A Record High… and a New Low Point

by David Gonigam – March 31, 2011

  • Gasoline prices reach record inflation-adjusted high… Byron King on the president's energy plan and "a new low point"
  • "Kabuki theater"… Patrick Cox on plans to "modernize" the FDA
  • Chris Mayer on why the grain complex is due for a rest
  • An indicator to watch as we move into April… and another banana peel on the path to Social Security's grave
  • Americans drinking more Scotch, less beer… The outrage of the $4 surcharge for drinks on the rocks… and "last call" for the Equity Reserve

0:00 — We've reached a milestone in the history of U.S. energy consumption. Gasoline prices, adjusted for the cost of living, sit at an all-time high.

According to the American Petroleum Institute, the $1.47 per gallon Americans paid in March 1981 — as the Iran-Iraq war raged early in Ronald Reagan's presidency — equals $3.46 today.

The national average this week, according to AAA? $3.58.

0:10 — Oil is touching another 19-month high this morning, a barrel of West Texas Intermediate fetching $106.42.

0:16 — It's at this moment, this week, that President Obama gave a speech on energy — setting out the goal of cutting oil imports by one-third over 10 years. This would be accomplished, he says, by…

  • Finding and recovering more domestic oil
  • Boosting fuel-efficiency
  • Turning to "cleaner" alternative fuels.

0:23 — "I've been listening to dumb presidential addresses, particularly on the topic of energy, since the mid-1960s," says our resident oil field geologist Byron King. "But I have to confess that Obama's speech sets a new low point for utter ignorance, if not conscious mendaciousness, on the topic of energy."

For starters, that reduction of oil imports by a third over a decade? That's not over the next decade. "The start date is Mr. Obama's inauguration, in January 2009," Byron points out. "How convenient. Just on the basis of the recession, U.S. oil imports have fallen from 11 million to 9 million barrels.

"Perhaps we should morph the current recession into another Great Depression and accomplish that one-third reduction goal quickly, once and for all!

"Then there's the idea of blaming oil companies for not drilling their offshore leases. This from the president whose administration has imposed an almost one-year 'moratorium' on issuing permits for offshore exploration and drilling. And who, by the way, opposes extending all leases, as a matter of course, by the amount of time that the Department of Interior has refused to issue permits.

"The bottom line is that Obama's speech yesterday was one more in a descending series of bad speeches, over many decades, from a long chain of U.S. presidents."

And it does nothing to change Byron's long-term energy investing thesis: The world will continue to run on liquid hydrocarbons (that is, oil) for decades to come… and that fuel source will be more and more difficult (and expensive) to pull out of the ground.

0:59 — Meanwhile, the president is making noises about "modernizing" the Food and Drug Administration.

"I've gotten a lot of commentary," he remarked recently, "about the fact that… essentially, their model was designed for the kind of medical devices you see in museums."

What sort of changes this means, well, the president hasn't offered many specifics yet… even fewer than in the energy speech.

1:07 — "This is more kabuki theater," says our tech and biotech maven Patrick Cox, himself not one to mince words. "So over two years into his term, Obama discovers that regulations slow economic growth. He's so smart.

"If, however, deregulating the medical and drug industries actually mattered to him, he wouldn't have pushed for the worst and biggest regulatory ramp-up in the history of America — Obamacare. So reforming the FDA is not high on his agenda.

"The FDA will, however, use his words as an excuse to ask for more money, saying they're not approving enough drugs because they don't have the money, which is nonsense.

"What they ought to do is regulate less, not more. Milton Freidman proposed that we take the FDA's power to keep drugs off the market away from them and turn it into a super peer-review agency that would provide doctors and patients with all they data they need to perform their own risk analysis.

"The FDA can destroy medicines by keeping or taking them off the market. That power requires onerous bureaucracy. They're not going to give up the power to control or reduce the burden they place on society unless they are forced through the enactment of real legislative reforms."

But as we've pointed out in this space before, the U.S. market is becoming less relevant for tiny companies looking to bring innovative treatments to market. For instance, one of the stem cell research firms Patrick follows has extensive operations in China.

In other words, regulators can't stop the innovators from achieving breakthroughs — and delivering life-changing wealth to early investors. Patrick likes to cite the example of the wealth you could have achieved investing in the Gutenberg printing press back in 1440.

That's the kind of potential he sees in seven companies he's eager to tell you about. He's so eager, he convinced us to arrange it so you can learn their names and ticker symbols free, at no risk to you. Here's how.

1:25 — Stocks opened flat today as traders digested the latest weekly number of first-time unemployment claims — 388,000 — ahead of the monthly jobless figures due tomorrow.

"Volatility is declining this week," notes Jonas Elmerraji of our small-cap team. The VIX dipped below 18 this morning, after peaking near 30 two weeks ago. "That's no surprise given the practically flat price action across most asset classes.

"As we approach a whole new trading month in April, it'll be crucial to keep a close eye on all markets, not just stocks," Jonas advises. That's because this sort of reduced volatility is rarely sustainable, and a volatility squeeze is likely to spark a big move."

1:32 — "Uranium isn't the only commodity negatively affected" by the disaster in Japan, Chris Mayer says. "Grain prices have tumbled also, in part because Japan is the world's largest importer of food.

"Japan, the thinking goes, will spend less on food. I think grain prices are falling for other reasons, as well. They got too far ahead of themselves anyway and were due."

Chris warned on Feb. 23 that grain prices were due for a 15-20% correction. Almost on cue, they took a dive, tentatively recovered and started tumbling again.

"The charts for soybeans and wheat look similar," says Chris. "We still have the U.S. planting season ahead. A robust seeding of acreage ought to drive grain prices even lower.

"Remember, the unrest in the Middle East hasn't gone away yet. We'll see reduced demand from those countries as well. Plus, at this point, the entire global recovery looks to be in jeopardy. All the projected increases in grain needs from more-rich Western-style diets won't come to fruition. At least not in the time frame first thought."

Indeed, "all commodities are vulnerable right now," says Chris, "with the exception of the energy complex (excluding uranium, of course)." He remains especially bullish on the prospects for natural gas.

1:49 — Gold is moving back toward the record territory it touched earlier this month. At last check, the spot price is $1,435. Silver is moving up in tandem, at $37.74.

1:54 — The dollar is weakening, but not much. The dollar index has slipped back below 76, to 75.91.

1:57 — One more step on the road to insolvency for Social Security: Thanks to two related phenomena — high unemployment and baby boomers choosing to retire — the number of new Social Security and disability claims is rising.

The Social Security Administration took in 10 million claims during 2009 — up from 8.2 million in 2004. Bad news for the agency at a time less revenue is rolling in, thanks to the payroll tax cut most folks paying into the system got at the first of the year.

And all this at a time when Social Security went into the red exactly six months ago — it's just more supporting evidence for the alternative income sources Lifetime Income Report editor Jim Nelson has sniffed out.

2:32 — Here's an intriguing indicator: Americans are drinking more Scotch whisky — that is, the stuff produced in Scotland. Shipments to the United States grew 19% in the second half of last year, according to the Scotch Whisky Association.

Indeed, Americans are basically propping up the industry at this point, seeing as worldwide shipments fell 2% during the same period. Demand is falling off a cliff in the PIIGS countries: Shipments to Greece plunged 26%, and shipments to Spain fell 15%.

2:58 — In contrast, U.S. consumption of beer is down. "U.S. beer sales were down 2.2% in 2009," notes Penny Stock Fortunes editor Greg Guenthner.

"In 2010, U.S. beer sales continued to sink, dropping an estimated 2.7% for the first half of the year." Import sales turned in an even worse showing.

"During this drawdown," says Greg, "the craft beer subsector picked up the slack. Craft brewing sales in 2009 totaled $6.9 billion, according to the Brewers Association, up from $6.3 billion in 2008. Domestic craft beer production has grown consecutively since 2008. During the first half of 2010, the craft brewing industry tallied sales growth of 12%.

"Still, craft beers make up a very small amount of the total beer sold in the country. So even though the growth thus far has been impressive, there's plenty of room for the industry to gain significant market share."

Greg names his favorite pick in the sector in our newest video, 6 Stocks for Right Now. This video also features Jim Nelson, Jonas Elmerraji, Patrick Cox, Chris Mayer and Byron King. The stocks they name are the "best of the best"… and it will be released tonight to members of the Agora Financial Equity Reserve.

To recap how it works: You pay a low one-time fee for entry — less than you'd pay if you subscribed to each service separately for only one year.

In exchange, you get lifetime access to all of our stock-picking services… plus, free admission to the annual Agora Financial Investment Symposium in Vancouver.

We've added two new services to this suite over the last eight months — Penny Momentum Trader and Technology Profits Confidential — making it an even better value than it was before.

As such, tonight is the last night membership will ever be offered at the current rate. And you'll get the video 6 Stocks for Right Now. When we released a similar video six months ago, we got letters like this:

"I had success with Patrick Cox's recommendation — up from $2.25 to $2.89. This single recommendation paid for my entire Equity Reserve!"

We want to get a letter like this from you. Again, tonight is the last time you'll ever be able to get in at the current rate. Here's your final chance to review the benefits and privileges of membership.

3:42 — While we have alcohol on the brain (so to speak), we note that drinkers in New York are pretty frosted about… ice.

You want ice? That's $4 extra!

A trendy Manhattan bar called the Darby has been outed for upcharging customers who want their drinks on the rocks. A Johnnie Walker Scotch whisky, which as we noted more Americans are drinking these days? That's $4 extra if you want ice.

"We use more alcohol for a drink served with ice," explains the bar's general manager. He also notes this is more common practice than you might think — but his establishment itemizes the ice on your receipt.

4:25 — "If my recall of an old accounting class is correct," writes a reader, weighing in on our corporate income tax debate, "corporations do not pay any taxes. It is a cost of doing business, marked up like all costs and paid by the consumer.

"Zero corporate taxes would help reduce the cost of goods and services, but the money would probably go to those executives who are already grossly overpaid."

4:41 — "It's always amazing to me when a nonbusiness owner pipes in on the struggles of owning a company in the U.S.," adds a reader who's cheesed off at the fellow reader who said he "struggled to understand why I should feel bad for Cisco."

"I owned a company in California for 20 years," our correspondent continues, "and finally sold it overseas, as we just could not keep up with the taxes and environmental garbage from 10 different three- and four-letter acronyms and more. And it was not the labor cost, as the plant was so automated we could build faster, better and cheaper than any other plant in the world.

"Even with a in house lawyer, there was no way to keep our heads above the lies, corruption and just plain silliness that was tossed at us every day, and I could not afford the bar bills any more.

"I can not even imagine starting a business in the States now, I would not subject myself to the horrors of the self-righteousness of the bureaucrats and a 78,000-page tax system that no one understands, but is manipulated to the benefit of the IRS to whatever that happens to be the flavor of the month.

"Now I'm on the beach running bigger companies with no worries. Forgot to mention we fired 250 employees and left the country. There went that tax base."

5:00 — "When the wife and I owned a small business," adds another reader, "at the end of the year when the corporate tax plus Social Security came to fruition, we always wondered why we were in business.

"Now that we are out and looking back, I say, ‘Pity the small businessman.' If he's somehow able to carry the world on his back, then watch out for the BS lawsuits.

"This is a hard nation on small business. Part of the problem he can't afford a team of accountants to get him through the loopholes."

The 5: Well, since you bring that up… we checked on the progress Congress is making repealing the infamous 1099 provision of the health care law — the requirement to send Form 1099s to every vendor from whom a businessperson buys more than $600 of goods each year.

It still hasn't been repealed. God help us, Congress is still wrangling over how to make up for the "lost" revenue.


Dave Gonigam
The 5 Min. Forecast

P.S. "Lately," writes one last correspondent, "I've been reading a lot about the Equity Reserve and all of the benefits that accrue to new members. Is there a significant difference to Agora Financial Reserve? Are we Agora Financial Reserve members now passe, without status of any kind? Could this be a debasement of the coinage, so to speak? Am I missing out on something, pray? Please enlighten me."

The 5: The Equity Reserve responds to the needs of a certain kind of customer — one who wants access to our full array of stock-picking services, without paying for options trading services he'll never use. So membership in the Equity Reserve costs less than the Agora Financial Reserve — no "debasement" going on here.

Now, if you're one of those readers for whom the Equity Reserve might suit your needs, you need to be aware: Because we've added new stock-picking services during the last year, the price of membership in the Equity Reserve will go up once our current membership drive winds down tonight.

With five entry-level advisories and four premium services, the Equity Reserve delivers unparalleled value. For less than the cost of two years' membership in our most-expensive service, Breakthrough Technology Alert, you can secure lifetime membership in all our stock-picking services… plus free admission to our annual gathering in Vancouver.

Again, after tonight, it will never be offered again for this low one-time fee. Here's your final chance to take advantage.


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