Israel’s wealthiest man died on Friday. His story spotlights one of the most lucrative investing opportunities in the world… and you don’t have to be a billionaire to access it.
Shipping magnate Sammy Ofer was 89. He and his brother Yuli had a combined net worth of $10.3 billion. But he died under a bit of a cloud: Only days earlier, the U.S. government slapped their firm with sanctions for selling an oil tanker to Israel’s archenemy Iran.
Officially, the Ofer brothers claimed they had no idea the buyer was a front company for Iran.
Unofficially, the deal might have been the latest in a long line of Israeli covert ops aimed at Iran. For years, cargo ships owned by Ofer’s firm were used to send Israeli special forces into Iran, according to the Times of London.
“Military experts suggested,” reports the paper, “the cargo ships carried Black Hawk helicopters, hidden in modified containers, for use by commando teams in reconnaissance missions against Iran’s secret nuclear sites.”
The Israeli government swears up and down there’s nothing to this. But Prime Minister Benjamin Netanyahu praised Ofer upon the news of his death as a “Zionist through and through.”
Ofer’s story sounds a lot like that of the legendary commodities trader Marc Rich. Even after the ayatollahs took over, Iran remained his leading source of oil for the better part of 15 years. And much of that oil ended up in Israel.
“He was always able to bring together impossible business partners such as, for example, Iran and Israel after the fall of the shah,” says Rich’s biographer Daniel Ammann, “and I think this was one of his biggest successes.”
Ultimately, those dealings got him in trouble with U.S. prosecutors — it was on the back of the Marc Rich case that Rudolph Giuliani made a name for himself. When President Bill Clinton pardoned Rich just before leaving office, we were told it was a favor to Rich’s ex-wife Denise, a big-time Democratic fundraiser.
That was a convenient story line for cable news channels, and an excuse to replay archive video of a buxom Denise Rich with a goatish-looking Clinton for the next three days.
But equally important, said Ammann, “were the Israeli dignitaries who came forward to put in a good word for Marc Rich because he had been very helpful to Israel in supplying oil and in cooperating with the Israel intelligence service Mossad.”
Aside from some good spy stories, your 5 editors are compelled to ask, what’s it to us? Well, Israel’s government is Washington’s closest ally in the Middle East. Israel’s economy is the most productive in the Middle East, going by per capita GDP. And that economy runs in large part on an oil supply that’s 99% imported.
This brings us to a bigger question: Where does Israel get most of its oil from, anyway? It sits in the middle of a region awash with oil — but also unfriendly governments.
“Israel’s situation is complicated,” said the nation’s infrastructure minister in 2004. “We don’t have diplomatic relations with most of the countries from which we import oil.”
“Over the past 25 years,” says a 2006 Slate article by Daniel Engber, “significant fuel imports have come from Angola, Colombia, Mexico, Egypt and Norway. In more recent times, the Israelis have turned to Russia, Kazakhstan and some of the other -stans for the bulk of their oil.”
Egypt once figured big in this equation, thanks to the 1979 peace treaty. The nation supplied one-third of Israel’s imports as recently as 1995. But as we’ve chronicled before, last year, Egypt began consuming all the oil it produced. It has ceased to be a net oil exporter. What Mubarak used to sell to Israel, the new government needs to keep angry mobs at bay.
So what do the Israelis do now?
Luckily for the Israelis, high-tech offshore exploration techniques have uncovered an oil and gas find in the Mediterranean so huge, it’s been given the name Leviathan. Indeed, it might turn Israel into the world’s biggest oil producer.
The World Energy Council estimates the potential reserves at 250 billion barrels. For context, Saudi Arabia is assumed to have the world’s largest reserves at 260 billion. And as the late Matt Simmons documented in Twilight in the Desert, there’s reason to be extremely skeptical of that figure: It hasn’t changed in 30 years, even though the Saudis have made no new “elephant” discoveries to make up for all the oil they’ve pumped out.
Even if it doesn’t turn Israel into the world’s biggest oil producer, Leviathan’s potential is immense. “The geology off the coast of Israel,” our Byron King explains, “has every indication of meeting criteria for a major ’petroleum system.’ It has analogues with other of the world’s best hydrocarbon-rich areas.
“There are salt layers similar to, but not as thick as, the pre-salt of Brazil. There are structures and stratigraphic traps, like off West Africa, with oil plays like Angola and Namibia.”
Readers might recall that offshore Namibia was where Byron uncovered a spectacular play for readers of his premium advisory, Energy & Scarcity Investor — up 633%. He sees even greater potential for a tiny company working this Israeli find. And as of this morning, shares can still be had for under $1 each. Let Byron tell you the whole story in this presentation.
U.S. stocks are adding onto last week’s losses. The S&P 500 managed to cling to 1,300 by the close on Friday, but as of this writing, it’s down to 1,294.
“This past week,” says Options Hotline editor Steve Sarnoff, “sellers asserted their advantage and stock indexes moved lower. Weak economic reports on housing and jobs are beginning to rattle investors’ confidence. Now, they’re looking for Bernanke and crew to delve deeper into the Fed’s bag of tricks.
“Will it be QE3 or QE4? Will central bank quantitative easing programs start being numbered in Roman numerals, like Super Bowls? The problem is, there are no tricks… just more of Bernanke’s U.S. dollar-bashing scheme. The revving of the printing press and Ben’s helicopter engine are nearly audible.
“Supply is greater than demand and share prices are acting accordingly. Until proven otherwise by price, it is the sellers’ ball to run with. We shall see how far this correction deepens.”
Round numbers count for a lot in market psychology, but with the S&P below 1,300, it’s important to take a longer view. “Keep in mind,” says Penny Momentum Trader’s Jonas Elmerraji, “that the S&P’s secular uptrend line (from March 2009’s lows) is still well below us, around the 1,230 level.
“We’d need to see the S&P tumble through that critical trendline and the 200-day moving average before any sort of reasonable bear market fears become tradable.”
Precious metals are perking up as the week begins. For the moment, gold has cleared the $1,550 hurdle, and silver is back above $37.
The strength in the metals comes despite the dollar stabilizing. At last check, the dollar index has recovered slightly to 73.9 after a Friday afternoon drubbing that came after another “We’ve fixed Greece” announcement coming out of Brussels.
Yeah, as if this one will have any more long-term significance than the one last Tuesday. Or the one a year ago.
“Even if Greek politicians strike an agreement with the EU, the ECB and the IMF to put off restructuring for another year or so,” says Strategic Short Report’s Dan Amoss, “continued strikes and demands for default from the public risk making such a deal irrelevant. Eventually, Greece will default.
“When that happens, the wealthier European countries will have to recapitalize their large banks and the European Central Bank.”
Remember when Bank of America tried to repossess the wrong house? Or when they foreclosed on a home that was already paid off? Or how about the ones they foreclosed on that were paid for with cash?
One couple, victims of the last mess on the list, has managed to turn the tables… and foreclose on Bank of America.
On Friday, attorney Todd Allen showed up with two sheriff’s deputies at a Bank of America branch in Naples, Fla. He represents a couple who bought their house from Bank of America (BoA) for cash in 2009.
BoA foreclosed on the paid-up house in 2010. BoA dropped the case two months later, but only after the couple incurred $2,534 in legal fees. BoA dragged its feet — even after a judge ordered the bank to pay the fees. So Allen won a court order allowing deputies to come in and seize the bank branch’s furniture on behalf of his clients.
Hence, the standoff Friday.
After an hour’s discussion, the bank handed over a check rather than surrender some desks and chairs that the homeowners would have had to unload in a yard sale for a loss anyway.
“I don’t know of any other way we could have done it,” says Allen. Heh.
Last week, the Case-Shiller index showed a double dip in housing. But those are just the stats. When you look at the housing market on a case-by-case basis and see mortgage upon mortgage bundled up in a security and sold off in the market, with no record of it at the county recorder’s office, you have to think the housing market is thousands of billable attorney hours away from a bottom.
In this particular case — in which the bank foreclosed on one of its own properties that it sold, for cash — we have to think the bankers have set some sort of indoor record for stupidity.
“There’s no such thing as a ’debt ceiling,’” a reader writes, with a good point, albeit delivered in a frantic and confused state, “as our former President Bush showed us. He raised the debt ceiling seven of the eight years he was president, and I didn’t hear anyone being too upset then. Of course, in 1998, he raised it twice!
“Where was all the outrage and screaming then?”
“Now with a Democratic president, it is a really big deal, when he really inherited the big mess you all left him. I never voted for him, and this is exactly what I expected from him and you!”
The 5: Where to start? We’re assuming you mean 2008, not 1998, since Clinton was president in 1998. That said, Congress did, indeed, raise the debt ceiling twice in 2008. But it was a Democratic congress that year. Please at least try to get your facts in order before hitting “Send.”
That said, we’re not exactly sure how you think “we” left Obama with the mess he inherited. We can only assume you’re new to the class and recommend you read Financial Reckoning Day (2003), Demise of the Dollar (2005), Empire of Debt (2005) or any of their updated second editions published in 2008 or 2009.
Or if you’re too angry and flushed to read any of these books, try watching I.O.U.S.A., a documentary about the national debt that took 2½ years to make but was released before Obama was elected. You’ll note there’s no screaming or outrage in any of these works… neither will you find any of the inane partisanship you pander to in your email.
You will find that neither party is capable of reconciling the promises they make to get elected with the reality of getting the nation’s finances in order. Nor are they likely to succeed before they wreck the economy of a once-great and prosperous experiment in political history.
“You mention in Thursday’s issue cutting popular local services like police, firefighters and trash collectors,” writes a reader who hasn’t lost his bearings, “but if you’ll notice they only threaten to cut popular services.
“For example, when it comes to schools, they always threaten to cut teachers, but not the countless useless bureaucrats wasting money on the payrolls.”
The 5: There’s a saying in tech circles: That’s “not a bug, it’s a feature” of bureaucracy. “Essential services” will always be held out for sacrifice before the administrative personnel. After all, it’s the administrators who put the jobs on the block.
“If your reader in Colorado thinks he has troubles now,” writes another reader with another look at bureaucrats in action, “just wait until the Department of Labor comes knocking to discuss how he took his two employees off payroll and started paying them cash.”
“The Department of Labor added 200-300 additional investigators in the last year and a half — all hungry to find employer wrongdoings. In addition, the DOL recently announced an ’app’ to help employees calculate wages due from their employers.
“They will also provide people with a list of local attorneys who can assist them with private legal action if they are unwilling to wait for the DOL to assist them with their complaints.
“Oh, and be careful about taking any employment action (discipline, wage changes, termination, etc.) on an employee who made any kind of negative comment (or social media statement) about wages or the workplace.
“Besides claims of retaliation from the DOL, the National Labor Relations Board (NLRB) is considering these kinds of comments to be ’protected activity’ under the National Labor Relations Act (NLRA) and grounds for legal action even when the employees are not unionized.”
“I read the following and wonder if you have any comments on it for your readers:
’Beginning Jan. 1, 2013, the HIRE Act will impose a 30% withholding tax on many types of U.S.-source income and gross sales proceeds to foreign financial institutions like banks, insurance companies and the like. The only way to avoid the tax is for the foreign institution to enter into an information-reporting agreement with the IRS.’
“With this action, the U.S. government seems to be limiting the options that many of your readers will have to avoid the (potential) collapse of the U.S. dollar. Will EverBank also be impacted by this law?
“I read your column every day and always find it interesting and informative. Keep up the outstanding work you do.”
The 5: There’s more — and less — than meets the eye with the HIRE Act. On the one hand, nothing will change for any taxpayer who already reports his offshore holdings and pays taxes on them.
On the other hand, it makes foreign banks that much less likely to do business with Americans. It’s one more brick in the “virtual Berlin Wall” that’s going up around Americans and their money.
We’re making that the focus of our next issue of Apogee Advisory &38212; where you’ll find an appropriate solution set no matter what your net worth. If you want to be on board, here’s where to go.
There will be no impact on EverBank products, including its two newest products — the MarketSafe Diversified Commodities CD and the MarketSafe Timeless Metals CD. Check them out while you still can; the funding deadline is this Thursday.
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. “Most people don’t realize yet that Israel has the potential to be one of the world’s major oil producers,” says veteran geologist Harold Vinegar, who spent three decades with Shell.
His remark turns up in the current issue of BusinessWeek, in a story about Israel’s attempts to find oil in shale deposits onshore. What the story doesn’t mention is the immense potential of the offshore Leviathan field.
When the mainstream catches onto Leviathan, there’s no telling what could happen to the one stock that’s a pure play on this enormous find. Best to do all you can to learn about this opportunity now — in Byron King’s newest presentation.