- China calls Washington’s bluff with “ethical oil”: Byron King on the petro story no one else is telling…
- Has it been six weeks already? Handicapping QE3 prospects as the Fed meets yet again
- Americans snap their wallets shut as signs of a pulse appear in the heretofore lifeless housing market
- Homemade weaponry, 21st-century style… The 5 tackles another Internet myth as we dive into the virtual mailbag…your last chance to beat a price increase on Vancouver video and audio… and more!
“China seeks resources wherever and from whomever it can strike a deal with,” says Byron King. Whether oil, natural gas, base metals, tech metals, rare earths — “China needs it all.”
MarketWatch called upon Byron’s expertise to examine one of the big stories that broke while we were up in Vancouver last week — the Chinese oil giant Cnooc picking up the Canadian oil-sands firm Nexen for $15.1 billion.
Alas, that was the only insight of Byron’s that made it into the article. At the risk of mixing media metaphors, everything else was left on the cutting-room floor.
No fault of the reporter; it’s the curse of mainstream media, which goes a mile wide and an inch deep. Today, with Byron’s considerable help, we aim to go deeper.
“China is now testing the waters in North America,” he says, “after Cnooc’s failed effort to pick up Unocal in 2005.
“This is part of China’s search for energy security going forward. And it’s not ‘just’ the oil and gas. That is, China seeks access to world-class levels of exploration and development technology, certainly within the energy industry.”
“Nexen is a world-class asset, but perhaps not the ‘best’ of the Canadian oil plays. Still, Nexen is sizeable — and the overall deal is nearly comparable to the unsuccessful 2005 Unocal effort, in fact. So Nexen is an exploratory effort by the Chinese, to see if the door to invest big in Canada — for energy, no less — will open up.”
In addition, China might be testing for whether Western nations will react with a double standard.
“The West (U.S./Euroland), “says Byron “often criticizes China for fishing in troubled waters — e.g., oil from Sudan or Iran, or minerals from the Congo, etc. On this front, China gets harsh criticism due to human rights issues and other political differences that Western governments have with the regimes in Venezuela and Iran.”
“Yet if you talk with the Chinese, they’ll tell you that they’re just looking out for their own national needs for energy and minerals. So now, we have China looking to acquire some of Canada’s so-called ‘ethical oil.’ This sets up a moral argument by the Chinese, that they’re doing the right thing by taking over Nexen.”
Meanwhile, we’re about to find out if Canadian Prime Minister Stephen Harper is serious about diversifying his country’s customer base.
“Canadian law governs the Chinese purchase offer,” says Byron. “There’s a legally vague concept of whether or not there’s ‘net benefit’ to Canada. Translation? It’s whatever the PM says it is. The ball is in Mr. Harper’s court.”
“Harper has to balance the national interests of Canada for foreign investment, and sustained energy development, with the strategic trade and energy relationship with the U.S. Perhaps it’s time for a beer summit with President Obama?”
Byron says you can trace a direct line from the Nexen deal back to the White House’s deferral on the proposed Keystone XL pipeline from Canada through the Great Plains. “At the diplomatic level, the Keystone decision was a severe affront to a longtime ally and partner in just about everything. The next question for Canadians was (and remains) whether or not to be held hostage to the geography of the North American interior. Must Alberta’s energy wealth remain stranded from world markets?”
“With the Cnooc run at Nexen, China is calling the bluff.”
[Ed. Note: Byron’s talk last week at the Agora Financial Investment Symposium was one of the most well received. He laid out a blueprint for the revival of the U.S. economy, drawing lessons and cautionary tales from the Roman Empire, 18th-century Britain and especially from the U.S. experience in World War II. It was a tour de force.
He also spelled out his favorite resource investing plays at the moment — ideas that will thrive even if his blueprint lies on a table gathering dust.
You can get HD video of Byron’s presentation, and a concise write-up of his investment recommendations, as part of the “virtual access” we offer to last week’s Symposium. There’s nothing like being there in person… but this package is truly the next best thing. Heck, you get a chance to rewind if you missed something the first time.
If you want to act, the time is now: The price of this exclusive package rises up to 50% at midnight tonight.]
Stocks are treading water again today. At last check, the Dow and the S&P were down fractionally, the Nasdaq and Russell 2000 up fractionally.
Volume is thin, traders making themselves as scarce as spectators at a London Olympic venue. And the traders who are around are holding their breath for whatever the Fed decides tomorrow and the European Central Bank decides Thursday.
“Stocks are still finding higher ground,” writes Greg Guenthner. “Yet they haven’t exactly taken the straightest path. Since the early June bottom, the S&P 500 has followed every thrust higher with a pullback of almost equal strength.”
Emphasis on the word almost: “Despite the choppy action,” says Greg, “stocks are finding higher highs and lower lows since the June bottom.”
We’re getting close to the launch of expanded our technical trading service, helmed by Greg and Jonas Elmerraji. They closed a textbook trade only today — an 11% gain in three weeks.
If you’re looking for double-digit gains in a three-four-week time frame, and you want to stick with a regular brokerage account, you won’t want to miss our announcement next week.
Meanwhile, if you’re looking for a sign that the Fed will launch QE3 tomorrow, you won’t find it in a chart spotlighted by Jonas Elmerraji.
The Fed’s five-year forward break-even inflation rate is what you get when Fed wonks run a formula through a computer evaluating Treasury Inflation Protected Securities (TIPS). It’s a guess at where investors believe inflation will be five years from now.
Every round of QE has coincided with the rate touching 2.2%. As of last Thursday — the most recent figure available — it’s 2.38%.
Home prices are flattening, or so says the latest Case-Shiller home price index. It rose 0.9% in May, marking three consecutive monthly gains.
The year-over-year change works out to -0.7%. Assuming continued improvement, next month’s report could turn in a positive number for the first time in 18 months.
Out of the 20 metro areas that make up the index, 18 showed improvement, led by Chicago and Atlanta.
Americans earned more in June, according to the Commerce Department… but they were loath to go out and spend it. The agency reckons personal income grew 0.5% last month… but spending was ruler-flat.
The eye-opener in this month’s “income and spend” report was the annual revisions. Income was revised down for 2009, 2010 and 2011. Spending was revised down for 2009 and 2010, and revised up — barely — for last year. How’s that “recovery” working out for you?
Meanwhile, “core PCE” — the Fed’s favorite measure of inflation — rose 1.8% over the last year, close to the central bankers’ 2% sweet spot.
Here’s a story that has it all, 5-wise… personal freedoms, cutting-edge technology…
It involves a 3-D printer a revolutionary device described recently by Laissez Faire Books’ Jeffrey Tucker: “This technology has moved with incredible speed from the realm of science fiction to the real world, seemingly in a matter of months.”
“You can get such printers today for as low as $400. These printers allow objects to be transported digitally, and literally printed into existence right before your very eyes.” Some people use them to copy house keys. Others make shoes and gloves. Still others make toy robots.
And now someone going by the Internet handle “Have Blue” has managed to make a firearm…
Strictly speaking, only the lower receiver was made with the 3-D printer. But it’s part of a working AR-15. “The lower receiver of a factory-produced AR-15 is usually made of metal, typically stamped aluminum,” writes Neil McAllister at the tech site The Register. “Have Blue made his out of the standard ABS plastic used by low-end 3-D printers. He then combined it with off-the-shelf metal AR-15 parts to complete the weapon.”
It successfully fired .22 caliber pistol rounds. It didn’t perform so well with .223 rifle ammo.
Assuming Have Blue’s story is for real, he’s successfully skirted the gun laws — for it’s the lower receiver that, until now anyway, comes with a serial number and has to be bought from a federally licensed arms dealer.
Quite a step up from hacking your shower head, we’d say…
“I am not at all surprised by Casey’s comments,” writes a reader who noted the outrage those comments in Vancouver generated during yesterday’s episode.
“I read a previous article in which he condemned contributions to charities. I was appalled even then. I am glad that others are seeing this man in his true character. I only hope that in his case, what goes around comes around. I applaud The 5 for printing the comments of those who are offended by his views.”
“The ‘ice floe’ verdict in preindustrial era,” writes another reader, “was reserved for the tribe’s psychopaths, not the elderly.”
“Today psychopaths are believed to make up 10% of Wall Street types. Read up on the work of Robert Hare, Ph.D.”
The 5: We did… and we found an Internet meme that took on a life of its own about four months ago.
Hare examined 203 corporate professionals in a single experiment; he told the website Psych Central the group was not randomly selected nor “necessarily representative of managers or executives, or of the corporations in which they work.”
Further, the number was closer to 4%, and Hare said his research “cannot be generalized to the larger population of managers and executives, or to CEOs and the ‘financial services industry.’”
It appears a psychologist who treats financial services professionals cited Hare’s work in an interview with CFA Magazine, casually tossing off the 10% number. From there, it filtered into the general media.
Funny how this stuff takes on a life of its own, eh?
“Don’t your readers see enough of Mr. Casey’s writing style, in clips and full articles, that they recognize his blunt, irreverent style (which, by the way, some of us appreciate)?”
“This reader did not jump to the conclusion that Mr. Casey was espousing social efficiency as a strategy to get us out of the hole we have dug ourselves into. The more-sobering subcontext for me is that we can expect the misguided ‘thinkers’ to further fuel the fire of inevitable ageism as the bubble of boomers becomes too many takers and too few left to tap. When they do realize that our generation ‘used up all the fun,’ I suppose a Soylent Green future isn’t too far-fetched.”
“Thanks for keeping the ideas flowing. If there is a way out of this mess, it has to be the breakthrough innovations so often mentioned. If someone did an idea count, coming even from just Agora’s free newsletters these days, it has to have at least tripled in velocity versus a couple of years ago. More ideas and more dialogue will drive more innovations that drive more value. I guess in your own moral way you’re engaging in your own form of market manipulation. Thanks for that!”
The 5: And thank you for what amounts to a glowing testimonial for the ideas that flowed freely in Vancouver last week.
“We live in an unprecedented age of financial threats, tax hikes and increasing government regulation,” wrote Symposium director Bruce Robertson this morning. “Yet we also live in an era of technological innovation that’s extending human life spans, unlocking new energy deposits and creating amazing new products.”
Our all-star speaker lineup delivered scads of ideas to skirt the dangers and seize the opportunities. If you couldn’t be with us last week, we still want to get these ideas into your hands… via the HD video or crystal-clear audio recordings of the sessions. Only a few hours remain before the price goes up as much as 50%.
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Nearly two-thirds of the people who’ve signed up for this year’s Vancouver recordings have chosen the video option.
But no matter your preference — to watch at your desktop or listen on the go — we have you covered. The deadline to beat the price increase is midnight tonight.