Dave Gonigam – January 20, 2012
- “A terrifying precedent”: Government takes down website, puts up barbed wire fence around First Amendment
- The best-performing commodity of the last 10 years? Frank Holmes with a surprise… Plus, a commodity sector on which Eric Sprott is bearish
- Byron King with two reasons oil will likely stay near or above $100
- Restaurant meals rising in price more slowly than meals at home: Dan Amoss uncovers the resulting investment opportunity
- If you don’t see this sign, call this number… a host of provocative reader replies about the Keystone XL pipeline… the ultimate irony of NYSE’s gambling ban… and more!
“The state system of oppression operates independent of the political puppet show,” observed Laissez-Faire Books editor Jeffrey Tucker by email this morning.
The “puppet show” is the change of heart many members of Congress had about the Stop Online Piracy Act (SOPA) after the protest/blackout by Wikipedia and other websites on Wednesday…
The system of oppression kicked in within 24 hours of the protest… as users of the Web’s 13th most-visited site were greeted by this…
Megaupload.com is (was?) a file-sharing site where you could send files too big to transfer via email. At the behest of Hollywood and the recording industry, the feds took down the site, while its owner and three employees were arrested in New Zealand.
“Unbelievable,” sums up an outfit called Demand Progress: “After history’s largest online protest, the U.S. government nonchalantly responds with the middle finger.”
“A terrifying precedent,” adds the Electronic Frontier Foundation. “If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?”
What indeed? Alas, the precedent it sets for freedom of speech appears lost on our craven defenders of the First Amendment in the news media. “The founder of this company is a big guy who lived in a huge mansion in New Zealand,” prattled NPR reporter Laura Sydell this morning, during a report that nearly made Addison veer into a guardrail on Interstate 83.
“Apparently, they confiscated something like $6 million worth of really expensive cars, he had a black Rolls-Royce with a license plate that said ‘GOD’ on it… Apparently, he had made something like $42 million off of Megaupload.”
The part about “So he must have been doing something wrong” was merely implied…
And then there’s collateral damage from the takedown of Megaupload — the millions of people who’ve used it to post photos, home videos and whatnot that don’t violate copyright.
But today, they’re just as inaccessible to their users as the “pirated” stuff.
That’s what happens when the state system of oppression proceeds unabated. Another instance: speed and red light cameras.
That was a source of contention this week close to home in Baltimore County: The County Council voted 5-2 to renew the contract of the firm that maintains 18 speed cameras; indeed, the number of cameras might be doubled.
There was mild protest: “One thing I don’t want to do is have Baltimore County start to look like the city,” said Councilman Todd Huff, “where you’ve got cameras on every street corner.”
“Then you just get to the point where it feels like somebody’s always watching you.”
Indeed. And you don’t have to be guilty of a thing…
Onto the markets: U.S. stocks are mixed today. The Dow is up, the S&P is down (but still holding 1,300), the Nasdaq and the Russell 2000 are also slightly in the red.
Precious metals are picking up strength as week’s end approaches. Gold is up to $1,661, while the bid on silver is $31.06.
Which commodity is tops over the last 10 years? “A precious metal was the best performer,” says U.S. Global Investors chief and Vancouver favorite Frank Holmes, “but it’s probably not the one you were thinking of.”
“With an impressive 20% annualized return, silver is king of the commodity space over the past decade, with gold (19% annualized) and copper (18% annualized) following closely behind.”
“Notably, all commodities except natural gas outperformed the S&P 500 index 10-year annualized return of 2.92%.”
Frank unpacks all 14 commodities that make up U.S. Global’s famous Periodic Table of Commodity Returns in today’s Daily Resource Hunter. Click on the table to get the goods… and Frank’s 2012 outlook for gold, silver, oil and more.
Canadian fund manager and commodities legend Eric Sprott remains bullish on precious metals going into 2012. Base metals, not so much.
“I am not bullish on cyclical commodities such as iron ore, coal, steel, lead and zinc, because I am worried about this economic contraction that everybody is talking about,” he tells Reuters.
Crude? He’s still bullish there. “It’s getting tougher and more expensive all the time to produce energy. I think that’s a pretty good foundation for the oil prices hanging in there.”
Crude prices are set to end the week below $100 for the second straight week.
After popping into triple digits on Monday and staying there since, a barrel of West Texas Intermediate has settled back to $98.40 as of this writing.
“Over the long haul, oil supply will remain tight for a long list of reasons,” says our Byron King — concurring with Mr. Sprott.
One of those reasons is the one Rick Rule cited in The 5 earlier this week: Saudi Arabia’s declaration that it wants to keep oil near $100 near and medium term.
“That’s another way of saying that the Saudis need a steady, predictable level of oil money to run their petro-state,” Byron says. “There’s a restive population, and potential revolution to co-opt. I suspect that the Saudis will turn the valves on and off to keep the world oil supply pricing out in that $100 range.”
On the other side of the Persian Gulf, Iran keeps making noises about closing the Strait of Hormuz. “In terms of propaganda, the Iranians present themselves to the world as a warrior race, led by a bunch of bold, military geniuses,” Byron says. “You can make your own judgment on that point, but meanwhile, the markets do their thing by bidding up the price for oil.”
“At the same time, with far less bluster, but plenty of malice aforethought, the Iranians have warned Saudi not to engage in its ‘swing producer’ role by increasing oil output to make up for any oil that gets bottled up in Iran. This kind of intimidation also serves to keep oil pricing firm.”
“The bottom line is that the oil biz is all about money. War is bad for business. But rumor of war — and rumor of supply interruptions — is good for business. The Iranians understand this.”
Of course, events can rapidly spiral out of control. You might want to prepare for that possibility.
Restaurant meals are becoming more affordable — relatively speaking, anyway. And that’s yielded up an investment opportunity for our short specialist Dan Amoss.
We noted yesterday that during 2011, food prices rose 6%, at least in the addled estimation of the Bureau of Labor Statistics. To be precise, that’s food consumed at home.
Away from home, the increase was a more modest 2.9%. That tells Dan one thing: “Margin squeeze” is in full swing as restaurants have trouble passing along rising costs to strapped consumers.
“U.S. households will continue to save and economize as much as they can and spend only on things that provide clear value,” he says. “This will crimp demand for meals out — especially among middle-class households.”
“Restaurants are a high fixed-cost business. As fewer sales are spread over fixed costs (utilities, rent, labor, etc.), earnings can fall rapidly.”
Dan’s out this morning with the new Strategic Short Report — pinpointing a restaurant chain that looks especially vulnerable. Coming on the heels of his 2011 call for the bankruptcy of American Airlines — delivering a 95% gain for his readers — you’d do well to give Dan’s research your careful consideration.
Looking for a growth sector? Look no further than high-frequency trading in emerging markets.
Already accounting for 50-70% of trading volume in the United States, HFT is about to take emerging markets by storm. The Bombay Stock Exchange forecasts HFT volume in India will double in the next three years. Meanwhile, last month, Brazil lifted a transaction tax on foreign investors that had the effect of suppressing HFT.
“These are enormous markets that are about to open up to faster trading,” notes our Jim Nelson — who ordinarily couldn’t care less about HFT. He recommends solid dividend-paying stocks, some of which his readers have been in for three years and counting.
But one such company stands to gain big-time from the growth in HFT. Indeed, without the “transmission belt” of information this company provides, HFT would shut down tomorrow. It’s among a host of income-producing plays in Jim’s Lifetime Income Report portfolio.
We’re tempted to present this picture with no further comment…
Indeed, we’re going to yield to that temptation. We’ve read a couple of articles that try to make sense of the insensible. They fail. In the interest of respecting your time, and maximizing our 5 Mins., we’re moving on…
“Sooner or later a pipeline springs a leak,” writes the first of many emails we got about the latest delay in the Keystone XL pipeline.
“The proposed path goes over the Ogallala Aquifer. Does it not make sense to rethink that route?”
“People don’t realize,” adds another, ”there is a lake under all of Nebraska and other states that is as big as four or five of the Great Lakes in surface area.
“Nebraska does not want the pipeline, but Obama does want it. He just wants to see if there can be a better plan that has not been located yet that is not across the Ogallala Aquifer. We would not want a shortcut pipeline across Lake Michigan.”
“The governor of Montana (D) appeared on Fox yesterday,” a third reader chimes in, “and explained it this way: Montana has approved of the route, as has South Dakota. Nebraska doesn’t have an approved route.”
“So what we have is a pipeline to nowhere. States don’t need federal permitting to approve pipeline routes, but since this one crosses an international border, the Department of State must sign off on it. Since there has been no final route presented, State has nothing to approve.”
“According to the governor, Nebraska is six-nine months away from having an approved route. Thus, even though he is politicizing it, the worst president in U.S. history has not denied the pipeline.”
“Quite a few readers correctly point out that energy sources from safe, friendly countries like Canada should be preferred to imports from the Middle East.”
“The problem is insanity rules nowadays politics. Besides that, reducing imports from volatile areas reduces the number of excuses for endless war and astronomical ‘defense’ expenses as well as the continual erosion of our freedoms. Except for Ron Paul, who else on Capitol Hill would want that to happen? What better excuse for yet another war than ‘keeping the supply lines (i.e., the Strait of Hormuz) safe’?”
“Not to mention that pushing Canada to build a pipeline to the Pacific and sell oil to the Chinese sets up reasons for future conflicts with China itself. ‘The best enemy (fiat) money can buy,’ again. The decision is not stupid; it is outright evil.”
“Creating jobs at home for young people, instead of pushing them into military ranks? God forbid!”
“Always a pleasure to read The 5.”
“We can all see Keystone as a political tool,” writes one more. “Just wait until gas again approaches $4-plus and the public will want the politicos to ‘fix the problem.’”
“Where do you think is the first place they will go and then claim all the credit for what a good job they did of producing jobs and solving energy problems?”
“Really, we will just watch it unfold in the near future.”
“Let me get this straight,” writes our final correspondent after seeing the NYSE’s reminder that gambling on the trading floor is prohibited.
“The largest gambling agency in the world (the U.S. stock market) prohibits other games of gambling on the floor unless of course they stand to profit from the fees charged and the spreads of their gambles on stocks?”
“At least in a casino there are watchful eyes and cameras to catch cheaters.”
The 5: To say nothing of free tickets to a show if the house notices you’re having a serious streak of bad luck…
Have a good weekend,
The 5 Min. Forecast
P.S. “Kodak fell victim to one of the classic blunders,” says our tech team’s Ray Blanco about the legendary firm’s descent into bankruptcy this week.
“It was out-innovated in the camera market by competitors. A new technology, digital photography, took the world by storm. Although the company was itself a pioneer in the field, it wasn’t able to fend off a wave of competitors also entering the space. In short, it didn’t capitalize on its own digital inventions.”
Unearthing the next generation of disruptive technologies is what Ray does each month in Technology Profits Confidential. The next issue will zero in on a discovery Ray and Patrick Cox made last week at the Consumer Electronics Show in Las Vegas. Not a subscriber yet? You don’t know what you’re missing.