by Addison Wiggin & Ian Mathias
- Hurricane Felix steers clear of oil and gas industry, but oil jumps to $75… reasons why below
- Gold gains $10… why the precious metal is looking more like “a store of value” every day
- Russia, India and Iran all reveal surprising uranium plans… and a way for you to play the trend
- Asian companies buying U.S. assets at a dizzying rate… Mayer on the future of this Far East buying spree
- 54% of seniors are ready to “sell the farm” to pay for their retirement… how this stat bodes badly for the “recovery” in real estate
Forecasters at the University of Colorado expect six more notable storms to roll through the Atlantic in 2007. Three of those will be “major.” The combination of a weak La Nina and Atlantic low pressure readings indicate an active season is still before us.
So far this year, hurricanes Dean and Felix have caused plenty of commotion within oil and gas trading pits, but neither has had any real effect on prices.
But “if a storm like Felix or Dean were to roll through the Gulf and into the Houston area, $100 oil could be just around the “Both Dean and Felix were Category 5 storms,” says our resource trader and weather watcher Kevin Kerr. “There have only been 31 Category 5 Atlantic hurricanes recorded in history,” says Kevin. “To have two of them fall in the last three weeks is noteworthy.”
Noteworthy indeed… this is the first time on record (since 1851) that two Atlantic hurricanes touched land as Category 5 storms in the same season, and only the fourth time that more than one Category 5 had formed in a calendar year.
Light sweet crude is up nearly $5 this week. It’s now trading at $75.
Libyan oil officials announced this morning that they will discourage OPEC from raising output at its Sept. 11 meeting.
Five of 12 OPEC nations have now publicly stated that they do not wish to ramp up production and subsequently lower prices. Libya joins Algeria, Qatar, Iran and Venezuela in support of keeping output the same. Indonesia is the only OPEC member so far to recommend increased output.
Gasoline supplies are at their lowest level since 1991. Measured in “days of gas available,” the Energy Department reported that, for the last week data were available, the U.S. has only a 20-day supply… the lowest since the first Iraq war.
Yet despite these supply levels, gas prices remained at a nationwide average of about $2.80 all last month. With the summer driving season drawing to a close, we might see lower prices still.
The S&P 500 and the Nasdaq both rose over 1% yesterday. The Dow rose too, up 0.6%. The Dow and Nasdaq have both rallied back from July and August slides… together, they are only about 3% off all-time highs.
The dollar continued to gain against the euro yesterday. Today, it’s at $1.35 and trending upward. The Bank of England’s “wait and see” approach to hiking interest rates had traders selling the pound down to $2. The yen, for its part, stayed put at 115 yen per U.S. dollar.
Gold was the big surprise of yesterday’s domestic trading. Despite dollar strength — a classic bad omen for gold prices — gold shot through the roof. The precious metal rose from $673 to $682 in the first few hours of U.S. trading.
“There is no question that it was boosted by a rising stock market,” comments Doug Casey. “But the surprise was how well gold did in the face of a strengthening dollar and some weak economic data. So perhaps, since equities and the buck didn’t align for maximum effect on gold, the metal is striking out more on its own path as a store of value.”
Gold has been trending slowly down since its spike… as we write, it trades for $679.
The Australian government announced this morning it will be penning an exclusive, multibillion-dollar uranium deal with Russia.
Aussie Prime Minister John Howard has agreed to sell Putin and company an undisclosed amount of uranium for “civilian uses,” reports the AP. This marks the second controversial big money uranium deal for Australia in as many months. India, whose desire to point nukes at Pakistan is fairly well documented, signed a similar deal with Australia last month.
Iran’s been buying up uranium, too. President Ahmadinejad announced recently that Iran has attained its goal of bringing 3,000 uranium-enriching centrifuges online. If he is telling the truth, that puts Iran about a year away from developing a nuclear weapon.
A recent U.N. report disagrees. It says there are closer to 2,000 centrifuges online, and that few are running optimally.
But before you take Ahmadinejad too seriously, keep this in mind: He shut down 20 barbershops this week for offering “inappropriate” hairstyles.
Hairstyle tips… from this guy?
Ahmadinejad’s brilliant gas-rationing plan incites near daily riots in Teheran. Unless the neocons get their way and we “engage” Iran “preemptively” — it’s hard to believe that Mahmoud won’t find a way to destroy himself. Nuclear energy and lower domestic energy costs might be the only way he can stay on the safe side of the firing squad.
The first uranium ETF, Market Vectors NCLR, debuted on the market last month. Check out the symbol NLR if you’re looking for a more conservative way to speculate in yellowcake. NLR claims to invest in uranium mining, uranium enrichment, uranium storage, nuclear power plant builders, nuclear fuel transportation and nuclear equipment and generation.
Since its inception only three weeks ago, the ETF is up 6%.
Here’s a small detail that doesn’t bode well for a “recovery” in U.S. residential real estate anytime soon:
“In the 2006 Financial Freedom Senior Sentiment Survey, 42% of the seniors polled selected the response ‘Leave it to my heirs…’ when asked about future plans for their homes. In this year’s survey, only 25% indicated this option as ‘very likely’ or ‘somewhat likely.’ In contrast, 54% of seniors responded that they would keep access to their homes as a retirement asset until forced to make a decision.
“‘When you realize that the home is most Americans’ largest asset, it’s impossible to ignore the power of the home to assist in funding retirement regardless of the strategy,’ said Michelle Minier, CEO of Financial Freedom. ‘Clearly, a growing number of seniors are beginning to consider retirement funding strategies that incorporate their home.’”
The survey revealed 12% of seniors already plan to sell their home and 38% more say they will sell if they have limited financial choices.
Here’s the rub. The more people who try to sell their homes to fund retirement at the same time… the more inventory is going to be sitting on the market… the lower prices are going to go. And the less retirement funding that sale is going to bring.
As we reported last week, there are already more homes on the market than at any other time in U.S. history. Hmmmnnn…
Asian companies are buying up U.S. assets at an unprecedented rate. “If you look at announced mergers or acquisitions by Asian companies (excluding Japan) of U.S. assets,” reports Chris Mayer, “you find the total is up to $16.1 billion YTD. Last year — for the ENTIRE year — the total was $3.9 billion. Last year at this time, there were only $1.8 billion such deals.”
These stats, mind you, are quite conservative… they don’t even include Chinese government purchases, like their $3 billion investment in Blackstone.
Why is Asia on this buying spree? “Well, the dollar has tanked big time,” says Chris, “The popular Fed-weighted dollar index recently hit all-time lows. For a non-U.S. dollar-based investor, it makes U.S. assets look cheaper.” Asia already has a whole slew of dollars to spend… we don’t blame them for getting rid of their greenbacks in favor of assets.
“I would expect more such purchases over time,” says Mayer. “So far, these purchases have been all over the place. But over time, I’d expect the Asian buyers will gravitate more toward the old-line manufacturing sector and natural resources — the things they need to grow. For investors, this could raise the bar for assets such as oil and gas, industrial metals and even agricultural resources.”
This morning, the Chinese government authorized the New York Stock Exchange to open a representative office in mainland China — the first foreign stock exchange to be granted such a right.
“When I saw a report on TV news of the computer hacking into Pentagon computers,” writes a reader, “believed to have been done by Chinese military operatives, and then read your comments in The 5, I immediately thought of the book entitled Unrestricted Warfare: China’s Master Plan to Destroy America, written by Col. Qiao Liang and Col. Wang Xiangsui.
“I read this book a couple of years or so ago, and its implications are frightening. I currently have the book loaned to a colleague, so I can’t refer to exact chapters or statements. Although my memory isn’t as good as it once was, I seem to remember that the book described intensive efforts by the Chinese military to hack into and sabotage computer systems of the American government, especially the military, as well as major business and financial centers. This was part of a comprehensive strategy developed by the authors (two Chinese military officers) to defeat the American military in time of war.
“Another part of the strategy was an economic one designed to weaken the American economy and allow the Chinese government to put the American government in what would amount to a financial headlock. Boy howdy, we sure have been walking into that part of the plan with both hands out, palms up and eyes closed for several years.
“This book should be widely read by Americans and our allies. However, because of the naivete of a vast percentage of our populace, I’m quite sure that few have or will. The fact that the book is not easy reading could also deter some would-be readers. Hopefully, it has been read by our leaders in Washington, especially our leaders in the Pentagon.”
The 5 responds: This is the book we were referring to yesterday. We’re plumbing the archives for our report on the book and its geopolitical implications. We’ll update you when we retrieve it…
“I just had to laugh out loud,” writes another a reader, who must have sipped the grounds at the bottom of his coffee this morning, “when I read the opening lines of the Chavez comments in Wednesday’s 5 Minute Forecast: ‘Our favorite South American dictator, Hugo Chavez, announced…’
“It really breaks me up when I see Americans calling democratically elected leaders ‘dictators’ when they don’t agree with their policies. What is it about Americans that they stoop to lying when they disagree with another country’s policies? To say that Chavez is a dictator is just that, an outright, baldfaced lie, given that he won his position in what outside observers called free elections (in spite of CIA-backed demonstrations). I presume he can get away with such lies in the U.S., where most people have been shown to have almost no knowledge of world events.
“I’m not saying I endorse all his policies — just that it doesn’t reflect well on our business or publishing leaders when they stoop to lying. It really speaks volumes about their own ethics and values; so where does that leave us subscribers to your services, when we see such a breakdown in values in an individual such as Mr. Wiggin? It certainly doesn’t boost our confidence in his services, that’s for sure. Undermining them would be a more accurate description.”
The 5 responds: You’re kidding, right? We write the word “dictator” with about as much seriousness as we take Chavez himself… even if he does manage to get himself elected president for life.
It’s worth noting readers who actually have to deal with his self-serving, inane, egomaniacal “policies” admire that nutjob a whole lot less than we do. See for yourself.
Enjoy your day,
Addison Wiggin,
The 5 Min. Forecast