Fuel of the Future, The Next Bubble, Oil Forecasts, Hugo Chavez and More!

by Addison Wiggin & Ian Mathias

  • Patrick Cox on the “fuel of the future” and why you need to start investing today
  • China leads U.S. stocks up, and now back down… Citigroup now officially a penny stock
  • Dan Denning with some long-term arguments for higher oil prices
  • Marc Faber exposes the next great bubble… like “the Nasdaq was in early 2000”
  • Plus, a preview of America to come? Chavez nationalizes another Venezuelan industry


  “Thorium will be the fuel of the future,” opens our technology adviser Patrick Cox, kicking off today’s issue with a proper forecast. Don’t know thorium? Allow us to introduce:

The elemental material is number 90 on the periodic table… down there near the bottom, next to suspicious sounding elements like protactinium. Aside from many industrial uses, it’s recently been touted as the next source of nuclear energy… without most nuclear hang-ups.

“Thorium is far more abundant than usable uranium,” explains Patrick. “Thorium reactors produce far less waste products that are much less hazardous. Not only do they produce fewer byproducts, they can be used to burn the wastes produced by other nuclear technologies. That’s several reasons why Senate Majority Leader Harry Reid, D-Nev., is such a strong proponent of thorium nuclear power.”

That would be the same Harry Reid who shot down the Yucca Mountain nuclear waste site earlier this week, a move Patrick says, “dramatically moved the thorium industry forward.” Reid’s also got his name at the top of a certain yet-to-be-enacted “Thorium Energy Independence and Security Act.”

It’s no secret he and Nancy Pelosi have been concocting schemes with the new president to encourage “energy independence.” Heh. And it’s certainly no secret that they’re willing to spend a few trillion to get what they want. You might want to check out Patrick’s thorium play before all this becomes reality.

  China’s moving the markets again today. But in reverse. Yesterday the Chinese purchasing managers’ index, which we mentioned, became the great hope of stock buyers around the world. Major American indexes popped over 2%.

But just as quickly, they’re jumping ship today. In a speech early this morning, Chinese Prime Minster Wen Jiabao gave no indication he was planning to expand his current stimulus bill, which was expected to be the case.

Alas, the Dow opened down over 100 points today. It’s down over 200 as we write.

  Citigroup can now officially be considered a penny stock. It traded below $1 for the first time today.

Wonder how long before we’re publishing a similar factoid about Bank of America?

  One bright spot we can see in today’s dark market: Wal-Mart. The world’s biggest retailer reported a surprising 5% increase in same store sales in February, easily beating the Street’s expectation for a fifth-straight month of sales decline.

Wal-Mart shares bumped up 3% in premarket trading. The retail sector might get a day’s reprieve from the thrashing it’s been deservedly enduring all year.

  Still, as usual these days, lousy data far outweigh the few surprises: Initial claims for unemployment exceeded 600,000 for the fifth week in a row, the Labor Dept. announced this morning.

Last week saw a small dip in claims, down from the 26-year highs we saw in February. Continuing claims backed off multidecade highs too. Now “only” 5.1 million Americans are filing for unemployment.

But the real job numbers to watch come out tomorrow. The market is expecting another 650,000 jobs lost in February and the “official” unemployment rate to jump from 7.6% to nearly 8%.

  No wonder, then, that c
onsumer bankruptcies soared 29% last month.

Over 98,000 Americans filed for bankruptcy protection in February, up nearly 30% from a year before. The American Bankruptcy Institute expects “at least 1.4 million bankruptcies this year,” over 340,000 more than 2008.

  Oil ticked up yesterday with the stock markets. The front-month contract peaked around $45 not long after China’s PMI printed. But just as the immediate hopes for a China bounce have been dashed today, so too crude has retreated… it’s clinging to $43 a barrel as we write.

  “There are a couple macroeconomic reasons to expect higher oil prices,” opines Dan Denning from his Australian post. “Global monetary policy is pretty accommodating at the moment. There is a great debate over whether or not this will lead to higher inflation in real tangible goods. If you’re on one particular side of the debate, you’d expect a big increase in the money supply to lead to higher general prices, especially for commodities like oil.

“And the oil price crash of 2008 has virtually guaranteed future supply constraints. As major integrated oil companies cut back exploration budgets, and as unconventional energy alternatives got put out of business by the crashing price of crude, the foundation was laid for a massive spike in oil prices sometime later this year.

“That spike won’t come from some unexpected recovery in demand or global growth. It will come from chronic production declines from the world’s oil industry and national oil companies.”

  Gold is right where we left it yesterday. After its recent sell-off, the shiny metal has been holding steady around $910.

  “U.S. longer-dated Treasuries,” opines Marc Faber, warning of the demise of a bubble we’ve been following here in The 5, “are in a similar position to where the Nasdaq was in early 2000, and that the risk of holding longer-dated Treasuries far outweighs the potential for further large capital gains. I might add that, from its top, the ‘long Treasury bond iShares’ have already lost 20%.

“Now, if we agree that the Treasury bond market is near a cyclical peak (irrespective of whether we have already seen the peak or whether another brief upward move takes them to new highs), shouldn’t the Treasury and the Fed, if they were smart, sell long-dated bonds like there was no tomorrow (mostly to foreigners, who would then be left holding the bag when interest rates go up), instead of buying them?

“I think the purchase of long-dated Treasuries by the Fed would be as clever a decision as that made a few years ago by the Swiss National Bank (another institution endowed with enlightened leaders) to sell a significant portion of its gold at below US$300! And these are the people who will now attempt to fix the economic and financial crisis! As the civil libertarian P.J. O’Rourke remarked, ‘Giving money and power to government is like giving whiskey and car keys to teenage boys’ — and especially when it involves the power to print money.”

  Both the European Central Bank and Bank of England cut their main lending rates to record lows this morning. The ECB chopped 50bps off its rate, now at 1.5%. The BoE slashed by the same amount, bringing its rates down to 0.5%. Both central banks kept with the party line, assuring the world that while “global and euro demand are likely to be very weak in 2009… over the course of 2010, the economy is expected to gradually recover.”

Nary the slightest bit of concern over attempting to fix an easy credit crisis with more easy credit… or the inflation they’re likely to spark.

  The ECB’s and BOE’s rate cuts to scary lows actually strengthened both currencies against the dollar. The dollar index has consequently fallen from its three-year high of 89.6 down to just below 89 as we write.

  Last today, a new chapter in a populist movement only the Obama administration could admire. Our favorite South American dictator Hugo Chavez nationalized Cargill’s Venezuelan rice growing operations today. The company has been producing a special breed of rice with the intention of evading his price controls. Thus, Chavez ordered his goons to “begin the expropriation process."
He’s threatening to do the same to Polar, which makes — among other things — beer. Heh. We’ve seen what happens when government controls the booze trade. That could get interesting.

By our count, the move today brings Chavez’s count of nationalized industries to six: oil, telecom, utilities, cement, steel and now agriculture.

  “What is going to save OUR economy?” asks a reader a little closer to home. “The government has already wasted all this money to bail out the ones who caused this mess. If the money that was given to them to survive a few weeks had been instead given as a stimulus to the population to buy a new car, redecorate their house or even buy a new home, where would we be today?

“The stimulus package is supposed to spur small business growth, housing development, personal positive belief in the economy. It feels like a ‘good luck package.’ A few will benefit; the rest have to hang in there waiting for it to affect them.

“It’s time to ‘rape’ the Wall Street executives. They are still hiding in their cocoons, immune from the rest of the world. It’s time to repossess their apartments and their resorts around the world. They no longer deserve them. Maybe one day they can earn them back.

“It’s time for America to get back to basics. You earn what you have earned and deserve. If you haven’t earned a profit for the company, you may deserve only a basic wage, or any wage at all. It’s time to back up a few years, when ethics was a part of company policy. You got what you earned. There was no such thing as a ‘golden parachutes.’ If you wanted one, you had to earn it.

“Let the government tax back all these Wall Street wages and bonuses based on company performance. If you earned it, you keep it. If you didn’t, pay it back. Simple math.”

The 5: Are we really going to have this argument again? Who is going to decide whether they deserve it or earned it? Who is going to pick the next rape victim? You? Your ire is exactly the point where fascism begins. As this next reader alludes:

  “The one thing you sometimes do not have an adequate handle on,” writes another, “is the depth of shallowness, stupidity and lack of comprehension of the public at large. If Ron Paul were in charge tomorrow, and, even more illusionary, implemented appropriate fiscal measures, trust me my friends — there would be blood in the streets all right, but not the bankers or the bloodsuckers from Wall Street.

“The public, which is simply not up to the task of understanding the actual situation, would be voting in some opportunistic demagogue that would make Gen. Peron of Argentina look good! Ron Paul would burn in effigy, or worse, while the worst of the bottom of the barrel would be embraced by the hoi polloi, making you long for the Obama days. Like a stage IV cancer patient who is given chemo and radiation that will not do a wit of good, these expensive and deadly false-hope cocktails are used to transition the patient to his or her real option — hospice care.

“So you need to add some more ‘praktical politikal wisdom’ to your commentary. Remember the lowest common denominator of the crowd we’re working with and what they are capable of.”

The 5: Actually, we agree with you. The only thing we’ve written about Ron Paul in these pages is that the country isn’t ready for the ideas he was campaigning on. “It’s too late for peaceful change,” our friend Doug Casey likes to say. “It’s too early to line them up against the wall and shoot them — but we are getting there.”


Addison Wiggin
The 5 Min. Forecast

P.S. Our currency man Bill Jenkins is knocking ’em dead… double digit gains betting against the euro last month, 21% gains on euro puts earlier this week, and then a quick 13% pop on a yen play yesterday. We’re so convinced you’ll profit from his advice, we’re offering 6 free months of his forex options trading service. All you have to do is sign up, here.

But remember, just as we mentioned yesterday, our offer expires tonight at midnight. You only have a few hours to pull the trigger… why not give it a shot?


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