by Addison Wiggin & Ian Mathias
- Markets of the world set to move… how FOMC, G-20 could kick start new trading trends
- Patrick Cox with a "history-making" opportunity in one sector…
- Greg Guenthner on the slow death of another
- First Saudi, then Prudhoe Bay, then Tupi… now what? Byron King on the next great oil frontier
After piddling about for the last two days, markets might actually take a significant direction in the next 48 hours. And par for the course in 2009, Washington will be crackin’ the whip:
First, the Federal Open Market Committee will reveal their latest interest rate decision today. Chances are they won’t even hint at raising rates for the foreseeable future, but the Street is in knots over whether they will extend quantitative easing plans. We care, but only a little… the damage has been done. More on that in a second.
Then after the Fed, we should start hearing whispers from the G-20 meeting in Pittsburg, which officially starts tomorrow. With world leaders mostly convinced the recovery is under way, we suspect talks of reform, regulation and exit strategies. Namely, they’ll be wondering what the hell to do about this:
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The dollar — the money every G-20 nation holds in reserve — has quietly become little more than a carry trade currency. It’s lent at one of the lowest rates in the world. The biggest financial bailouts in modern history have made prospects for dollar inflation pretty high, to say the least. And with every day of this “recovery,” it’s worse.
More QE from the Fed or dollar reserve jitters from the G-20 should mark the next move for the dollar… we’ll keep an eye on it for you.
“The fact that the dollar has been the reserve currency of the world has allowed us to live beyond our means for a long enough period of time to get into trouble,” our executive publisher Addison Wiggin told the Pittsburg Post Gazette yesterday. “That’s what the crisis is. The deficit spending in Washington is the biggest threat to the dollar’s status as the reserve currency."
"Most of our spending is financed through the credit market, which is heavily dependent on our ability to attract capital from the rest of the world. That ability is in serious jeopardy.”
“The popular explanation for dollar weakness is that investors have a fresh appetite for risk,” Chris Mayer adds. “But maybe there is more to it than that. As one analyst said, if the dollar is the new yen, ‘The greenback is in real danger.’ That’s because foreigners hold a lot of dollar assets, and selling them to swap into higher-yielding currencies could continue to keep fresh pressure on the dollar.
“This loss of purchasing power is like a subtle tax and eats away at your wealth. That’s why I’m bullish on gold and oil and other real assets. As the dollar weakens, these assets ought to reprice and hold their own.”
It’s no coincidence Addison and Chris have teamed up on this story today. The dollar’s fall is a key component of a very special report they just published — one that debunks what Addison calls “the biggest financial swindle in world history.” Read their shiny new expose here.
And lest we forget, the fate of the dollar and stocks remain intertwined. “Sell the dollar, buy stocks” has been THE trade of the last six months… but too much exit strategy talk from the Fed or FOMC could turn that trade on its heels.
Add this to the “recovery rip-off” file: There is a “shadow market” of 2.7 million homes that are technically in foreclosure but are yet to be reclaimed by the lender, says a Wall Street Journal study today. While it’s no secret banks are kicking the can down the road on finalizing foreclosures (and consequently accepting the mortgage loan as a loss) this is the first guess at the total number of such homes that we’ve heard:
“As of July, mortgage companies hadn’t begun the foreclosure process on 1.2 million loans that were at least 90 days past due,” says the study. “An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn’t yet acquired the property. The figures don’t include home-equity loans and other second mortgages.
“Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier.”
So that’s how to dodge this housing mess… just stop paying your mortgage!
Overcome by public ire, Bank of America and JP Morgan Chase announced today they are overhauling the fee structure for their debit cards. Aside from scaling back charges, pretty soon both banks will allow customers to enable a feature that prohibits them from overdrawing their accounts. Heh, what a novel idea.
And without a single piece of legislation? It’s almost as if customer demand has forced these business to adapt… how strange.
“While you were sleeping, history was being made,” says our technology analyst Patrick Cox. Yesterday Patrick told us about biotech’s booming opportunities in Asia, where the will of American scientists can be met with the looser regulations and overflowing capital of Chinese investors.
Well, as we’ve been forecasting all week, the particular company Patrick’s been following announced such a deal overnight. “It’s the most important press release in the history of the stem cell business,” says Patrick.
We don’t like to be cryptic, but the nature of the deal insists upon some editorial tact… if we say much more, it wouldn’t be fair to Patrick’s Breakthrough Technology Alert readers.
So here’s the deal: For the rest of today, Breakthrough Technology Alert will be 33% off. If you want the story and the ticker, this is your chance to get it at our lowest possible price. For all the details, click here.
And with the rise of one industry, the fall of another:
“Comcast and Verizon are dying a slow death,” says the man at the helm of our small-cap ship, Greg Guenthner.
”Comcast, Verizon and other government-protected duopolies won’t be around for your grandchildren to enjoy — at least not in their current forms. You see, companies like these are selling outdated services. And they’re more than reluctant to change their business models.
“Consider the home telephone. This beast is becoming scarcer by the day. In fact, mobile phone-only households are becoming the norm. Yet despite huge increases in wireless sales by traditional telecoms, it’s the wireline segment that keeps these blue chips in the black. More than half of Verizon and AT&T’s revenue comes directly from wireline sales.
“For the old-school telecom giants, it’s all about infrastructure. They want to milk the cable and phone lines for all they’re worth. After all, it took decades — and millions upon millions of dollars — to create these vast systems that pump TV and telephone service into our homes.
“But the communications landscape has changed. We don’t need separate wires to connect our homes to world. Now it all comes back to bandwidth.
“The technology is ready. Wireless dominates the landscape, and the old-fashioned telecoms and cable providers can only desperately hang on to their antiquated services. Even the government — which normally favors any out-of-date and/or irrational business model — is coming around.
“In the end, technology will win, and media convergence will open the door to new data service packages for customers that will provide phone, television, gaming and Internet service through lightening-fast, reliable wireless connections.
“It will be the beginning of a new tech boom. Companies such as Limelight Networks Inc. (NASDAQ: LLNW), a content delivery network (CDN) provider that offers a variety of services, including live Internet video feeds, will thrive. In fact, Limelight’s lucrative contracts with heavy hitters like MSNBC have helped the company grow its revenue more than 500% over the past three years.”
Greg recommended Limelight Networks to Penny Stock Fortunes readers back July, and it’s currently netting his readers double-digit gains. “And we’re waiting for more,” he says. For the full story on Limelight and the rest of the PSF portfolio, look here.
Gold is waiting for the dollar’s next move, too. The spot price has been bouncing between $1,000-$1,020 all week.
Oil, on the other hand, has gone nowhere but down this week. Opening Monday at $72, a barrel of light sweet crude is down to $68 as we write. Selling came on especially strong this morning when the Energy Department unveiled a much larger rise in inventories than the Street had anticipated.
“Offshore Namibia is quickly becoming one of the world’s greatest frontier oil provinces,” says our resident rock hound Byron King.
“Back in the 1960s and 1970s, a few major companies took out oil exploration concessions there from the government of South Africa. In 1974, Shell discovered a gas field off the southwest coast with the Kudu project. Early estimates were 1 trillion cubic feet of reserves, but current estimates range up to 10 trillion. Kudu was big, but nobody much cared about natural gas back then. Gas was too cheap, and southern Africa was too far away.
“There was hardly any development around Kudu for the next 20 years. South Africa was under international sanctions due to its apartheid regime, so oil companies and other outside investment stayed away. Almost nothing happened with energy development until Namibia became independent in 1990.
“By the early 1990s, the gas field at Kudu intrigued foreign oil companies. Kudu showed a large hydrocarbon resource. Clearly, there was significant potential. But nobody really understood the offshore geology. Plus, back then, it was tough to drill in water more than about 1,500 feet deep. Namibia didn’t make for an investment magnet.
“But with the recent success of offshore Brazil, the energy exploration expectations of the world have been fundamentally altered. The same brilliant researchers and scientists that discovered the potential of Brazil’s Tupi field are now doing extensive research in offshore West Africa, in particular offshore Namibia. One researcher I’ve been following very closely believes the offshore areas of Namibia are ’geologic analogues’ to Brazil.”
Get it? Think Pangaea…
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Of course, there is much, much more to this story. Bryon told us this morning “this may be the best potential for any offshore-related investment anywhere”… better check out your latest issue of Energy & Scarcity Investor for details.
“It’s absolutely jaw-dropping how willing readers of The 5 are to be taxed,” a reader writes of our week-long debate on the sugar tax. “’No taxation without representation!’ was a phrase that many brave people shouted and were prepared to die for. The founding fathers were amazingly brilliant men who anticipated nearly every kind of boondoggle that our government would try to use to cheat its own citizens. Unfortunately, they were not blessed with the foresight to predict our citizen’s disregard for their own liberties.
“You open Pandora’s Box when you so freely encourage a soda tax with the justification that ’soda is unhealthy.’ If that’s all it takes, then what is next? What are all the things that could be taxed because they are unhealthy? Is a coffee tax next? Have you seen all the ill side effects of caffeine? And how about a tax for every hour you watch TV? Sitting stagnant for that long is pretty bad…
“Stop trying to protect me from myself. Stop trying to tax me to pay for something that I don’t want. I’m okay with dying at 72 rather than 78 because I had a rich diet and enjoyed life, and I’m okay with deciding my own health coverage to offset those decisions in the meantime. Mind your own business, and if you’re so gung-ho about a sugar tax then why don’t you stick three cents in a jar every time you drink a soda to remind yourself what I already know.”
The 5: We’re with you… but are we not adequately represented? It’s not like this tax is coming from Queen Elizabeth.
Thanks for reading,
Ian Mathias
The 5 Min. Forecast
P.S. This is your last chance. At midnight tonight, the offer we mentioned above on Breakthrough Technology Alert is off the table. The news release Patrick Cox predicted has come to fruition. The stock it involves is taking off. If you want to get in before the mainstream swarm, click here today.