Mobile Wallet Technology: The New Barbarians are at the Gate.

[Editor’s Note: As Shah wrote in Part One, “Your future is calling and the ringtone sounds like a cash register.” Below is the second installment in this four-part series on mobile wallet technology. I hope you enjoy it.]

As I discussed in Part One, the sky is the limit when it comes to mobile wallet technology.

The big brand credit card issuers: American Express, MasterCard, Visa, and Discover Card, along with every other card issuer and wannabe credit extension intermediary are all already into the mobile wallet space.

Their offerings vary and competition between them will be as brutal as it always has been. And that’s good for consumers.

Creating choices for consumers to drive business will lead to more innovation and more services offered at more competitive prices. At least, that’s the way the free market is supposed to work.

But, traditional credit card issuers that are forcing banks to compete to offer credit to card borrowers, aren’t the “disintermediators” I talked about in Part One.

They help spread banking relationships across the spectrum, they do not remove banks from the equation. And because banks are all in the present equation, pricing pressures aren’t prevalent and fees and costs remain stubbornly high.

But as you’ll see, that’s about to change.

The Greater Fear for the Banks

What banks fear most in the burgeoning mobile wallet world are New Barbarians breaking down the gates that traditionally walled off banks from meaningful interlopers.

The biggest, baddest New Barbarians at the gate are some of the biggest names in the Internet world, the social media world, and the telecom world.

If you want to make a fortune on the mobile wallet future the giant players and Barbarian disintermediators to watch and invest in include: Google, Yahoo (yes, Yahoo), Microsoft (believe it or not), Facebook (when it goes public), Nokia, Research in Motion (yes, I am advocating buying Nokia and RIMM), Apple, Verizon, and Vodafone.

There will be other giants worth buying, but until the ground shakes from their emergence, these giants have a giant head start in the mobile wallet world of the future, starting now.

Of course, keep in mind that the scope of this series is intentionally broad.

So, it’s not the place to give specific reasons to buy specific companies. My purpose is to explain to readers the extraordinary opportunities inherent in the mobile wallet future.

But, if you want to know why these specific companies will be huge winners in mobile transactions and what they are doing to warrant their own exceptional futures, as well as when you should buy them, take heart. Keep readingMoney Morning.

As it takes shape I will follow this report with specific recommendations accompanied by all the reasons and metrics you’ll need to make informed investment decisions.

In the meantime, here’s why these businesses are primed to rake in profits on the digital wallet phenomenon.

I’ll use PayPal as the example of where things are now and where they’re going.

Already, PayPal, the online payments juggernaut that eBay cleverly bought for a mere $1.3 billion in stock back in 2002, is giving banks nightmares.

It’s not that PayPal doesn’t incorporate banks in its business model, it does. But it does more than facilitate credit card transactions for buyers and sellers on eBay.

The threat to banks, and the direction bank disintermediators are taking, is transparent in what PayPal offers once there is a balance in your PayPal account.

Your balance can be electronically transferred to your checking account, you can request a check, you can withdraw cash from an ATM with a PayPal debit card, you can use your PayPal debit card (debits your PayPal account) for purchases where it’s accepted, and you can buy anything on eBay with what’s in your PayPal account.

Buying and selling through PayPal without a bank in the middle, which is possible because people trust PayPal to hold their money and transfer payments effectively, is the quintessential example of how new technologies are disintermediating banks.

Seeing how Facebook, with its almost 900 million users, can directly facilitate transactions between its “members” by doing what PayPal does, opens up the window to new commerce possibilities that can be facilitated digitally through a trusted mobile device directly connecting business buyers and sellers and facilitating person-to-person money transfers.

There will always be giant killers sharpening their tech offerings to stake their claims in the mobile wallet world.

Some companies will change the face of commerce and shape the future. We’ll want to keep an eye on these agitator upstarts.

Some will be bought by larger concerns and some will go public.

What’s important right now is knowing who some of them are and what they’re doing to shape the mobile wallet future.

In Part Three next week I’ll name these “giant killers.”

BY SHAH GILANI, Capital Waves Strategist, Money Morning

[Editor’s Note: Capital Waves Strategist Shah Gilani is a rare commodity. As a retired hedge fund manager, Shah knows all of the ins and outs of the markets and can always spot the hottest opportunities.

And since he’s no longer directly a part of the Wall Street power structure, he is willing to show you how to capitalize on them. This report is just one way Shah helps investors level the playing field. 

His Capital Waves Forecast is another.

To learn more about Shah Gilani click here. You’ll be glad you decided to follow along.]

Apple Inc´s (Nasdaq AAPL) store within a store Strategy bold but risky

Hoping to expand its reach, Apple Inc. (Nasdaq: AAPL) is testing a store-within-a-store concept with both Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).

Although both retailers have already been selling Apple merchandise, the new “micro-stores” will expand the current offerings (with the exception of Mac computers) and create a product experience more akin to an Apple Store.

Several dozen more micro-stores are planned, though the rollout will be gradual.

Piper Jaffray analyst Gene Munster said Apple’s long-term goal isn’t so much to stuff a micro-store into every Wal-Mart and Target, but to place them strategically in rural areas many miles from the mostly urban, wildly successful mall-based Apple Stores.

“We always talk about growth outside the U.S.,” Munster said on CNBC recently. “The reality is, just look in our backyard. There’s still a growth opportunity that no one’s talking about, which is kind of outside the urban areas.”

The allure for Wal-Mart and Target is the extraordinary foot traffic Apple products can generate. They’re hoping that customers who come to shop for Apple products will stick around to buy other merchandise.

If the strategy works, both Apple and the big retailers win. But, as the saying goes, the devil is in the details.

In fact, Apple is no stranger to what can go wrong with the store-within-a-store concept.

Apple Micro-Stores at CompUSA and Best Buy

Apple’s first experiment with the strategy goes all the way back to 1997, with CompUSA.

Apple was compelled to develop the store-within-a-store idea with CompUSA in response to issues with other retailers, such as Sears, Office Max, and Circuit City.

With the popularity of Apple’s computers at their nadir, most outlets relegated Macs to a dusty shelf in the back, and staff routinely steered customers to Windows PCs.

CompUSA agreed to feature Macs in their own section with Apple-designed displays and knowledgeable staff on hand to help sell them.

But despite the lofty promises, CompUSA’s store-within-a-store soon earned a dark reputation among Mac users. In most stores the displays were not well kept, and the staff often knew little or nothing about Apple’s products.

While Mac sales at CompUSA were strong, the lack of commitment to the concept did not sit well with then Apple CEO Steve Jobs.

Jobs’ frustration with the CompUSA experiment led directly to the creation of the Apple Store retail chain, which finally gave Apple the total control over the customer experience it wanted.

Apple also can glean some lessons from its long — if checkered — partnership with electronics retailing giant Best Buy Co. Inc. (NYSE: BBY).

Apple had cut off Best Buy in the late 1990s, but renewed the relationship in 2002 to sell iPods.

By the middle of the decade, Apple was again experimenting with micro-stores in Best Buy locations. Today, about 600 out of 1,000 Best Buys contain an Apple store-within-a-store.

Overall, Best Buy has done a better job than CompUSA. But as Apple’s own retail chain has grown (it’s up to 250 U.S. locations), many Best Buy micro-stores now compete for customers with the Apple Stores.

What’s more, the micro-stores can’t replicate the cachet of a real Apple Store – that all-important customer experience.

Aside from that, there are Best Buy’s recent struggles.

The company lost $1.7 billion in the December quarter, is planning to close 50 stores, and announced $800 million in cost-cutting measures. If Best Buy is in crisis management-mode, keeping its Apple micro-stores up to snuff will hardly be a top priority.

Beyond Apple’s Control

The biggest issue with the Apple micro-stores in Wal-Mart and Target will be the lack of control, particularly if many are in relatively remote areas.

Again, it comes back to the customer experience – a vital part of the Apple brand.

Figuring out how to maintain a proper “Apple experience” at far-flung Wal-Marts in Oklahoma or Montana presents a significant challenge. Apple won’t be able to police its partners easily, as it discovered with CompUSA.

Adding to the challenge is the reputation both Target and Wal-Mart have as discount retailers.
Even if the micro-store concept is done well, Apple’s elite brand is still going to look a bit out of place there. And can the employees possibly match the personalized attention you get at a bona fide Apple Store?

That’s especially true of Wal-Mart. Its stores are often crowded and disheveled, and the staff isn’t always the most knowledgeable.

And none of that takes into account other wild cards that could affect how well the big retailers pull off the store-within-a-store strategy.

That said, Apple does have some factors running in its favor.

For one thing, it sells a lot more than Macs these days. The extreme popularity of those iPods, iPhones and iPads are the main reason Target and Wal-Mart are so eager to partner with Apple in the first place, and it gives them incentive to do the micro-stores right.

Plus, Apple is not the also-ran of the tech world it was in the late 1990s. On the contrary, its tremendous size has endowed it with enormous power.

But even those advantages can’t balance out the risks of what could become highly visible partnerships with Target and Wal-Mart.

“I have concerns about a strategy that expects products alone to draw traffic,” Leslie Hand, research director atIDCRetail Insights, told MacNewsWorld. “The jury is still out for me, because I have not yet seen an implementation of an Apple store within a store that delivered Apple retail service.”

BY DAVID ZEILER, Associate Editor, Money Morning

Five with Fitz: What I See When I Look Over the Horizon

“When you’ve been working the markets as long as I have, you learn that the biggest dangers are always found in a place just over the horizon.

It’s why I spend my time hunting for stories, news items and opinions that in the old days were considered far “below the fold.”

Invariably, what I am looking for is the stuff that everybody else has missed.

Because I believe that’s where the real information is — especially when it comes to uncovering profitable opportunities others don’t yet see or understand.

It’s the story behind the story that interests me. To find it, you need to go beyond the headline news.

In that spirit, here’s my take on five things that I’m thinking about right now.

5 “Over the Horizon” Investment Stories

1. Facebook amends its S-1 statement…for the sixth time!

An S-1 is a document filed with the SEC in conjunction with an upcoming Initial Public Offering (IPO). It’s intended to give prospective investors an understanding of the basic business and financial information needed to consider the merits of an offering.

Facebook has now revised its documents six times since February 1, 2012.

This time around, Team Zuckerberg is admitting that – gasp – it’s difficult to monetize users who are migrating to mobile devices and that the company has to spend more money to attract them. The company also commented that the number of average daily users is rising far more rapidly than the number of ad units being displayed to those users – and that average revenue per user will decline.

My Take: No question Facebook has changed the planet, but don’t forget that the executives, venture capitalists and underwriters are the ones who make out on IPOs. These comments reinforce all the reasons why I suggest investors pass on the Facebook IPO. Speculators…that’s a different matter, but don’t confuse the two for three reasons: 1) Revenue growth is slowing; 2) Facebook does not dominate mobile devices and won’t likely do so; 3) Startups are already cannibalizing Facebook’s user base. 

2. The seven largest U.S. phone companies report customers dropping long-term contracts

The seven largest U.S. phone companies reported in Q1 that 52,000 subscribers hung up on their long-term contracts. This is significant considering these companies represent 95% of the US market and account for 220 million devices according to the Associated Press.

My Take: Contract plans are the big earners and the Achilles’ heel. As customers shift to cheaper, no-contract plans, watch revenues drop and phone companies shift to non-phone devices like security and data sharing. Apple is particularly at risk because the phone companies have subsidized sales and now face extinction-level events thanks to the very devices – iPads and iPhones – that changed the game. While I’d love to short “em, I am reluctant to play against the Fed and central banks at the moment (for reasons I’ll get to next).

3. The Markets remain addicted to QE

Speaking of which…I’ve written and talked about this for several years in publications and at presentations worldwide but very few people have put two and two (trillion) together.

Here’s a chart that might help:

My Take: QE is wrong on so many levels and robs economies of the very vitality they desperately need at the moment. Yet, our markets are addicted to cheap money. Without QE the markets drop, so the government– which desperately needs growth to shed the toxic assets it has absorbed as part of the bailout process — will continue to throw everything, including the kitchen sink, into this mess. Sadly, the responsible thing to do right now would be to take a deep breath, hold our noses and let everything reset. Unfortunately, our “leaders” will never allow that to happen.

4. Why we’re turning Japanese … and why Bernanke will hold rates lower even longer

Since 1948, there hasn’t been another recession/economic deterioration anywhere close to the scale of what we are dealing with now, either in terms of depth or the length of time it will take to dig out. On an economic scale, that’s just pabulum. But in human terms, the cost is very real and very devastating.

My Take: Low job creation and an even lower job participation rate create a Fed that’s scared of its own shadow. Every 1% rise in interest rates is an additional $150 billion in interest payments to U.S. bondholders. Total debt including household, corporate and government obligations is already 279% of GDP. This is Japan’s problem, only their total indebtedness is 512% of GDP. Today, Japan can’t raise rates and avoid financial suicide…and we are rapidly approaching the same point of no return with each new, misguided stimulative effort. We are turning Japanese – a suggestion that I initially voiced in late 1999 to open scorn, derision and outright ridicule. Nobody’s laughing now–including me.

5. What it takes to grow through a downturn

I hear it all the time…investors are desperately trying to convince themselves that there’s no growth to be had and, therefore, there are no investments worth making.

My Take: This is a total copout. If you look at earnings, many of the world’s best companies have not only pulled farther ahead during the financial crisis, but many continue to grow despite the fact that the world appears ready to go off a cliff. 

I know the bar is low and I understand that CEOs are managing expectations, growth is slowing, etc.

But would you rather place your bet with a bunch of politicians who have no clue how real money works or a bunch of CEOs who have navigated international waters for decades?

Excluding the banks, I’m with the CEOs any day.

There are obviously a lot of variables when you look under the hood but generally speaking the kinds of companies that interest me have four things in common:

1. They operate in highly localized markets like China and Brazil where their globally recognized brands can be brought to bear on a new generation of consumers hungry for them.
2. They create products in industries they can dominate.
3. Most are growing at 5% or more a year and are repositioning their operations in places like Oman, Vietnam, Bangladesh, Panama, Brazil and more. Never mind the BRICS of the past…the new markets…some call them frontier markets…have the potential to be even more profitable in the next 10 years than the formerly emerging markets were from 2000-2010 – no small change considering the latter turned 250% over that time frame, more according to CSS Zurich.
4. All are involved in “needs” based industries at the moment like water, food and tech, for example. Until this crisis transitions, these are going to be the best places to protect wealth while also preemptively positioning for growth that will come on the other side eventually.

Anyway, that’s today’s missive in terms of what I see when I look over the horizon.Now where did I put my French dictionary?I am pretty sure I heard Germany’s Chancellor Merkel say “merde” when Francois Hollande got elected…”

BY KEITH FITZ-GERALD, Chief Investment Strategist, Money Morning

Three rules to get into revolutionary new ideas that’s still tiny penny stocks

By James Baldwin

“Kent has three rules when he’s looking at new energy stocks.

These three rules allow him to get into revolutionary new ideas – while they’re still tiny penny stocks.

And most importantly, they protect him (and his readers) from the hundreds of bad energy bets coming onto the markets every day.”

In this recent interview, Kent explains his rules for investing in new energy.

And he explains the single most important factor investors should be looking for when they consider a new energy company…

You can watch Kent’s recent video right here.

Oil and Energy Investment

By Mike Ward,

 

We’ve spent the past few months creating an exclusive investor’s guide called “The Power of Options.” It’s ready for you today. And it could be the most important thing you read all week.

That’s why I’m giving it to every single subscriber.

I’ve seen over the years firsthand how few people understand what options can do for them.

Some people think options are too complicated for them to trade. Some think they’re too risky. Others just don’t know how to open an option trading account.

Yet trading options is much easier than you may think. Some strategies even reduce risk. (One popular strategy actually profits whether your stock goes up or down.) And it can be very, very lucrative.

This new guidebook we’ve put together is designed to remove the uncertainty and give you everything you need to know about options in plain, simple language.

And you do need to know it…

Fact is, options are growing at the fastest rate of any segment of the market. In five short years between 2005 and 2010, the volume of options trading tripled. That’s because once you know how to use them… the profits become addictive. Especially once you understand the low-risk, high potential side of options.

There is no reason that you should not be grabbing your share of those profits.

I actually approached Michael Thomsett – the best-selling options author in the United States (as of 2010), and an old colleague of mine – to pull this information together for you.

His “Power of Options” guidebook will walk you through everything – from when to buy a “call” and when to buy a “put”… to how to read an option ticker… how to create income with options… how to take risk out of the markets… and even how to protect your portfolio with a range of easy trades.

It also shows you, step by step, how Keith, Shah, Peter, Martin, and Kent have all used options to create some amazing gains, some as high as 456%. The case studies alone are worth reading.

Again, this guidebook is absolutely free to you, just for being a subscriber. You candownload it here in less than 30 seconds. You can read the PDF file on your screen, or you can simply print it out for your convenience.

We created this guide purely as a service for our readers. It’s 100% free and it’s 100% educational.

This is part of our growing commitment to investor education, in our effort to help our readers use every tool available to find success and wealth.

Wall Street Insights

By Michael Ward,

We’ve spent the past few months creating an exclusive investor’s guide called “The Power of Options.” It’s ready for you today. And it could be the most important thing you read all week.

That’s why I’m giving it to every single subscriber.

I’ve seen over the years firsthand how few people understand what options can do for them.

Some people think options are too complicated for them to trade. Some think they’re too risky. Others just don’t know how to open an option trading account.

Yet trading options is much easier than you may think. Some strategies even reduce risk. (One popular strategy actually profits whether your stock goes up or down.) And it can be very, very lucrative.

This new guidebook we’ve put together is designed to remove the uncertainty and give you everything you need to know about options in plain, simple language.

And you do need to know it…

Fact is, options are growing at the fastest rate of any segment of the market. In five short years between 2005 and 2010, the volume of options trading tripled. That’s because once you know how to use them… the profits become addictive. Especially once you understand the low-risk, high potential side of options.

There is no reason that you should not be grabbing your share of those profits.

I actually approached Michael Thomsett – the best-selling options author in the United States (as of 2010), and an old colleague of mine – to pull this information together for you.

His “Power of Options” guidebook will walk you through everything – from when to buy a “call” and when to buy a “put”… to how to read an option ticker… how to create income with options… how to take risk out of the markets… and even how to protect your portfolio with a range of easy trades.

It also shows you, step by step, how Keith, Shah, Peter, Martin, and Kent have all used options to create some amazing gains, some as high as 456%. The case studies alone are worth reading.

Again, this guidebook is absolutely free to you, just for being a subscriber. You candownload it here in less than 30 seconds. You can read the PDF file on your screen, or you can simply print it out for your convenience.

We created this guide purely as a service for our readers. It’s 100% free and it’s 100% educational.

This is part of our growing commitment to investor education, in our effort to help our readers use every tool available to find success and wealth.

The most endangered and rare snake in China!

Mangshanensis zhaoermia the Mangshan Mountain pitviper.

See the film!

 

http://english.cntv.cn/program/natureandscience/20101105/104838.shtml

I am a snake enthusiast and I would like to, with great pleasure, have the Mangshan Pitviper, Mangshanensis zhaoermia, in my collection and my care. Let’s work together and save this beautiful and extremely rare species!

I would also as a herp enthusiast and photographer like to go to China on more

time and take photos of this rare creature.

I’d love to here your comments on this topic!

 

 

Cheers!

Learn The House Rules

 

Learn The House Rules
(and Beat Wall Street at Its Own Game)

Dear Reader,

Thanks again for signing up to receive my e-letter.

Now that you’ve officially subscribed, you’ll get access to all my reports as soon as I release them.

Today, though, I urge you to take a few minutes right now to learn “the house rules.” It may be the smartest thing you can do for yourself – and for your future. Otherwise, you will end up a Wall Street patsy, jumping when they say “jump” and probably losing your hard-earned money besides.

The truth is, Wall Street has stacked the deck against you. Heck, Wall Street is the dealer, the card-counter, and the house, all in one.

You just can’t beat em…

But you can certainly learn how to play like them.

So here’s how the game works, from someone who knows it all too well… along with three simple lessons to help you play it like a pro.

First, Though, We Need to Debunk a Myth…

The myth – it’s a persistent one – is that the Street lowered brokerage charges for the benefit of retail investors.

At one time, these fees were obscenely high – and fixed. But on May 1, 1975, fixed commissions were abolished forever, after brash upstarts like Charles Schwab and other disgruntled investors decided to attack The Street’s price-fixing schemes.

The negotiated commissions regime that followed lowered the cost of access to the stock market, essentially ushering in the era of the “individual investor.”

The influx of these individual investors, many of whom didn’t have enough money to create diversified portfolios, soon became a boon for mutual funds – which have since grown like weeds in an untended sod farm.

And just what do you think happened next?

Wall Street Changed the Game, Of Course

Since the commission business was no longer profitable, Wall Street moved its retail business to an “

So instead of making money on commissions, their game changed to gathering as many assets as they could into a retail investor’s account and charging a fee to “manage” them – that’s Wall Street-ese for “sit around and watch” them.

That’s one of the reasons why Wall Street advocates a “buy and hold” strategy for retail investors. They don’t want you to take those assets away from them.

It’s the same thing with mutual funds.

And, conveniently, if your broker puts you into mutual funds that are losers, it’s not your broker’s fault. Now it’s the mutual fund manager’s fault.

Now your broker can tell you, “Don’t fire me, let’s fire the mutual fund manager, and let’s find you a better fund to invest in. But, no matter what happens, we need to buy and hold and not try and time the market.”

That’s what retail investors are told to do… over and over and over again.

But guess what? That’s definitely not what Wall Street firms do with their own money…

In fact, while you’re being told to buy and hold, exchange specialists, market-makers, hedge funds, and every trading desk at every Wall Street bank and firm are busy trading.

Well, before long, some individual investors began to see how Wall Street was really making its money and started trading themselves. Of course, that only increased the competition for easy trades, as more retail investors traded in and out of stocks.

To renew their advantage over the public, in 2007, Wall Street fought to do away with the “uptick rule” adopted by the SEC way back in 1938. This was a trading restriction that disallowed short selling, except on an uptick in the price of the security.

The rule was wiped out so traders could short sell any stock at any time. But it’s the big Wall Street players who benefit from the rule change, because they can use their huge capital positions and work with each other to drive down stocks they have shorted.

Who gets hurt…? The buy-and-hold retail investors who are told to buy more at lower prices are the ones who get fleeced.

And who is selling to them…? The same short sellers who are driving the price down.

“Decimalization” is another idea Wall Street pushed on the markets under the guise of helping investors.

See, stocks used to be priced in increments of one-eighth of a dollar; they are now priced in pennies. The net effect of decimalization was to lower spreads at the cost of lowered liquidity.

And who do you think benefits from decimalization? Wall Street does.

That’s because fewer large investors were willing to put down orders on exchanges to buy and sell at set prices when specialists and market-makers could “front-run” them and risk only a penny if they were wrong. Standing orders were withdrawn and the markets (willing buyers and sellers) became thinner.

Interestingly, as these markets became thinner, Wall Street started to open private trading venues and “dark pools” to cater to big institutional clients because they were afraid to put down orders at exchanges or with market makers.

Needless to say, retail investors weren’t invited.

The splitting up of orders across multiple venues works against those who don’t have access to dark pools and private trading venues – you know, people like you and me.

The catchword here is volatility. Everything Wall Street has done has increased volatility.

What’s so great about volatility? Well, volatility is what makes trading profitable. Without volatility, traders wouldn’t have the same opportunities for the quick profits they enjoy.

Of course, this same volatility puts retail investors at a complete disadvantage.

But you don’t have to be a Wall Street patsy.

Here’s How to Play the Markets Like a Pro

Retail investors can play a lot of the same games that Wall Street does.

First of all, unless you’re getting excellent advice from your broker and you don’t mind paying the fees they charge, move your portfolio over to a discount broker. E*TRADE, Scottrade, TD Ameritrade, any of those are fine.

On that note, don’t get caught up in the myth that mutual funds are the answer to beating the market. They’re not. Most of them buy and hold a lot of the same stocks and end up trailing general market performance.

Check out the fees they charge. Are they worth it? Are you paying fees to lose money because you believe mutual funds have a leg up?

Remember, mutual funds are Wall Street businesses, run on the same “assets under management for a fee” principle.

Second, realize that “buy and hold” is dead. While it’s great to buy and hold onto winning positions, it’s holding onto losers that will kill you.

The only time you should hold onto a losing position is if you actually plan to add to it when prices come down, and only then if you understand why the stock has dropped in price.

It’s okay to add to that position if it’s fallen because the rest of the market fell, but only if the company’s business model and fundamentals are sound and growing. Otherwise, it’s a sell.

Just make sure you have an “out” in mind, or a price at which you say to yourself, “That’s it, I’ve reached my limit on this position.” And then promptly get out.

Let me put it to you like this…

The way to play the Wall Street game is to do what they do, not what they sayyou should do. In other words: Trade.

Trading doesn’t mean day trading. It means thinking like a trader. Know what entry points are good places to buy. Know what points are good selling points. Trading means having a plan.

First, pick the stocks or exchange-traded funds (ETFs) you want to trade. It’s important to diversify by building a portfolio of stocks that represent different asset classes, like U.S. big-cap dividend-paying stocks, tech stocks, materials stocks, emerging markets ETFs, or commodity-based ETFs.

What matters is that you have a handful of stocks that you know and watch… and that when you hold them, you are diversified. Learn how they move and why they do what they do.

Trading is the first step in investing. You have to take a position, and that means putting on a trade.

But don’t fall in love with any position unless it keeps doing what you expect it to do and you’re making money holding it.

Even then, don’t be greedy. Pick a point to take some or all of your profits.

Finally, always have an exit plan.

Every trader I know has one (and after 30 years as a Wall Street trader I know a lot of them). Whether they are winning or losing, every single one of them has plan. You should, too.

It’s not hard to play the Wall Street game.

Now, don’t try and beat them – you can’t.

Simply play the game the way they set it up for themselves. You’ll figure out pretty quickly that volatility can be your friend, and that you can make money trading from both the long and short side of rapidly rising and falling markets.

Otherwise, you’ll end up just another one of their patsies.

Cheers!

The next Trillion-Dollar industry

 

Dear 

I’m Michael Robinson, I’m a Pulitzer Prize-nominated former journalist, and Defense and Technology Specialist here at Money Map Press.

For more than 30 years, I’ve had privileged access to the forbidden clean rooms of Silicon Valley. I’ve privately conferred with technology-pioneering CEOs. I’ve earned the confidence of military and government planners. And I’ve rubbed shoulders with key scientists and researchers as they gave birth to revolutionary ideas in top-secret labs.

One thing I can say for certain is that there’s a technology emerging right now that’s a game changer. It’s big. In fact, it’s very big. And it could end up making regular folks millionaires.

That’s because this new technology could:

1. Become the backbone of the next Trillion-dollar global industry…
2. Rescue American manufacturing from the Chinese…
3. And make early investors once-in-a-lifetime rich in the process.

There have only been six “Mega RTDs” like this one in the past 29 years. And each one has made vast fortunes for individuals who embraced the big ideas.

You can see the details of what this is… how it will affect your future… and how you can use this information to potentially do very, very well for yourself.

You can access my presentation here. At the very least, people will be talking about this for years to come.

By Michael Robinson

Money Map Press

Cheers!

The New Barbarians are at the Gate

 

The New Barbarians are at the Gate 

[Editor’s Note: As Shah wrote in Part One, “Your future is calling and the ringtone sounds like a cash register.” Below is the second installment in this four-part series on mobile wallet technology. I hope you enjoy it.] 

By Shah Gilani, Capital Waves Strategist

As I discussed in Part One, the sky is the limit when it comes to mobile wallet technology.

The big brand credit card issuers: American Express, MasterCard, Visa, and Discover Card, along with every other card issuer and wannabe credit extension intermediary are all already into the mobile wallet space.

Their offerings vary and competition between them will be as brutal as it always has been. And that’s good for consumers.

Creating choices for consumers to drive business will lead to more innovation and more services offered at more competitive prices. At least, that’s the way the free market is supposed to work.

But, traditional credit card issuers that are forcing banks to compete to offer credit to card borrowers, aren’t the “disintermediators” I talked about in Part One.

They help spread banking relationships across the spectrum, they do not remove banks from the equation. And because banks are all in the present equation, pricing pressures aren’t prevalent and fees and costs remain stubbornly high.

But as you’ll see, that’s about to change.

The Greater Fear for the Banks

What banks fear most in the burgeoning mobile wallet world are New Barbarians breaking down the gates that traditionally walled off banks from meaningful interlopers.

The biggest, baddest New Barbarians at the gate are some of the biggest names in the Internet world, the social media world, and the telecom world.

If you want to make a fortune on the mobile wallet future the giant players and Barbarian disintermediators to watch and invest in include: Google, Yahoo (yes, Yahoo), Microsoft(believe it or not), Facebook (when it goes public), Nokia, Research in Motion (yes, I am advocating buying Nokia and RIMM), Apple, Verizon, and Vodafone.

There will be other giants worth buying, but until the ground shakes from their emergence, these giants have a giant head start in the mobile wallet world of the future, starting now.

Of course, keep in mind that the scope of this series is intentionally broad.

So, it’s not the place to give specific reasons to buy specific companies. My purpose is to explain to readers the extraordinary opportunities inherent in the mobile wallet future.

But, if you want to know why these specific companies will be huge winners in mobile transactions and what they are doing to warrant their own exceptional futures, as well as when you should buy them, take heart. Keep reading Money Morning.

As it takes shape I will follow this report with specific recommendations accompanied by all the reasons and metrics you’ll need to make informed investment decisions.

In the meantime, here’s why these businesses are primed to rake in profits on the digital wallet phenomenon.

To subscribe to Shah’s free newsletter, Wall Street Insights & Indictments and to continue reading click here..

Cheers!

This is Truly an Outrage…

 

This is Truly an Outrage…

by Shah Gilani

Dear Insight & Indictments Reader,Many of you know that I also write for a newsletter called The Money Map Report.

Well, my colleague Peter Krauth does, too – only he’s the commodities “guru.” When it comes to gold, silver, timber, coal, and other natural resources, I’m no world-class expert, but Peter is. So when he speaks, I listen. I’m sending you this because Peter has uncovered a situation in the resource markets that is truly an outrage… yet it also creates a unique opportunity (as is so often the case). Just click here for a look at his report. The research he’s done on this is amazing

Cheers!

The Facebook IPO Facts: The Good, The Bad and The Ugly.

The Facebook IPO Facts: The Good, The Bad and
The Ugly 

By Shah Gilani, Capital Waves Strategist

Face it, you want it. It seems that everyone wants a piece of the Facebook IPO.

But, can you handle the truth? Will the hyped sensationalism be a boon or a boondoggle?

I’m not going to tell you what to do, whether you should buy Facebook sooner rather than later. That’s up to you.

However, I will tell you that I won’t be buying it right away, but, I will be buying it if…

First though, here’s the good the bad and the ugly truth about the company, the IPO and owning “FB.”

The Good News About the Facebook IPO 

The good news is overwhelming if you’re Mark Zuckerberg, any of the company’s founders, executives, or venture capital backers, many of whom own Facebook stock (Nasdaq: FB) at a dollar a share.

So far, the target range the stock is expected to be priced at–which was originally $28-$35/share– has been raised to between $34-$38.

And it could very well go higher before tonight’s pricing deadline. The amount of shares to be floated is being raised too.

That’s all good news for the insiders, the underwriters and the company itself.

FB is causing its own IPO hype, partly because it will be the largest IPO in U.S. history, in terms of the value it will put on the company, which will likely approach $100 billion. However, Visa in 2008 and GM in 2010 will have raised more money on their IPO debuts. (I know, calling GM’s IPO a debut is strange to me too.)

Facebook will raise at least $13 billion (at the lowest end of the price and share offering range) and bank some $9 billion in cash on its balance sheet. That’s good news.

But better than that, the company will now have a huge hoard of stock as currency to use to buy up companies and technology to advance its master of the social media universe status.

The other good news is that…

Cheers!

Heavy Betting in the Middle of Mayhem

Heavy Betting in the Middle of Mayhem 
by Shah Gilani

Dear Reader,

There’s going to be a lot of very heavy betting over the next few days, weeks, and months on what’s going up, what’s going down, and what’s going around:

 

1. How far UP from tomorrow’s IPO price will Facebook go?
2. How far DOWN from here will JPMorgan go, with the FBI and DOJ now sniffing around?
3. How far AROUND the globe will the fallout be if Greece loses its game of chicken?

If you don’t have the stomach for what’s going to feel like an out-of-control rollercoaster ride, sideline yourself.

If, on the other hand, you like a lot of action, welcome to Mayhem – the preamble month to what will likely be the Summer of Some Discontent.

That is, unless you like rapid-fire trading. Which, by the way, is not just fun, but can be very, very profitable. I’m in, and so are the subscribers to my Capital Wave Forecast. We’re gearing up for some heavy betting in the weeks and months ahead.

So, what’s front and center today? You know. The big three headlines: Facebook, JPMorgan Chase, and Greece. Are you sick of hearing about them? I’m not. I like trading the headlines.

Here’s my “heads-up” on the big three headlines.

1) Facebook is going to be a Wild Ride, For Sure

I didn’t even try to get into the Facebook IPO.

Too many people at too many brokerages and banks that own brokerages don’t like me because I’m constantly calling them out on their you-know-what, so I had no chance.

But if I was to get IPO shares, or – better by a mile – if I was smart or lucky enough to own some VC (venture capital) or insider shares between $1.00 and $5.00 (which is where the insiders own shares at), you can bet your bottom dollar that I’d be flipping those shares tomorrow. Maybe not all of them, but I’d sell at least half, depending on how the stock opens and trades in the first one to three hours tomorrow.

I like Facebook as a company, and I like it as a stock to own.

Personally, I don’t bother much logging onto Facebook myself, and I don’t post stuff there (I’m too busy doing things to make time to write and tell my “friends” what I’m doing, because I’m usually doing it with them).

That doesn’t mean that I don’t get it.

I know a LOT of people who are on FB all the time. Good for them, and that’s, of course, good for the company.

For sure, I will buy FB shares in the future, and I may load up on it if they do what I hope they do with their about-to-be monumental war chest of equity currency. I’m just not buying the “IPOhhh” hype.

You can read more about my thoughts on the good, bad, and ugly of Facebook’s debut at Money Morning today.

I’ll leave you with this about that: FB’s coming out could be the top of the market.

On to JPMorgan Chase…

2) The FBI’s Involvement Means One Thing

What in the world is the FBI doing, opening up an investigation into JPMorgan’s big trading loss?

And what is Attorney General Eric Holder (wish he couldn’t “hold” onto his job), unfortunately the top dog (and I mean DOG, sorry all you real dogs, I’m a dog lover, just not that species) at the Department of Justice (oh, don’t get me started, I’ll end up Fast and Furious), doing, opening up an investigation into the loss?

Forget about the DOJ. They’ve lost a lot of credibility in my book, because they’re far too politicized an agency. And that’s more dangerous than disgusting to me.

But the FBI?

The FBI isn’t interested in regulation. It’s about criminal activity.

Folks, if the FBI is involved, there must be more than just suspicion – something must smell of criminality. (Hopefully they’re not just going around attacking people and institutions based on just “suspicion,” but hey, the way this country has drifted from our Constitution and our inalienable rights, anything is possible… can you sayThe Patriot Act? TSA?)

I’m holding off buying JPM until I see where this is going. Too bad, because it’s been getting close to a buy. I had told you on Sunday that I’m a buyer here and down 10% to 20% lower. Now, I’ll wait a little to see if I can start buying lower than where it is now.

In the end, JPM is too big to fail and will kick ass in the future.

And last but not least, my favorite…

3) The Greek Tragedy

There’s a very, very dangerous game of chicken being played out between some ascending political factions in Greece and the rest of the EU, and in particular, Germany.

Left wingers in Greece are saying the EU won’t kick them out of the currency arrangement they’re a part of, and they won’t kick them out of the Union.

Let me say this about that.

They are dead wrong on the first count and dead right on the second count.

The Germans have their Achtung Baby boots all over Greek necks. They want to force harsh austerity measures (make that even harsher than they already have imposed) on Greece if they are going to give them any more of German taxpayer’s hard-earned euros.
But German taxpayers may revolt against the German government giving up its wealth to save a profligate neighbor who flaunts its laissez faire – some call itunfair and just lazy -ways in the face of all of Europe’s helping hands.

If the chicken can’t cross the road, the world will be eating raw chicken soup with all its attendant salmonella implications. And we’re all going to lose some weight, the ugly way.

It’s just all such Mayhem right now. I don’t see any sanity or saving grace coming our way any time soon.

But, boy, do I hope I’m wrong.

If I’m not, I’ll be making a lot more short bets than I have on now.

The Great Energy Reversal

 

By Kent Moors Ph.D. 

Don’t look now… but the almost unthinkable is about to happen.

The United States could finally become completely self-sufficient in its energy policy.

You already know that our energy situation is undergoing a revolution, thanks to things we talk about here every week: huge shale gas surpluses, the highest domestic oil production volume in years, prospects for major gains in North American heavy oil production, and increased efficiency standards.

And you already know that this new vision will lead to huge profits for investors like you and me.

But it does require that we change the way we approach investing in the energy market. 

This is A New Kind of Self-Sufficiency

See, it’s not that the U.S. market has suddenly figured out how to curb domestic demand levels.

And no – we’re not going to stop importing from foreign countries, either.

No matter what anyone tells you, we will still be importing crude, and we will still have to worry about what happens in the Greek Parliament, or with Iran and the Strait of Hormuz.

It’s that domestic sources will be producing a greater percentage of the energy we use (and that will have another tangible benefit).

The cost of oil is the primary focus here. 

That means a fundamental transformation in the energy balance will be accompanied by a greater percentage of that balance marching to a different tune.

The energy sector reflects the essential pricing and availability component of its dominant element. Globally, that has been – and, for the next two decades or so, will continue to be – crude oil.

However, we are replacing rising portions of the mix by engaging alternative energies or domestic oil and gas.

And that accomplishes three rather significant changes.

Change No. 1: It moves the U.S. market from a price-taker to a price-setter.

Simply put, as a market becomes more dependent on other regions for its primary fuel, it defers pricing to its source.

The obvious secret: OPEC sets the price; the U.S. takes it.

In the case of using more American oil production, the overall price charged to the end user may not go down. In fact, one of the primary reasons we’ve relied on imports has been the dramatic difference between the low cost of production abroad and the much higher costs at home.

So, again, relying more on domestic production would not lead to a reduction in the price at the pump.

But it will put the costs more and more in American hands.

And that allows us to predict energy costs in what has been a foreign seller’s market.

It also means that the imports that we use become secondary to the pricing dynamic, rather than the creator of it.

Change No. 2: Having sufficient domestic volume makes us less susceptible to pricing spikes.

Remember, it’s not that the local volume makes the imports unnecessary. And this is not a return to a vision where America is completely self-sufficient and removed from international events.

What happens elsewhere is still going to have an effect on the U.S market. The international oil market is integrated, and, well, international.

But it does mean that the cycles should be less severe. 

Greater flexibility in where our energy comes from – with a rising percentage of our sources inside the country (or from Canada) – provides a genuine offset to volume disruptions abroad.

Third (and most important): Crude is no longer “the fuel of choice.”

Whenever the supply and demand for oil products is at issue, vehicle use is usually the dominant concern.

We tend to think first about the relationship between oil prices and transportation… the relationship between the cost of a barrel of crude and a gallon of gasoline.

Yet vehicles are only one of four major “use” categories. The other three are power generation, industrial, and as feeder stock for petrochemicals.

And there, we have made major gains.

Substitutes in these other three categories – primarily from our domestic largesse of unconventional gas – are reducing our dependence upon crude oil as the fuel of choice.

In addition, as trucking fleets replace diesel fuel with compressed natural gas (CNG), there will develop a rising ability to temper the hold crude oil has on the most persistent source of demand for it (from our gas tanks).

Now, this is not going to happen overnight. The domestic replacement of reliance upon some of the crude oil and oil products import volume will not be inexpensive or quick.

Yet it sure does seem to be coming…

Just look at the spread between West Texas Intermediate (WTI) and Brent benchmarks. Brent has now been more expensive than WTI for 377 consecutive trading sessions (since August 13, 2010). The spread stands at almost 19% of the WTI price beginning trade today. 

And this isn’t only about traditional supply and demand concerns.

International crises, the “Arab Spring,” Iranian sanctions, and a host of other problems have prompted both benchmarks to increase. Clearly, though, the impact has been greater on Brent than on WTI.

Prospects for rising domestic sourcing in the U.S. has not been the major cause of that, but they will figure more prominently in restraining risk elements as we move forward.

Here’s the Outlook for the Investor

More of the energy we use will either be produced here or transported in from Canada. 

That is going to result in a more defined energy sector – one in which domestic elements have a greater determining factor in price.

The new environment will be unfolding over the next several years, and volatility will still have a thing or two to say about what the investor needs to do.

The international stage will still pressure both prices and availability.

But, as we roll out this new energy balance, what happens here in America will have a greater determining factor in our market pricing and value.

That will allow investment decisions to be made less on what some Ayatollah says, and more on what a domestic energy company does.

That should be the road to greater profits for us.

The Next “Lehman Moment” Is Coming Fast

 

 

APRIL 2, 2012

 

BY SHAH GILANI, Capital Waves Strategist, Money Morning

 

It seems that my latest edition of Insights & Indictments was warmly received by the bullish crowd, many of whom reached out to me to thank me for my optimism.

I’m sorry to burst your bubbles, but I am not a raging bull (but thank you for asking).

In fact, I’m still bearish.

There’s a big difference between being bullish and playing all stocks (and other asset classes) from the long (that means “buy”) side… and judiciously buying select momentum stocks with fat dividend yields, which is what I was recommending.

I was talking about taking the path of least resistance, which I identified as “upward,” based on equity activity so far in 2012. You’ve heard the old adage “the trend is your friend.” Well, that’s what I was talking about. The trend has been up.

I’m bearish because I’m afraid of a European meltdown and a “hard landing” in China. 

But there’s a huge danger in missing what could be the beginning of a real bull market. 

So, it makes sense to start putting on solid positions and even speculating here and there. But I am not all in – not yet. However, the time is coming. But, that is also the problem.

I’m fearful that a crash is coming, and maybe soon. If we get one, and everything flushes out and we get a capitulation bottom amidst a global panic sell-off, then I’ll be all in, all the way, for the long-term. I’m talking about loading the boat up with stocks and commodities and enjoying a generational ride that will last for maybe 10 years, or more.

What keeps me up at night now, however, is the echo of 2007. 

I call where we are now 2007.2. If we are facing 2007.2, then 2008.2 will follow with a vengeance. 

I’m guessing the breakdown could come in the second quarter of this year (although it could also take as long as 18 months to develop, which would only make it 10 times as bad when it does come).

Think about what I’m about to lay out for you, and ask yourself, 
what if he’s right?

Back in 2007…

In the spring of 2007, U.S. Treasury Secretary Henry Paulson, when addressing problems surfacing in the subprime mortgages arena said things “appear to be contained.” Fed Chairman Ben Bernanke said, “We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited.”

Comforting words, right?

Then, speaking to members of the Federal Reserve Bank of Chicago in May of 2007, Bernanke said, “Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market.”

Comforting words, right?

Even before two Bear Stearns hedge funds imploded in June of 2007, the Fed Chairman was touting the virtues of derivatives and the widespread sale of mortgage-backed securities when he stated, “The key thing to remember is that these losses are not just held by American banks, as the bad loans were in Japan (referring to Japan’s lost decade), but they are dispersed.”

Comforting words, right?

Then, on August 9, 2007, after one Bear fund was shut down and the other fund temporary propped by an injection of some $3.2 billion from Bear itself, and the seemingly contained fallout from subprime and AAA mortgages hitting “dispersed” banks in Europe, the European Central Bank’s website quietly announced that the ECB would provide as much funding as banks might wish to borrow at only 4%.

What was happening was that European banks weren’t lending to each other. The commercial paper market was at a standstill, and there was no short-term funding facility open wide enough to finance their longer-term mortgage positions. And they couldn’t sell their positions because after the Bear funds imploded, there were no buyers for mortgage bonds, even the super-senior AAA tranches many European banks and all the big American banks were holding.

Two hours later, 49 banks borrowed three times what they were usually asking to borrow. And by the time trading closed in the U.S. on that same day, gold had spiked higher, as had safe-haven U.S. treasuries.

Of course, the equity markets were doing their own thing and were rising that summer, nearing new all-time highs (which they would reach in September 2007).

It took another year before we got our “Lehman moment.” But, 
boy did it hurt.

 

Fast-Forward to Now….

We’re being told by the Fed that our banks are in good shape. We’re being told by bank CEOs that they are in good shape and their European exposure is limited. We’re being told that there won’t be any significant hit to our economy from events in Europe. We’re being told that there won’t be any significant spillover because European debts are dispersed and banks have derivatives hedges.

These are all lies.

Exactly like what happened in 2007, banks in Europe aren’t lending to each other. The commercial paper market over here is closed to them. That’s why the ECB announced they would effectively execute unlimited three-year term repos at 1%. And, by the way, they are taking just about anything for collateral, really.

Did 49 banks step up like in 2007? No, in 2007.2 (meaning now) some 500 banks stepped up and took 489 billion euros the following day. And they’ve been adding to that.

What’s happening to gold in 2007.2? After selling off as part of the initial risk-on grab for equities a couple of months ago, it’s rising again. 

What about safe-haven bonds? U.S. bonds have been rising rapidly in price as investors clamor for safety. The 10-year closed recently at a 1.87% yield, only 20 basis points from its all-time low yield, which it saw only a few months ago as European woes were strangling global markets.

How panicked is a lot of smart money? Yields on German and U.S. short duration bills recently fell to less than zero. That means investors have bid up the price of these short-term safe government instruments so high that the premium they are paying is greater than their yield. Put another way, people are paying to place their money in safe government securities.

Comforting, right?

No, it’s not. 

 

Evidence Is Mounting

Talk about concentration build-up. First of all, most U.S. banks and most European banks are still sitting on tons of mortgage-backed securities that they can’t unload. And the U.S. housing market has yet to show significant signs of life, just like Spain, Ireland and China. 

Sure, foreclosures are down lately. But that’s because of foreclosure moratoriums resulting from lawsuits. There are estimated to be 10 million homes for sale and over 11 million homeowners holding onto upside-down mortgages. What’s going to happen when banks get on with foreclosing and start dumping houses again? It’s about to happen.

All that nonsense about dispersed risks – don’t believe it. There is no dispersion that matters because all the big banks in the U.S. and Europe and plenty of others hold the same asset mixes, the same duration mortgage pools, the same sovereign debts. 

But in the place where things are smoldering and there’s kindling everywhere, European banks are buying more of their sovereign’s toxic debts to stave off a collapse of the prices of the debts already on their books. It amounts to a crazy leveraging up on the same bet that sovereign debts will pay off 100 cents on the dollar. 

And where are they getting the money to buy more of this crap? From the ECB, who is printing it against the backstop of the same countries who need banks to buy their constantly rolled-over debts.

It’s musical chairs, and sooner or later the music is going to stop. Greece looks like it will be the first one standing, or in this case, falling down. Portugal could be next, or Spain, or Italy.

 

The New Subprime

Greece has more than one trillion euros of public sector debt outstanding. Do you think that a real default isn’t going to crush a lot of banks? Wake up. And if you think that Greece defaulting (or even forcing a 50% haircut on private investors, that would be banks, folks) wouldn’t spill over into other countries and across the globe… wake up.

Talks in Greece over private investors taking a 50% haircut – meaning they will only get 50 cents on the dollar on the 100 cents they lent out previously and the other 50% they are giving up will be replaced with longer-term bonds yielding less interest – aren’t going well. Most analysts and even central bankers believe the haircut needs to be closer to 75% than 50%. Comforting words to be spoken while negotiations are ongoing, right?

Ah, then there’s that little downgrade thing that happened to nine European countries a few months ago. Just because the downgrade of the U.S. from AAA to AA+ didn’t cause our borrowing costs to rise doesn’t mean it isn’t going to happen in Euroland. 

It will happen. Downgrades will trigger new capital calls as margin requirements will increase to offset the lower quality of collateral, we’re talking about the same collateral folks, the same sovereign bonds. It’s an increasing pile, make that pyre, and it’s going to self-ignite.

Stocks are going one way, and credit markets are signaling trouble ahead. 

Sovereign debt has replaced subprime as the powder keg. That makes the brewing storm infinitely more powerful than the subprime dust-up was. It’s a question of how long before we get the Lehman moment. 

We’ve survived, even thrived, on a series of “liquidity puts,” which is what I call all central banks’ stimulus, and “free and easy” money thrown at banks to keep them afloat. In a politically charged 2012, that could change.

Keep this in mind. If we’re facing 2007.2, then 2008.2 is coming right around the corner. It’s just a matter of time.

That’s why I say play the equity market diligently; we could scrape higher for a while, as we did in 2007. But, when the fat lady sings, it’s going to be deafening. 

And everyone knows the opera isn’t over until the fat lady sings.

 

What You Can Expect if Mitt Romney Wins the Election

Romneynomics: What You Can Expect if Mitt Romney Wins the Election 

By Martin Hutchinson, Global Investing Strategist

Yesterday I wrote about what to expect if President Obama wins a second term in office. Today it’s Mitt Romney’s turn. 

I’d like to look at Romneynomics – the policies that are likely headed down the pike if the underdog Mitt Romney wins in November. 

As for the horserace, I think it is President Obama’s to lose. 

But last Friday’s weak employment report indicates again that the economy could slow enough to push Romney ahead. 

As with an Obama victory, I think the election will be a close one even if Romney emerges the winner. That means the Republicans will not have an overwhelming majority in Congress. 

On the other hand, the Republicans might just get the four seats they need to win the Senate; if Romney wins I assume they will accomplish this. That would give them theoretical control of both the presidency and Congress, but with only small majorities.

The Top Priorities of Romneynomics

As with an Obama win, the first order of business will be to sort out the “fiscal cliff” that comes along with expiration of the Bush tax cuts and the automatic expenditure cuts that will also occur at the end of the year. 

With Romney set to inhabit the White House, I expect the solution to this to involve genuine spending cuts–perhaps along the lines of the budget presented by Rep. Paul Ryan (R.-WI).

To continue reading, please click here…
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Big Pharma’s Big Freak Out 

Right now big drug makers are scared silly. For good reason: Between now and 2016, 104 of their major drugs will lose their U.S. patent protection. A whopping 44% of them will lose protection THIS YEAR. So they’re gobbling up the little guys, hoping to land the next big drug ready for market. Not surprisingly, this “biotech buyout binge” is sparking some very juicy opportunities for investors. Go here for full story.
————————————————————————————————
The New Space Race Could be 
Worth Trillions

By Michael A. Robinson, Defense and Technology Specialist

Many people think the United States has turned its back on the Space Race.

And it certainly looks like our leaders have thrown in the towel…

Two years ago the Obama Administration cancelled plans for another manned moon shot. The thinking goes, it’s not prudent to work on extraterrestrial exploration when we’ve got so many problems right here at home.

Just two weeks ago, the very symbol of our commitment to explore the heavens flew for the last time.

I’m sure I’m not the only person who felt sad watching the space shuttle Discovery take its last “flight” by piggy-backing on top of a Boeing 747.

Now, with history’s most-flown spacecraft mothballed in the Smithsonian’s National Air and Space Museum, that’s the end of the story, right?

Not so fast… 

What I call the New Space Race is about to “take off” in a big way. 

Front and center in this race is asteroid mining. And you won’t believe how much this stuff could be worth.

Here’s the math that will blow your mind: A space rock the size of a museum gallery could contain resources worth $100 billion (according to the startup I’m about to tell you about).

And yes, I mean literally digging into asteroids to extract ores and other materials.

Asteroid Mining Could be a $15 Trillion Business

Not long ago, this was the stuff of sci-fi. (It smacks of the 1998 movie Armageddon, in which a team of roughnecks lands on an asteroid on a collision course with Earth in order to blow it out of the sky.)

Today, it’s a reality, thanks to advances in three fields – low-cost computing,cheaper rockets, and advanced robotics.

Both private industry and the U.S. government want to extract a wide range of resources from asteroids. They are teeming with resources like iron and nickel. A rock the size of a football stadium contains more platinum than we have mined in all of world history.

Remember, space is a target-rich field. 

To date we have discovered some 9,000 of these rocks that pass near Earth’s orbit. Of those, about 1,500 are just as easy to get to as the surface of the Moon. Moreover, they have light gravity, meaning spacecraft can land and take off easily.

If we hit pay dirt on all the close asteroids, they would be worth a combined $150 trillion. Don’t take my word for it. You can do the math yourself right here.

No doubt, many of those rocks will be dead ends. But if we could tap just 10%, that would total $15 trillion worth of resources. (And if we’re being even more conservative, just a 1% return would still equal $1.5 trillion – nearly the value of Canada’s entire economy.)

So who’s pursuing all this untold wealth?

The Great Push North for Oil Continues

The Great Push North for Oil Continues 
by James G. Baldwin

Dear Oil & Energy Investor,

The search for oil on “the roof of the world” got more serious.

Over the weekend, Norway’s Statoil ASA (NYSE:STO) signed a massive exploration deal with Russian behemoth Rosneft in a venture that may require more than $100 billion in investment over the next few decades.

Specifically, the company is aiming to help Rosneft develop untapped oil resources in the Arctic, as Moscow struggles to gain a competitive advantage given declining conventional oil and gas production in Eastern Siberia.

The deal highlights a number of key issues for both companies and for Moscow moving forward. 

For Russia, some of its most mature conventional oil basins are declining in output rapidly, at a pace that could reach 8% a year within this decade. With production waning and concerns about long-term supplies accelerating, Russia has no choice but to venture into the north. 

But they know that they cannot make this push alone.

Such a radical change in procurement is technologically sensitive… and very expensive. Moscow needs outside investment and the most advanced technology to push into the hostile, energy-rich environments of the vast Arctic and East Siberian basins.

At the same time, Statoil has been scrambling to find new ways to get more involved in this push north. In recent months, oil giants Exxon Mobil Corp. (NYSE: XOM) and Italy’s Eni SpA (NYSE:E) had been very active in working with Moscow to develop in these oil-rich environments. 

In the wake of Russia’s slumping reserves and production in Siberia, the Kremlin has been looking for ways to incentivize producers to help Rosneft replace waning production. Tax breaks have been one way, but companies also want a little bit of insurance when they work with Moscow.

The major question, of course, is this: How can shareholders know that Moscow won’t expropriate any major resource finds, should the exploration deal succeed?

Nanotech Breakthrough Delivers “Cleaner” Oil

Nanotech Breakthrough Delivers “Cleaner” Oil

By Michael A. Robinson, Defense and Technology Specialist 

A recent nanotech breakthrough means we won’t have to rely on wind and solar as the main ways to fuel the coming Green Economy – to drive our cars and trucks and planes and keep our factories running.

And that’s a huge relief.

You see, there’s a problem with “clean energy”.

Nothing in the world today can compete with the power provided by oil.

At present, it only takes a few barrels of oil to match the power a big windmill or a massive array of solar panels can provide. 

And efficiency is just one problem. Unlike oil, it’s very difficult to store clean energy to use (after the sun goes down or when the wind refuses to blow).

On the other hand, drilling for oil poses big risks. We want to keep our land and water clean and need to protect ourselves from the huge damage oil spills do to the environment. 

Those safeguards, however, raise the cost of drilling and the price you pay at the pump. But what if you could drill for oil without concern for spills? 

It would provide a boon to the entire U.S. economy and reduce our need for oil imports. We could save billions a year at the pump, lower the cost of making U.S. products, and create millions of jobs in the process.

No doubt, that would be a game changer… 

That’s why I’m happy to report that researchers recently invented tiny sponges that can soak up huge amounts of oil.

I predict that, in as little as a decade, these “nanosponges” will help the U.S. become more energy independent. 

Too bad clean-up crews didn’t have these two years ago to soak up the 200 million gallons of oil BP spilled in the Gulf of Mexico.

That was a big job, but these tiny new sponges – much smaller than a single human hair – could have handled it. In fact, their miniscule size is what gives these sponges their huge advantage. It’s hard to imagine making sponges any smaller. After all, you can’t see them individually without the aid of a powerful microscope.

Yet they can soak up many times their own mass… It’s almost like being able to drain a swimming pool with an ordinary kitchen sponge.

Not only that, these sponges resist damage. You can actually abuse them without the material breaking down. Consider that a team of researches “squeezed” the sponges 10,000 times in the lab and found that they remained elastic and ready for use.

To subscribe to Michael’s free newsletter, Era of Radical Change and continue reading, please click here… 
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This Week’s Most Profitable News

Insights from the week in investing and links to our most-read Money Morning articles.

Everything You Need to Know About Gold Price
Gold prices have hit the skids of late falling below $1600/oz. for the first time since January. But don’t expect the downturn to last. Keith Fitz-Gerald explains. >> 

Romneynomics: What You Can Expect if Mitt Romney Wins the Election
It’s not going to be all smooth sailing if Mitt Romney becomes President. Romneynomics has its own set stumbling blocks. Here’s why you need to be prepared for a 2014 crisis. >>

Obamanomics: What You Can Expect if President Obama Wins the Election
It’s just six months until the presidential elections. Now that it’s down to a two-horse race, it’s time to break down “Obamanomics.” Here’s what an Obama win means for the economy. >>

The New Space Race Could be Worth Trillions
The new space race is all about the money. One good-sized space rock can literally be worth $100 billion. Here’s the company that’s leading the way. >>

Mobile Wallet Technology Will Make You Rich 
There is no stopping the future. Mobile wallet technology is going to change everything about the way we use money. This story is your wake up call. >>

The Commodities Bull Market: Insights on Gold, Energy and Agriculture
Don’t think for a minute that commodities have run their course. Seven billion people promise to send the commodities bull market higher from here. You can play it with gold, energy and agriculture. >>

Bullish on Commodities: This Chart Says it All
Virtually every substance vital to modern life will soon become enormously expensive − and profitable for investors who know how to play it. Today’s scarcity and soaring costs could spur history’s biggest gains. Peter Krauth explains.>> 

How to Trade the VIX: Using the “Fear Gauge” to Hedge Down Markets 
The VIX is one of the best contrarian indicators. At its core it measures fear and greed. Here’s how to trade the VIX in today’s volatile markets. >>

The Commodities Bull Market: Insights on Gold, Energy and Agriculture

MAY 7, 2012

BY PETER KRAUTH, Global Resources Specialist, Money Morning

Despite the setback caused by the 2008 financial crisis, the commodities bull market rolls on. A short four years later, many commodities are trading at or near all-time highs.

And thanks to huge swaths of the developing world moving up the ranks, the current bull market in commodities promises to be one for the history books– both in time and size.

After all, the wants and needs of 7 billion people are an irresistible and monumental force. 

Soon virtually every substance vital to modern life will become enormously expensive − and profitable for investors who know how to play it. 

In fact, today’s scarcity and soaring costs could spur history’s biggest gains.

It is one of the reasons why I recently sat down with resource investor extraordinaire Rick Rule.

A leading American retail broker specializing in mining, energy, water utilities, forest products and agriculture, Rick has dedicated his entire life to all aspects of the natural resource industry. 

Rick is without question something of a heavy hitter. 

At Sprott Global Companies, he leads a team of professionals trained in resource-related disciplines such as geology and engineering. Together, they work to evaluate commodities-related investment opportunities.

I think you’ll enjoy what Rick had to say during our recent Q&A. 

Insights on the Commodities Bull Market

Peter Krauth: What is your general outlook for commodities – the commodities market over the next, say, one to three years and even beyond that?

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Rick Rule: I think my outlook is quite good and quite good for simple old economic reasons: supply and demand. Supply is constrained because in the period sort of 1982 to 2002, we had a 20-year-long bear market in commodities, and the bear market constrained new investments.

These are long lead time, capital intensive businesses, and taking 20 years out, with, figuratively speaking at least, not very much investment in natural resource and commodity-specific production facilities: oil fields, mines, things like that, you greatly constrain your ability to produce over time.

Secondly, in terms of the constraint side -constraint to production, so lack of supply side, the incidents beginning late 2007 -2008 rocked the worldwide credit markets. That’s constrained the availability of debt finance for large-scale natural resource projects. This is a capital intensive business and without capital, you don’t have a business.

Finally, at least in the oil and gas side, but increasingly in the mining side, a lot of natural resource exploration and production activities don’t take place in the private sector but rather take place with things like national oil companies, and these national oil companies have now, for 15 years, diverted way too much of the free cash flow from the national oil businesses, to politically expedient domestic social spending programs.

And so there’s been insufficient sustaining capital investments in the oil and gas business to sustain current levels of production; which is very worrisome. So on the supply side, we have real supply constraints. On the demand side, the equation’s really Malthusian.

We have 7 billion people in the world now and at least in frontier and emerging markets, as those societies become a little more free, they become a lot more rich. And as they become rich, the things that people at the bottom of the demographic pyramid buy are very much resource intensive; while when you and I get more money we tend to buy more services or things with higher value added from technology.

When people at the bottom of the demographic pyramid get more money, they develop as an example a more calorie-intensive diet, a more energy-intensive lifestyle, and a more materially-intensive lifestyle, and so on both sides of the equation you have constrained supply and you have increasing demand, which is very good for the natural resource business. 

Insights on the Growing Markets in Gold, Energy and Agriculture

Q: When we compare it to commodities in general, it looks like either gold has gotten relatively expensive or the commodities have gotten relatively cheap compared to the gold price in U.S. dollars. Which individual sectors do you think have the best risk/reward setup right now in terms of commodities?

Rick Rule: I suspect that what you’re seeing really is deterioration in the denominator that is the U.S. dollar over time. I certainly believe that gold has outperformed other commodities as a consequence of the fact that gold acts in many capacities, but seldom as a commodity itself.

Gold is viewed, I think, historically and traditionally as both the store of value and the medium of exchange. And so the gold price, I think, has been relatively strong as a consequence of people’s renewed preference of it to other mediums of exchange.

You have to go back to sort of the old gold bug tenets. Gold, unlike other mediums of exchange, is simultaneously a store of value. It isn’t a promise to pay, it’s payment in and of itself, and as a consequence of that and as a consequence of the fact that you’re seeing on a really global basis, debasement of other mediums of exchange be it euro, U.S. dollars or Renminbis.

I think the gold price is going to continue to do well, simply because it’s denominated in a fiat sea of currencies, and those fiat currencies are engaged in sort of a competitive debasement.

The other commodities that I like are the grossly oversold commodities. I think in the energy complex, North American natural gas, if you have a two- or three-year time horizon, is astonishingly cheap.

And buying companies that are solvent that have lots of proved, undeveloped locations that aren’t worth anything at $2.50 per thousand, but would be worth something at $4.00 per thousand are really good speculations. I like the uranium business. I think the world needs more energy of all kinds, but in particular it needs the energy density of uranium and the ability to generate 24/7 baseline load economically.

I like the agricultural minerals, meaning potash and phosphate. One of the things that we’re learning with 7 billion of us on the planet is that increasing food supplies by increasing the amount of farmland that we have under cultivation is increasingly a difficult proposition. And what we need to do is increase the yields per acre and the best way to increase the yields per acre is through the intelligent application of potash, phosphate and nitrogen.

I’m not talking about the profligate use of it like we used to do in the 60s, but the intelligent application of nutrients is the only way that we can feed 7 billion people — particularly when 1.2 billion of them are increasingly able to better their substandard diet in terms simply of calorie concentration than they had in the past.

So, I’m attracted to the potash business, I’m attracted to the phosphate business and those businesses have gotten very cheap. The potash and phosphate quotes have fallen pretty dramatically in the past 12 months, but I think that they are probably unsustainably low on a going forward basis.

Longer term, not in the near term but longer term, I’m still attracted to the crude oil business. Because despite the impact that high crude prices have, rising crude prices have had in Western Europe and the North American atmosphere, you can’t get over the fact that in the next 20 years at least, we’re extremely oil dependent.

In the context of vehicular transportation and the problem that we talked about earlier in the call, which is these national oil companies not reinvesting substantial amounts of sustaining capital in their business, means to me that in the fairly near term, perhaps as near as three years, perhaps as near as five years, several major exporting countries, particularly Mexico, Venezuela, Peru, Ecuador, Indonesia, and probably Iran, cease to be petroleum exporters.

If that happens, about 20% of the world’s export crude comes off the market. With crude demand on a worldwide basis growing at 1.5% compounded, you could imagine what would happen if 20% of the world’s supply came off in the face of fairly steady increases in demand.

When those supply/demand lines converge and then cross, the price experience can be pretty explosive, and I think that we could see, you know, three years out $150 crude in real terms which could mean $160-$170 crude in nominal terms if the depreciation of the U.S. dollar continues.

Insights on Gold Stocks

Q: The World Gold Council has just indicated that gold’s risen in all major currencies in the first quarter this year. But as you no doubt well know the equities have lagged considerably. What’s your opinion, is this justified or is it at this point exaggerated? 

Rick Rule: I think it is at this point exaggerated, but I do think it was justified and this is an important topic, too. You know, the first thing in terms of the metals outperformance of the equities, I think is due to several factors. One, in the period five years ago to three years ago, the equities outperformed the metals fairly substantially, so there was a catch up to do.

The second thing that happened was the increasing acceptance of equity-like vehicles for bullion participation: things like the Sprott Physical Gold Trust (NYSE: PHYS), the Sprott Physical Silver Trust (NYSE: PSLV) and the gold ETFs. It’s become easier for equity investors and people with brokerage accounts, you know bond buyers and things like that, to buy bullion without having to go down to, you know, a bullion dealer and put it in the safe deposit box but rather to have it in securities accounts or in retirement accounts.

And that made bullion relatively easier and hence relatively more attractive to buy. The third factor was really disgusting corporate performance for the last decade by the gold mining companies themselves. You would have expected that when the commodity you produce increases in price from $250.00 an ounce to $1250.00 an ounce, that your cash flows wouldn’t merely increase, but they would in fact explode.

And for much of the past decade that didn’t occur. In fact the mining companies, rather than returning capital to shareholders, continued to raise capital to build up capital projects.

And I think the final factor was simply that people misunderstood the nature of the junior of the markets and many people got invested in the junior markets as a sector rather than understanding that all of the value in junior markets is controlled in about 10% of the listings.

So you had a situation that led to overvaluation of gold equities and led to a collapse of gold equities. What you have now, however, is an entirely different set of circumstances. In the first instance, the overvaluation of the equities relative to the metal is over. The equities are fairly valued, or in some cases undervalued relative to the metal. So the attractiveness offered up by the ETFs other than convenience has disappeared.

Importantly the corporate performance in the last 18 to 24 months has turned around, too. Finally, the impact of the capital expenditures made through the decade by the gold industry and the impact of the higher gold prices is flowing through on the income statements of the major mining companies.

If as an example one were to look at the income statement of Goldcorp or Barrick in the last six quarters — what you see stripped away of all the accounting subtleties, if you look at cash at beginning of period and cash at end of period and also expensed and capitalized, sustaining capital investments; these things are generating literally tons of cash.

The cash that is starting to flow through the gold mining industry really at all the producer levels from the super majors like Barrick all the way down to the 100,000 ounce producers is starting to be truly spectacular.

Understanding that if you look at the whole junior market, with 4,000 companies, there is no aggregate value in the junior sector. There is superb performance among the top 10% of juniors, but it’s really a stock pickers market and as investors and speculators come to understand the nature of the junior market, the junior market will be less able to disappoint them, simply as a consequence of the fact that they’ll be more judicious in the application of capital. 

One factor that’s more pronounced in gold is that we’re really in a discovery cycle now. We have funded the exploration industry and funded it lavishly for 10 years.

And people are disappointed in the results that have come from the exploration expenditures, but that disappointment reflects a lack of knowledge of the industry. It takes a long time and consistent application of capital to have successful exploration efforts.

And it’s my belief that we are on the cusp now of a discovery cycle of the type that we enjoyed in the late 70s and early 80s in the gold sector. And there is nothing that drives both, if you will, liquidity and greed, like a discovery in the junior sector.

I remember the excitement that followed as an example: the Diamond Fields discovery where the stock went from $4.00 a share to $180.00 a share, or Arequipa that went from thirty cents a share to $30.00 a share. Big discoveries like that do two things: they add lots of liquidity to the system and they add hope, or even greed, to the sector.

Those are the type of things that can ignite a whole sector, and I really think that we’re going to see a convergence of valuation, cash consolidation and discovery. And I think it’s going to be a pretty exciting market. Doesn’t mean it’s going to happen tomorrow, but my outlook for the next one, two, and three years particularly in the precious metals sector is pretty bright.

***

So there you have it. One of the sharpest minds in the entire resource business sees tremendous opportunities in the years ahead in a number of subsectors. 

From undervalued junior mining companies to major producers gushing cash, there’s a potential area for every commodities investor. 

Perhaps most interesting is Rick’s view of the prospects for a major discovery cycle that could ignite a huge wave of excitement.

But remember, if you’re going to invest in resource companies, consider carefully what you don’t know. Read, research, and get expert opinions before you dive in.

The key is that the commodities bull market still has plenty of room to run. 

[Editor’s Note: As Peter explains, soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it.

As he explains in his latest report, “today’s scarcity and soaring costs could spur the biggest investment gains in history.”

To read Peter’s latest free report click here.]

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What You Can Expect if President Obama Wins the Election

Obamanomics: What You Can Expect if President Obama Wins the Election

MAY 8, 2012

BY MARTIN HUTCHINSON, Global Investing Strategist, Money Morning

Now that we are left with a two-horse race for president, the markets are going to begin to handicap the November results.However, when the markets begin to handicap the race it will be about a lot more than just picking the eventual winner.

Instead, everything will revolve around the policies and consequences that come along with the winner.

The difference in approach promises to be stark with “Obamanomics” on the left and “Romneynomics” on the right.

Each one comes with its own set of consequences, though.

Today I’m going to look at “Obamanomics II,” or the policies we will get if President Obama is re-elected.

But those on the left shouldn’t despair…In my next piece, it’s Romney’s turn.

As for the horserace itself, it’s too close to call, with neither side having much chance of winning a big victory.

President Obama Has the Edge

Even still at the moment, President Obama appears to be ahead. Apart from his modest lead in the polls, my former home state of Virginia appears to be swinging definitively toward the Democrats.

Yes, Republican Bob McDonnell did win the Virginia governorship handily in 2009, but he was a very good candidate. Moreover, turnout in gubernatorial elections is normally low. Thus I believe the latest polls showing Obama with a 7% lead in Virginia are accurate, and without Virginia Romney has a very difficult path to the presidency.

If we believe the presidential election will be close, then it follows that Congress and the Senate elections must be close, too.

If Obama wins in November, the most likely outcome must be that the Democrats will hang on to the Senate, while the Republican House majority survives, albeit much smaller than at present.

With this combination, the president’s more extreme wishes (or those of his team) will be restrained. But as a newly re-elected figure he will nevertheless have more power to get what he wants than he does currently.

Whatever the congressional numbers may be, the president’s first task will be to face the “fiscal cliff” of January 2013, when the Bush tax cuts and temporary payroll tax cuts expire and automatic spending “sequestration” comes into effect.

This problem will be faced by the “lame-duck” current Congress in November and December, but it’s likely the election results will heavily influence what it does.

President Obama has made several attempts to raise taxes on the rich, and re-election would allow him to succeed. As well as allowing most of the Bush tax cuts to expire, it’s likely a re-elected Obama will close some of the major tax loopholes – for home mortgage interest, charitable deductions and state and local taxes – at least for the rich, probably defined as those with an income over $500,000.

However, he probably won’t engage in a Francois Hollande-style attempt to raise the top rate of tax to 75% — that would yield no extra revenue and would make it more difficult for him to do other things he wants.

On healthcare, re-election will allow Obama to adjust Obamacare to reflect his own priorities more closely. If the Supreme Court strikes down the individual mandate (whereby individuals must purchase health insurance) then he will probably extend Medicaid up the income scale, so that middle-income people can take advantage of the program.

Spiraling healthcare costs will be controlled by price restrictions on reimbursements to healthcare providers.

In four years’ time, more people will likely be covered by health insurance, but healthcare quality will decline as increasing numbers of providers refuse to accept patients from the expanded Medicaid.

Obamanomics and the U.S. Economy

From the U.S. economy’s point of view, the most worrying feature of President Obama’s re-election is the free rein it will give to the regulators. With a full set of regulators in place, and President Obama not facing re-election, the more damaging regulatory schemes will have a full four years to be implemented.

Possible hazards include a shut-down of fracking, tight regulation of carbon emissions that will force increased use of uneconomic green technologies, further detailed restrictions on non-discriminatory hiring that would prevent employers from taking criminal records and past employment history into account, and tightly-directed bank lending rules restricting availability of capital for small business.

The precise nature of regulatory restrictions in 2013-17 is unknown, but their general direction and seriousness is certain.

There is some evidence that the entire decline in U.S. productivity growth after 1973 is due to the creation of the Environmental Protection Agency (EPA) and other regulators around 1970. Enthusiastic regulators given full rein could well cripple U.S. competitiveness for decades to come.

On the monetary front, President Obama’s re-election will mean Ben Bernanke and his “soft money” acolytes will be given full rein.

Either Bernanke will be re-appointed in January 2014 or one of his acolytes like Fed Vice-chairman Janet Yellen will succeed him.

Interest rates will remain at near zero-levels until late 2014, while inflation will get out of control. For investors, stocks will be good but commodities, oil and gold will be even better, with EPA restrictions limiting prospects for new oil supplies.

Overall, the U.S. economy will be in a very different place in January 2017 than it was in 2009, with the state representing a much larger share in output and exercising considerable control over the rest.

But that’s what Americans would have voted for, twice.

The Strategic Petroleum Reserve Becomes a Political Football

The Strategic Petroleum Reserve Becomes a Political Football (Yet Again)

APRIL 2, 2012

BY DR. KENT MOORS, Global Energy Strategist, Money Morning

With the prices of both crude oil and gasoline racing higher, it was just a matter of time before the cries began sounding to open up the Strategic Petroleum Reserve (SPR).The White House is now under renewed pressure to combat rising gas prices by releasing that oil.

The problem is that the SPR was not created to deal with our current crises.

Following the Arab oil embargo in 1973, which resulted in long lines at the pump in the U.S. and alternate fueling days (based on your license plate), Washington made the decision to establish the national reserve.

The original rationale, offsetting a loss of imported oil, is no longer valid. The American market will never again face such an embargo.

But we have found plenty of other reasons to tap it.

To subscribe to Kent’s free newsletter, Oil & Energy Investor, and to
The Reserve was designed to store 727 million barrels of oil – or enough to meet all U.S. domestic needs for more than a month. It becomes a target during times of unusual stress on the oil market.

Today, the SPR contains 695.9 million barrels – 262 million of “sweet” (low sulfur content) and 433.9 of “sour” (higher sulfur content) crude.

And it has been used before to balance the domestic oil market.

On 11 occasions between 1996 and 2008, there have been “loans” of crude oil to companies, ranging from a low of 500,000 barrels to a high of 30 million barrels. The latter was to address a Northeast U.S. heating oil shortage in 2000. In each case, those consignments were later returned to the reserve by the companies.

However, we normally think of three times when Washington released the crude in direct response to a crisis. These are the precursors considered these days as the administration decides whether or not to release additional volume.

It happened first in response to the Iraqi invasion of Kuwait in 1991 (a release of 21 million barrels), then in the aftermath of Hurricane Katrina in 2005 (11 million barrels), and finally after the loss of Libyan crude last summer (30 million barrels).

In each of those cases, however, the impetus was a result of events beyond the control of the West.

Not so this time around.

Growing Concerns Over IranThe current concerns stem, at least in part, from an embargo. Only this time, the embargo is by the European Union (EU) against imports of Iranian crude, set to begin on July 1.

U.S. Treasury Secretary Timothy Geithner has said there was “a case” developing for releasing oil from the SPR “in some circumstances.” Yet during the meeting of the G20 nations (the 19 most developed global countries and the EU), the U.S. did not make a formal request for a coordinated release from strategic reserves.

Nonetheless, this indicates the changing nature of using oil reserves to offset price changes. This is a global oil market, and the pricing dynamics are certainly not confined to the American economy.

Last summer, it was a coordinated effort by both the Paris-based International Energy Agency (IEA) and Washington to release 60 million barrels. Unilateral U.S. moves are no longer either enough or well-conceived to deal with what is a global economic issue.

That move hit while I was dealing with other matters in Athens. I criticized it as badly timed and certain to provide no improvement in the oil situation following the Libyan uprising.

As I predicted then, the experiment did end in failure. But it did indicate that the U.S. recognized a joint effort was required.

In hindsight, the Obama Administration rightly concluded the move last June was ill-advised.

It accomplished nothing, unless the combined U.S.-IEA approach was committed to releasing at least 60 million barrels per month for a longer period of time.

This makes Geithner’s statement on Friday significant.

For a government that concluded the release last summer was a bad idea, this is a rather significant change of heart. The fact that there was no follow up in Mexico City means nobody is prepared to pull the trigger.

There are a number of reasons for this.

There’s Limited Upside to Any Release

First, there is no indication that pricing would respond favorably to a release now. There is substantial reason to believe the prices for both oil and oil products will be moving even higher. A release now, therefore, would have limited effect.

Remember, if everything goes wrong, the SPR holds one month’s supply – no more.

Then there is the primary issue. We are still awhile away from the embargo taking effect. Absent a change in that policy decision, the current trajectory up is not likely to change – whether SPR and other worldwide reserves are employed or not.

The crisis would remain, and the oil traders know it. As I wrote last summer on the use of SPR in the Libyan situation, “the actual price of the crude oil will now encompass the reserve injections, with traders setting new risk approaches that include the artificially determined volume. It will further distort the actual trading market without providing significant benefit. That’s because this additional supply will not drive the price of crude down to a level that will result in substantial savings to end-users.”

Nothing will change this time around.

The energy folks I know in the current administration certainly understand this.

But it is also an election year. And you know what that means.

It’s Time to Bite the Bullet

Nothing can derail a reelection bid quicker than spiking gasoline prices.

And as a result, crude oil is once again a political football.

Using the SPR is not a solution for anything. Yet we are not looking for a solution here; we need a temporary fix (again).

All the better solutions are longer range and won’t help us in the current situation.

We need to bite the bullet here.

As we approach Memorial Day and crude oil is selling far into the triple digits on NYMEX and gasoline is well over $4 a gallon everywhere in the country, then maybe tapping the SPR would make some sense in a limited move.

Because by that point, the market will not be able to correct itself by moving anywhere but up.

Don’t kid yourself. This is not far off.

WTI closed trading on Friday at almost $110 a barrel, while Brent is approaching $127 in London.

Gasoline prices are exceeding $6 a gallon in Alaska, over $5 already in Los Angeles, hitting $4 in Chicago… Prices now stand nationally at an average $3.69… an all-time record for this time of the year.

Yes, at some point, the rise in prices will depress demand. But there is also nothing to prevent this from recurring, in more volatile and frequent cycles.

In attempting to offset the effect of oil prices on an economic recovery, the question of whether to tap the SPR may soon be the least of our worries.

Puff Adder

Amazing and Funny parrot!

The Fate of the Eurozone Hangs on Sunday’s French Elections

MAY 4, 2012

BY MARTIN HUTCHINSON, Global Investing Strategist, Money Morning

It now looks as though Nicolas Sarkozy’s days are numbered. In the balance lies the fate of the Eurozone itself. 

It appears Socialist Francois Hollande will win the French election runoff on Sunday and that June’s legislative elections will give the Socialists a powerful position in France’s parliament. 

Added to these developments is the good chance that both the major existing parties in Greece’s parliament, which had jointly agreed to the bailout deal, will be voted out of office on Sunday as well and replaced by a motley set of far-lefties. 

So while the Eurozone has been quiet this week, the calm is deceptive with the elections on Sunday.

Meanwhile, most of the worry in the Eurozone centers on Spain – which is quite foolish. 

Spain recently elected a center-right government with a large majority, which is clearing up the mess left by its predecessors. The country does have a 25% unemployment rate, but that’s a function of Spanish labor law and excessive welfare payments, both of which the current government is addressing. 

Spain’s budget deficit is also smaller than France’s, as is its debt level. In fact, Spain’s debt and deficit burdens are lower than both Britain and the United States. Spain is not the issue. 

Considerable Danger in the Eurozone

As for Greece, it is a shambles. 

The truth is it should have been chucked out of the Eurozone two years ago, when it was first revealed that its governments had been consistently lying about its budget numbers. 

Had that happened, the new drachma would have sunk to about a third of its former value, and Greek living standards would have reduced by half, all without anything but market forces to be blamed. 

Now hundreds of billions of euros have been poured into the country, and its ungrateful electorate is determined to elect every nut-job it can rake up. The whole Greek rescue project has been a complete waste of time and money, and should be ended forthwith.

Fortunately, throwing Greece out of the Eurozone will not destroy the euro – after all, nobody was relying on the strength of the Greek economy in their calculations of the euro’s value. 

However, France is a different matter entirely. 

Unlike Greece, if France gets into serious trouble, the remaining “solid” euro economies led by Germany are not big enough to save it.

And, led by Hollande, France looks to be in considerable danger. 

Hollande wants to increase the top rate of tax to 75% and to reverse the one significant reform of the Sarkozy presidency – the raising of the retirement age from 60 to 62. Needless to say, in Germany, where the retirement age is 67, there will be little sympathy for France’s predicament.

Hollande also objects to the emphasis on austerity in the bailout plans put together by the Eurozone leadership led by Sarkozy and German chancellor Angela Merkel.

So if France gets into trouble, the willingness of the German populace to put up yet more money for a further bailout looks doubtful, to say the least.

What’s more, as I discussed last week, the brewing “Target-2” scandal has blown another hole in the euro. 

As it turns out the foolish design of the “Target-2” euro payments system has left German taxpayers potentially liable for $800 billion, the amount of paper the German Bundesbank is holding from southern European central banks that may be forced to default. 

This additional potential cost to German taxpayers is larger than the bailouts themselves and should cause a rebellion against another bailout “solution” – and rightly so. 

German politicians, facing an election next year and seeing the fate of their Greek billions, will not dare push through yet another bailout if the call comes in from France. 

The Euro’s Days are Numbered as Well

At that point the euro will break up, with Greece leaving it altogether, defaulting on its debt and becoming a European Argentina without the resources. Spain and Italy will also leave the euro. 

In Italy’s case, this may also result on a default on the country’s debt, since the debt is very large and the current government of EU-appointed “technocrats” will be thoroughly discredited. 

In Spain’s case, a modest devaluation from the euro’s exchange rate may well prove sufficient to revitalize the economy without a default on the country’s moderate debt, although the Spanish banking system’s bad debts, left over from its real estate bubble, may yet sink it.

As for France, leaving the euro will not automatically bring debt default, but it will allow Hollande and the socialists to engage in an orgy of left-wing policies similar to those of Francois Mitterrand’s first government from 1981-1983. 

Given that France’s debt position is already somewhat precarious and its government already far too large, that will bring a French debt default, but probably not for a year or two.

Germany, the Netherlands and Scandinavia, meanwhile, will do fine, although the new strength of their currencies, whether separate or still combined into a “strong euro” may in time make their industries somewhat uncompetitive. Still, their debt remains top quality and in general, if they continue pursuing sound policies, they will prosper.

As for U.S. prospects, the break-up of the euro won’t affect much over the long term, although European debt defaults will draw unwelcome attention to the U.S. deficits and spiraling debt. 

In the short term, however, European turbulence will inevitably have an adverse effect, both on the U.S. economy and on the stock market.

“Sell in May and go away” may never be better advice than this year, at least until we see how the Eurozone debt crisis pans out.

Sunday’s French elections are going to be critical.

It’s an outrage!

It’s an outrage…

A scheme that appears to involve traders… investment banks… and, as some suggest, even the COMEX and the federal government itself is so massive, it could put the Hunt Brothers 1973 attempt to “corner” the silver market to shame.

Yet it’s creating an opportunity of unprecedented size – at a time when few opportunities exist.

Some estimate that early investors who know how to play this – in a completely legal and ethical way – could well see returns of 10 times their money.

Get the full story here.

Experimental Brain Injury Treatments Could Be Worth Billions

MAY 3, 2012

BY MICHAEL A. ROBINSON, Defense and Technology Specialist, Money Morning

Brain trauma is one tough and expensive field. 

Each year brain injuries cost the nation roughly $50 billion. That’s half a trillion every decade.

And then there’s the human toll…. 

Brain injuries kill 52,000 people each year, making this the third leading cause of death from injury.

But there’s more to this story than the death toll. Another 80,000 people a year in the U.S. survive brain injuries but go on to lead reduced lives. 

Luckily, there is hope. Today we’re on the verge of saving millions from the suffering brought about by traumatic brain injuries. 

These insights also will lead to new treatments for such severe brain diseases as Lou Gehrig’s (also known as ALS) and Alzheimer’s. 

And that’s what the Era of Radical Change is all about — seeing friends and family survive things that a few years ago would have killed them. 

It’s all the result of more than 50 years of exponential growth in high tech and its effect on every aspect of science.

We are now at a tipping point in human history. Cases that once seemed doomed now offer new hope.

Brain Injuries: The Tragedy and the Hope

Unfortunately, this is a story I know all too well. It is one of the reasons why I’m deeply interested in this field.

Nineteen years ago last March, my cousin was killed in an infamous boating accident while his family looked on.

Doctors tried to save him but to no avail. His brain injuries were just too severe. 

Now I wonder how my cousin would have done had that very same boat crash happened today. 

As it turns out, a similar accident just occurred in our town. 

Three high school seniors were cruising up Highway 101 when the driver lost control of the car. It crashed, rolling over several times.

The driver was killed outright, while our family friend, Matt, suffered severe brain trauma. 

As I write this, doctors are attempting once again to take him out of the coma they induced to stem the swelling of his brain. Though he still has a long way to go, I’m happy to say he has made great strides in the past 10 days.

In another case, doctors in Indiana recently used an experimental drug to treat a 30-year-old mother who has made an amazing recovery from her brain injury. 

It’s based on the female hormone progesterone. You see, doctors already knew that young women recover from brain trauma faster than men. 

Studies with pregnant rats also showed they recovered more quickly than non-pregnant rats. And male rats that got progesterone also fared better.

Now, a team led by Emory University in Atlanta is in Phase III of a key clinical trial. It covers more than 1,000 patients at 17 U.S. medical centers. 

The fact that the study already cleared major hurdles bodes well for its outcome. If the test succeeds it could mean that a new drug to treat brain injuries will hit the market in just a few years.

Stem Cells Open Paths to New Cures

But researchers at the University of Texas at Galveston recently took an even more novel approach. They treated brain traumas with stem cells. 

It’s pretty complex stuff. So, let me simplify. 

Our brains are teeming with nerve cells called neurons. To work correctly, neurons rely on very special nerve fibers called axons.

Simply put, when axons are too damaged from trauma the patient dies. That’s why the Texas team’s work is so important.

Team members implanted neural stem cells into rat brains and made two major findings. The stem cells not only reduced brain damage, they also lowered levels of a deadly protein that courses through the brain after it suffers an impact. 

Stem cells hold great promise for the long haul because they are natural. That means no drug side effects and the chance to have healthy cells grow new tissue.

It’s why I believe it’s just a matter of time before a biotech firm comes to market with an effective drug or treatment for brain injuries. Success here could be huge.

At the very least it will save us billions a year in healthcare costs alone.

As investors, that lets us make money while also saving lives.

In fact, I believe that in as little as a decade I will be able to report to you that thousands of patients like Matt have bounced back from their brain injuries. 

It is one of the reasons I am so hopeful for America’s future. Breakthroughs like these are part of our DNA.

It’s why I just launched the Era of Radical Change to keep you abreast of this and other cutting-edge technology.

It is a unique advisory service that will show you how to profit from the most important trends reshaping the world around us. 

I’m referring to things like: 

• Crab-like robots that eat cancer.
• Nanosatellites that can fly to the moon on a single drop of fuel.
• Gold nanoparticles that can help get rid of brain tumors.
• And much, much more…

So, if you want to find a way to profit from the next generation of tech breakthroughs, please join me at the Era of Radical Change.

You can’t beat the price. Get it free by clicking here.

Related Articles and News:

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  These High-Tech IPOs Are Fueling the Nasdaq Rally
• Money Morning:
  The “Miracle Material” That Will Change the World

 

Cheers!

Tags: anoxic brain injury treatment, brain injury, brain injury recovery, brain injury treatment centers, concussion treatment, mild traumatic brain injury treatmen, traumatic brain injury treatment

Gold Prices

Gold Prices: How to Climb the “Golden Staircase’

MAY 2, 2012

BY WILLIAM PATALON III, Executive Editor, Money Morning

When U.K. subscriber John M. wrote in this week, he got right to the point.

Asked John: “What’s happening to gold prices? Why are they dropping?”

For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth – our resident expert on mining and precious metals.

Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.’s question.

And he recommended three ways to profit – including an ETF he says is perfect for first-time gold investors.

To explain what’s happened with the “yellow metal” – and to project where gold prices will go next – Peter invented a pricing theory that he christened the “Golden Staircase.”

“The bottom line, Bill, is that the price of gold has simply entered a consolidation phase – much like it has done numerous times since it entered this secular bull market back in 2001,” he told me. 

Gold futures were at $1,662.40 an ounce yesterday – well off the yellow metal’s high. Here’s why.

“If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn’t resolve its debt-ceiling crisis,” Peter explained. “A deal in Congress was reached in time, but Standard & Poor’s went on to downgrade the nation’scredit rating for the first time in history. Since then, there’s been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What’s more, government-calculated inflation looks benign, taking away from gold’s luster.”

And here’s where it gets interesting.

Now, You Don’t Have To Pay Lots Of Money To Make Lots Of Money

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Gold Prices, Inflation and the “Golden Staircase’

You see, as we’ve detailed to you a number of times, inflation is much, much worse than Washington would have us believe.

The consumer price index (CPI) – the “official” gauge of U.S. inflation, fell to 2.7% in March. But the American Institute forEconomic Research (AIER) says everyday prices – the ones that matter most to working Americans – are up a good 8% over the past year.

“Don’t be fooled by the “official’ numbers,” Peter said. “What this means is that the “real’ rate of interest (the interest rate you can earn on the safest investment minus inflation) is down aroundnegative 3%. That scenario has typically kept gold in a bull market. That’s why I still expect that we’ll see $2,000 gold by late this year or early 2013.”

To forecast the timing of that rebound, Peter invoked his “Golden Staircase” theory.

“Since the beginning of gold’s secular bull, the “Golden Staircase’ has demonstrated that it typically takes 12 to 18 months for gold to establish a new price high once it retreats from a strong run-up. Eight months have already passed since gold reached $1,900. The “Golden Staircase’ theory tells us that it will take between four and 10 months to see new highs.”

Here are three ways to position your portfolio to profit from this rebound:

• If you’re a newcomer to the gold market – or you are somewhat risk-averse – Peter suggests the physically backed Sprott Physical Gold Trust ETV (NYSE: PHYS).

• If you’re game for somewhat more leverage, Peter likes Newmont Mining Corp. (NYSE: NEM). It’s currently yielding 3%, is stable and well-diversified, and its dividend is linked to the price of gold, Peter said.

• If maximum profits are your goal, Peter’s favorite play – and his personal pick for the Private Briefing report“The Five Stocks You Have to Own in 2012“ – is Sandstorm Gold Ltd. (TSXV: SSL). This streaming-gold company is the riskiest of the three. But it’s up 39% since Peter recommended it, and forecasts call for years of rapid growth.

So, yes, gold prices are down lately. But don’t expect the downturn to last.