by Addison Wiggin – March 21, 2011
- U.S. opens third front of "Forever War"… The 5 surveys effects both seen and unseen
- Japan aftermath: How to profit from the fall of uranium, and do good for quake victims, in one step
- Traders don rally caps… The chart that shows stocks still have room to run
- Seeds of ongoing crisis: A depressing list of the most profitable small businesses
- Japan’s debt, U.S. debt spotlighted in reader mail… plus, the strange case of not-counterfeiting
0:00 — There are things that are "seen"… and those that are "not seen".
0:05 — Seen:
Saturday, on the eighth anniversary of the invasion of Iraq, the United States opened up a third front in the "Forever War.". U.S., British, and French warplanes carried out air strikes to enforce a "no-fly zone" over Libya.
0:10 — When George H.W. Bush established a no-fly zone over parts of Iraq after the 1991 Gulf War, it was enforced with routine bombing for 12 years until his son ‘W’ sent in ground forces.
What, we ask with all the feigned interest we can muster, is the endgame in Libya? A cease-fire in their nascent civil war? ‘Regime change’? Oil exports diverted from their destinations in Europe and China…?
Does it matter?
"Circumstances will drive where this goes," says Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. And because "circumstances" have a funny way of getting out of hand, oil is again within a couple bucks of the high it set two weeks ago.
0:45 — Precious metals are reacting too. Gold is up to $1,431. Silver is a nickel away from $36.
0:55 — Not seen: "With whopping budget deficits of more than $1 trillion per year, a national debt of more than $14 trillion, and the U.S. military already overstretched by two drawn-out occupations," muses foreign policy analyst Ivan Eland, "one would think some sort of ‘Vietnam Syndrome’ would have set in."
"Traditionally, the foreign policy elites of declining empires have never accepted the need to retrench overseas before it was too late."
And so it goes.
1:15 — In contrast to oil, the spot price of uranium is down more than 30% since the earthquake-tsunami-nuclear disaster in Japan.:
As we forecast, hedge funds and banks are dumping their positions. Volume is running five times average.
1:35 — As we also forecast, the U.S. price of natural gas turned in its biggest rally so far this year. It’s back above $4 per million British thermal units.
Conventional wisdom says that’s because Japan is about to import a lot more liquefied natural gas to meet its electricity needs. That may be true, but it’s not the whole story.
Traders are getting itchy about the prospect of some sort of U.S. regulatory crackdown. Members of the Nuclear Regulatory Commission (NRC) are meeting today.
"We could imagine the NRC requesting a timeout over coming months," says a report from Credit Suisse, "for each plant to come offline and take a full assessment of safety equipment performance."
Say the NRC orders a one-month shutdown of all General Electric Mark 1 boiling water reactors — the type damaged in Japan. Instantly, U.S. nuclear power generation would fall by 20%. Overall power generation in this country would fall 4%.
That would goose demand for natural gas by 3.6 billion cubic feet per day — more than 5% — according to analysts at BENTEKentek Energy, a division of the respected Platts research firm.
2:25 — "Increased demand for natural gas," writes our energy analyst Byron King, "in combination with insanely low prices — could make you handsome gains — very quickly — if you take action today.
"Natural gas is so cheap it could easily experience a handsome bump up in the coming months. Existing inventories could get used up. Exploration for and production of more natural gas could take off like a rocket.
"This is exactly the setup you can play today for stout gains."
Byron’s eager to tell you how. Act here and we’ll send you our special report — 11 Ways You Can Profit From the End of Nuclear and the Return of Natural Gas. All we ask in return is that you make a donation to the American Red Cross for disaster relief in Japan.
Over the weekend, readers donated $4,420 when we made our first appeal. We want to see that number grow significantly. Here’s where you can help. When the earthquake hit in Haiti on Jan. 12, 2010, we were able to donate more than $80,000 to Hospital Albert Schweitzer in the ensuing months. Let’s be as generous in our aid this time around.
3:10 — Back in the markets… nothing like a little merger-and-acquisition news to drive up stocks on a Monday morning. Traders are giddy to learn that one mediocre mobile-phone provider — AT&T — is buying another mediocre mobile-phone provider — T-Mobile — for $39 billion.
The Dow is back above 12,000 as we write.
3:30 — The S&P remains three or four points below the key threshold of 1,300 that Jonas Elmerraji of our small -cap team has been eyeing for months now.
"The first close below 1,300 [on March 10]," he writes, "was the spark that set off what was ultimately a 5% pullback in stocks — and a similar-sized decline in other asset classes that normally provide protection from the stock market’s movement."
For clues to what happens from here, Jonas points to this chart of the S&P going back to early 2009:
"One thing that’s immediately clear is that while the short-term uptrend in stocks was clearly broken last week [the red line], the long-term trendline from March 2009’s secular lows [the blue line] is still intact. That’s a good sign for bulls."
"This isn’t the first time during this rally that the S&P has broken an intermediate trendline only to remain obedient to the longer-term trend. It’s not likely to be the last either."
While the S&P is basically at break-even for the year, members of Jonas’s Penny Momentum Trader have collected cumulative gains of 125%. That includes gains like 11% in three weeks… 20% in two days… and 51% in five days.
For the next four days, we’re still offering access to Jonas’ Penny Momentum Trader at the charter-subscription rate. We’ve extended this offer for far too long — it’s been more than four months since we launched the service. So the deal comes off the table at midnight this Thursday. Take advantage here.
4:15 — A new list of the fastest- growing small businesses after the crisis reveals, well, the seeds of ongoing crisis.:
You do the math: what percentage of these margins owe their increase to new ‘reforms’ — health or financial — passed by the government?
As a side note: The infamous 1099 provision of the health care law still hasn’t been repealed. The House and Senate have both passed repeal measures. But they differ greatly in how to make up the "lost" revenue. President Obama doesn’t like either one.
An article on the website CFO Daily News warns its readers to "figure out how you’d capture Employer ID numbers and other pertinent data you’ll need to file 1099s starting with Tax Year 2012" in case repeal doesn’t happen. Ugh.
4:25 — "Far from being ‘idiots,’" one reader responds to another on Friday, "the yen strength in the forex markets after the tsunami was built on good market principles!"
"Japanese insurance companies and others will need to repatriate hundreds of billions of yen to rebuild, so yen strength after the disaster is simply a measure of supply and demand."
4:30 — "The insurance companies in Japan had to sell USD," adds another "and convert those to local currency in anticipation of claim payouts." The Japanese Central Bank, along with the G-7, did try to offset this by selling yen.
"Oh, what an interconnected world we live in."
The 5: Japan represents 8-9% of the Treasury market right now. How long will Japan keep that up when it needs to direct those resources to rebuilding?
As we mentioned above, the most immediate impact of Japan is the end of the "nuclear renaissance" and a new boom in natural gas. To learn about eleven 11 ways to play the trend and make a donation for Japan relief efforts all in one simple step, follow this link.
We’ll be on the lookout for longer-term effects in the Treasury market.
4:40 — "With all the recent hand-wringing about the national debt," writes another, "the one fact that always conveniently gets forgotten is this: in 1980, the national debt was less than $1 trillion."
"Over the next thirty 30 years, we American voters indulged ourselves with multiple large tax cuts without ever once cutting government spending. We are now ‘shocked’ to find the national debt at $14 trillion."
"It is my opinion that American voters have demonstrated the same level of financial acumen as the hairdresser that bought the $750,000 McMansion with a sub-prime mortgage and a ‘silent’ second. The new ‘fiscally responsible’ Republicans in Congress made it their first order of business to extend tax cuts for the rich."
"Does anyone with a brain really think that we are going to seriously address this problem before we find ourselves in Greece’s shoes?"
The 5: We haven’t forgotten it, conveniently or otherwise. For reference, please reread the section "Evening Iin America," and specifically, "Reagan’s Legacy," in Empire of Debt.
"I’d like to take up your offer for The Case for Gold," writes another, "but can’t make the connection by clicking on the links provided. Is there any other way, or is this just a temporary blip?"
The 5: It’s a physical book:; a handsome little tome tidy enough to fit in your pocket. If the link wasn’t working, we assure you it was a temporary blip and apologize. Try again here.
The 5 Min. Forecast
P.S. "I almost joined the Reserve recently," a reader wrote us right after the first of the year, "but have an aversion to some of your advice. I know nothing about puts and calls and shorts and longs and currency manipulation. I understand buying and selling stocks and the reasoning behind it."
"As a Capital & Crisis subscriber, I am starting to profit from slowly moving money from fixed accounts into stocks following your advice. And I would love to invest more based on Mayer’s Special Situations, Breakthrough Technology Alert and other "buy/sell this stock" publications. So here’s the question…"
"Do you have a package deal that includes "’just"’ the "’stock"’ advice, versus the whole (Reserve) enchilada?"
The 5: Indeed we do. We call it the Equity Reserve. And we’ve now reopened it to new members.
Join now and you get access to every stock-picking letter we publish… everything from the entry-level advisories to the micro-cap shoot-for-the-moon advisories. Plus, you get free admission to our annual shindig in Vancouver.
And you’ll get our special presentation, 6 Stocks for Right Now — the pick of the litter among all our editors — which we’ll release at 5 p.m., Thursday, March 31.
That’s when this offer closes. And it’ll be the last time we ever extend this offer at the current price. Please review this extensive list of the privileges and benefits that come with membership in the Equity Reserve, right here.
The curious case of Bernard von NotHaus came to an end on Friday when a federal jury in North Carolina spent less than two hours concluding he was guilty of — in the words of the FBI’s statement — "making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States."
The U.S. attorney who successfully prosecuted the case resorted to language that was rather, shall we say, over the top: "Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism," declared Anne Tompkins.
"The Liberty coins were marked with the dollar sign ($); the words ‘dollar,’ ‘USA,’ ‘Liberty,’ ‘Trust in God’ (instead of ‘In God We Trust’); and other features associated with legitimate U.S. coinage," reads the FBI statement.
That would lead the casual reader to presume the resemblances are what ran afoul of the law — that and von NotHaus’ intention that Liberty Dollars "be used as current money in order to limit reliance on, and to compete with, United States currency," again going by the FBI’s words.
So von NotHaus wasn’t charged with counterfeiting per se. Rather, he violated the statute that imposes fines or prison on anyone who "except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design."
In other words, von NotHaus attempted to challenge the government’s monopoly on currency. Although, he did use the word "dollar" and its symbol, he didn’t have to in order to be found guilty of breaking the law. And for that, he faces 15 years in prison.