are ALREADY building their gold reserves -- using that humongous pile of dollars they have stashed away. That would drive up the price of gold -- and drive down the value of the dollar, which is exactly what we're seeing right now.

And if they're not doing it yet -- well, the fall in the dollar, and the rise in gold, that we're seeing now are just a shadow of what's to come.

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Tuesday, May 09, 2006

Fear Not, Oil Traders -- It's Hugo Chavez to the Rescue!

As I write in the upcoming (tomorrow's) Money and Markets...

It is in the interests of both Iran and Venezuela to keep oil prices high, and one way to do that is to inject as much fear as possible in the global oil markets. Every dollar rise in the price of a barrel of oil is more money in their coffers.

So, the price of oil pulls back below $70 per barrel, and what happens? Hugo Chavez steps up with an announcement to set the oil markets on edge. From Bloomberg News:

Venezuelan President Hugo Chavez will increase taxes on foreign oil producers, grabbing a larger share of windfall profit from companies including Exxon Mobil Corp. and ConocoPhillips. Chavez, who last month seized Total SA and Eni SpA assets, will raise the income tax rate to 50 percent from 34 percent, Energy and Oil Minister Rafael Ramirez said in a press conference today in Caracas. The new rates threaten to curtail investment in the world's fifth-largest oil-exporting country at a time of record energy prices and rising industry profit.

As I write this the front contract for oil is back over $70 per barrel. And if it swoons again, Hugo will probably step in with another "Up Yours" to Uncle Sam.

And how about that news that Iran’s president has written a diplomatic letter to President Bush suggesting “new ways’ to resolve tensions"? That's what sent oil prices lower on Monday.

Does anyone really think this is anything but “war by other means”? Negotiations will likely fall apart. And then Iran’s President Ahmadinejad will be able to tell the Muslim world: “See, I tried to make peace with the guy. It’s all HIS fault!” And oil prices will ratchet higher.

Sure, it could play out differently. But my money's on $80 oil by the end of the year -- potentially much higher if hurricanes deliver a direct hit to Gulf of Mexico oil facilities.
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Monday, May 08, 2006

Monday Is Chart Day

You can see that the US Dollar continues to swoon. It’s on the opposite end of what I like to call “The SeeSaw of Pain” with Precious Metals – as the dollar folds, gold continues to soar. Notice that silver is dragging right now – consolidating after its big run-up before the debut of the silver ETF. Short-term the easy money will be made in gold. Use the consolidation to get into the best silver stocks.

I’d look for crude oil to find short-term support today or tomorrow. It’s close to support, the January high. It is oversold, which should (but not always, or we’d all be rich) limit further downside.

Fundamental drivers: Global supply and demand are in balance. If nothing else, Venezuela and Iran are determined to have higher prices. When the price of crude gets low enough, they throw a scare into the market. In the intermediate term, hurricane season, with its potential impact on Gulf of Mexico oil and gas production, is around the corner.

The TSX-Venture, which tracks the type of small-cap Canadian stocks in Red-Hot Canadian Small-Caps, has consolidated over the last few weeks. That consolidation appears to be over, and the breakout is confirmed by momentum indicators. Hoist the Jolly Roger, and set sail for profits!

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Friday, May 05, 2006

When Is a Plateau a Peak?

Time to give a shout-out to, a great website for energy-related charts.

On Wednesday, Oilceo put up a great chart showing monthly global oil production.

Worldwide production was down in February to 84.330 million barrels per day, from a revised 84.368 mbpd in January. The drop is 38,000 bpd -- not much on a global basis when the world is using A Thousand Barrels a Second.

In Wednesday's Money and Markets, I expressed the opinion that we're very close to Peak Oil. That's when global oil production reaches its maximum. After that comes a (hopefully slow) decline.

Can a plateau be a peak? It certainly seems like oil production isn't going up. What if the next move is down ... way down?

And that got me to thinkin': Hurricane season is coming. It's likely that oil and gas production in the Gulf of Mexico will suffer. And remember, 23% of Gulf of Mexico oil production and 13% of its natural gas production is STILL shut in from last year. Some of that is never coming back.

And if the Gulf takes another hard hit this summer, there will be more knocked out for the next year ... or longer.

So maybe $70 per barrel oil is cheap.

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Thursday, May 04, 2006

When Does Hurricane Season Really Start?

If you're living in the path of a potentially active hurricane season (me) or run your car on oil that comes from the Gulf of Mexico (just about everybody) that's a question on your mind: When does hurricane season really start? We know it's June, but when in June?

The envelope please...

The earliest killer hurricane on record was Hurricane Agnes, which was first detected over the Yucatan Penninsula on June 14, 1972. Agnes killed 129 people, most from flooding. Agnes flooded so much fresh water into the Cheseapeake that the local seafood industry was crippled for years.

Agnes was unusually early. In fact, even the last week of June is considered early.

That's when Hurricane Bertha formed in the Eastern Atlantic in 1966. It made landfall as a category two storm in North Carolina. Bertha killed 12 people and caused a lot of damage.

Hurricane Audrey formed in the Gulf of Mexico in 1957 in the last week of June. It slammed into Texas and Louisiana as a Category 4 storm. Audrey killed 390 people, partly due to its 12-foot storm surge. Until Hurricane Katrina hit last year, Audrey held the dubious record for most deaths caused by a hurricane. Audrey formed in the Gulf so hard and quick because the water was warmer than normal.

Hold that thought...

Check out the warm water anomolies on this map of sea surface temperatures in the most recent week:

Do you see where a lot of the hot spots are cropping up? The Gulf of Mexico!

One last chart -- this is an animated one showing weekly sea surface temperatures. Look how the Gulf of Mexico is warming up like a cauldron on the stove.

Looking at that chart, would it surprise you to see a hurricane form in the Gulf of Mexico in the middle of June?

It wouldn't surprise me. Let's hope for the best, but prepare early.

And my sincere best wishes that you dodge any potential bullets go out to everyone who lives in Louisiana and the Texas Coast.

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Hoo Boy!

Here's some bad news for anyone who owns a Bolivian-based silver stock...

LA PAZ, Bolivia, May 2 (Reuters) - A day after Bolivia's president said the
nationalization of the energy sector was "just the start," the country's vice
president said on Tuesday the state wanted more control of the mining industry.

"The big mining companies have to pay more taxes ... the current rate is too low," Garcia told local radio. "There aren't going to be company expropriations ... but we are going to assume a greater level of state control."

You'll remember that the shares of Apex Silver and others tanked on Tuesday after the Bolivian government nationalized the oil and gas industry.

"We've been assured by various members of the Bolivian government that the
investment being made in San Cristobal will be honored and that has
reassured us," Apex Silver Chief Operating Officer Alan Edwards, told
Reuters by telephone.

Oh.. well THAT'S reassuring!

How bad is this? It's so bad, Barrick Gold says Pakistan is a more stable place to do business than Bolivia or Venezuela.
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Wednesday, May 03, 2006

The Trouble With Silver

On Tuesday some silver stocks swooned like Southern Belles at Scarlett O'Hara's wedding. The problem was that Bolivia nationalized its natural gas industry, and the fear was that this would spread to other Socialist-leaning countries in South America.

Red-Hot Canadian Small-Cap subscribers, don't worry. Our stocks operate in Mexico, and if anything, its market is going to open up more, not close up. I've avoided Canadian miners that own property in Bolivia and Peru, for example, for just that reason.

But THEN silver took it on the chin today (Wednesday). Gold did too, both triggered by a rally in the US dollar, so my friends in New York and Chicago say, along with the all-purpose "profit taking."

But gold recovered. Silver did not. And a chart of silver looks ... well ... weak.

Looking at the chart, we can see that momentum (as indicated by RSI) is not keeping up with price action. Indeed, it may be leading it lower.

Remember how I said last week that the debut of the silver ETF could be followed by a short-term correction? We may see that.

Now, a couple of points...

1) Silver could laugh off Wednesday's action and vault higher on Thursday. Nobody I know is stupid enough to short silver at this point. Leave that to the hedge funds.

2) Even if the metal goes lower, and silver miners go with it, this is just setting up a great buying opportunity.

Heck, the Barclays iShares silver ETF (SLV) is already exceeding expectations. 21 million ounces of demand flooded in during the first trading day, and through Tuesday, that increased to 32 million ounces.

Its silver stash will likely reach and possibly exceed 100 million troy ounces within the first month, according to UBS. That's way up from the previous estimate of 60 million ounces.

You can find a news story on it here

And let's say the worst happens. Bolivia, Chile and Peru either confiscate mines outright or keep raising taxes. That means there's less silver production from those countries, and the silver produced by the mines in our portfolio is worth MORE.

Now for the really interesting thing. Silver has blazed the trail north for much of the year, and gold went along for the ride. Now, I think gold is getting back in the drivers' seat. Which stocks do you want to own under those circumstances?

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Peak Oil in Money and Markets

My latest Money and Markets ... on Peak Oil ... is up today at

This one was really cut a lot in the editing process. Now, if anybody needs an editor, it's me. I'm loquacious to a fault. But I'd like to include one of the passages that was cut right here...

Wind … nuclear … hydro … I believe all these alternatives should be explored, and as rapidly as possible. Rather than spend $85 billion a year in Iraq to … well, I don’t know why the hell we’re in Iraq … why don’t we spend $85 billion here in the U.S. developing viable alternative energy and public transportation systems? Russia, for example, has electrified a railway spanning from one end of the country to the other. China is building electrified railways, too. The energy savings are HUGE. Why can’t we invest in electrified rail? Or any of the other half-dozen solutions we could bring online in the next five years?

The problem is a lack of vision and willpower on the national level. I hope it changes soon.

William Howard Kunstler, author of “The Long Emergency,” recently compared the reaction of Americans to rising oil prices to the classic “five stages of grief”:

1) Denial
2) Anger
3) Bargaining
4) Depression
5) Acceptance

What are they grieving for? For what Vice President Dick Cheney once called “the American way of life that is non-negotiable" – cheap gas so we can drive around in big cars.

Many Americans are still in stage 1. Working Americans who are getting squeezed mercilessly at the pumps are angry; they’re at stage 2. I hope our national consciousness moves quickly to stage 5 – acceptance. That’s when we get on doing what we need to do – what we should have done after the FIRST oil crisis in the 1970s.

Here’s an interesting fact: Brazil took the first oil shock as a challenge. At the time, it imported a lot of oil. Now, three decades later, it is about to become self-sufficient in energy thanks to conservation, innovation, offshore drilling and ethanol made from sugar cane.

I think we can do it FASTER than Brazil. We put a man on the moon, for Pete’s sake. Don’t tell me that Americans can’t rise to this challenge.

We just need to do it before oil hits $100 a barrel.

There, I feel better. If you don't know what Peak Oil is, click through to the article. Some of my explanation was changed -- I'm sure there were GOOD reasons for doing that, Mister Editor, he said through a clenched smile -- but it explains the basics pretty well.
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