Saudi Sees Shale Threat

July 30, 2013

  • Fracking sends Saudi prince into panic: Eye-opening graph underscores the “Tale of Two Americas”
  • Sign of the apocalypse? Uber-mainstream “New Keynesian” with kind words about gold in your portfolio
  • “Bullish for the whole gold universe”: Richard Russell spots a change in a key chart
  • Blackstone and other heavy hitters latch onto the “fire sale of the century”… but it’s not too late for you
  • Two days or four? Vancouver or elsewhere? A blizzard of email about the future of the Agora Financial Investment Symposium… and your last chance at the best available price on this year’s recordings

  “Our country is facing continuous threat because of its almost total dependency on oil.”

T. Boone Pickens in 2008?

No, Prince Alwaleed bin Talal, the Saudi Arabian billionaire investor, 2013. By “dependency” he means his country’s government depending on oil for 92% of its budget.

Last we heard from Alwaleed, he was busy suing Forbes for lowballing its estimate of his net worth. The magazine places him 26th on its list of the 400 richest people in the world; he thinks he’s No. 10.

It takes big bucks to have your shirt match your shades that seamlessly…

That said, whatever the size of his fortune, you don’t accumulate it without knowing a thing or two. So let’s look under the hood of his warning…

  Alwaleed “has warned that his country’s oil-dependent economy is increasingly vulnerable to competition from the U.S. shale revolution,” sums up the Financial Times.

The warning comes in an open letter to the country’s oil minister, copied to Alwaleed’s uncle, King Abdullah. The letter was dated May 13; Alwaleed saw fit to post it to his Twitter account Sunday.

“It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately,” the letter says.

U.S. production is now at levels last seen more than 20 years ago…

Result: U.S. imports from the OPEC nations sit at a 15-year low. The International Energy Agency projects demand for OPEC crude to drop like a stone over the next five years.

True, Alwaleed is something of a black sheep in the House of Saud, “frequently taking positions that differ from official policy,” the FT says. But it wouldn’t surprise us if the rest of the royal family joins him in his controlled panic, and soon.

The prince’s remarks help to underscore the crosscurrents we dug into last week during the Agora Financial Investment Symposium in Vancouver… a “great energy revolution,” to say nothing of high-tech and biotech breakthroughs occurring alongside epic blunders by politicians and central bankers. A “Tale of Two Americas,” we called it.

For a few more hours, you can still get the best available price on the recordings of every session in the main hall… and a concise write-up of every investment recommendation detailed in the afternoon workshops. MP3 audio files are on track to be emailed by Friday, and the HD videos will be posted sometime next month. But today’s the time to move: Depending on which package you choose, the price goes up as much as 50% at midnight tonight.

100  Stocks are treading water this morning, every major index barely in the green.

The Federal Reserve has begun two days of meetings today, so many traders are biding their time. Still, hardly anyone expects any change in policy to be announced tomorrow at 2:00 p.m. EDT, so even the aftermath may prove a snooze.

  Home prices jumped 2.4% in May, says the Case-Shiller home price index. The year-over-year increase works out to 12.2%.

Prices rose during May in each of the 20 metro areas tracked by the index. Dallas and Denver managed to exceed their 2006 peaks.

May is when mortgage rates started to rise. Whether the rising price trend carries into June, we shall see…

  The commodity complex is sliding today. At $103.30, crude sits at a three-week low. Copper is sliding back toward the $3-a-pound level it tested a month ago, currently $3.05.

As for precious metals, gold has been in a slow-motion decline so far this week. At last check, the bid is $1,326. Silver’s at $19.75.

  “In the end, I abandoned my initial aversion to holding gold,” concludes N. Gregory Mankiw in The New York Times.

Mankiw is about as establishment as it gets — a “New Keynesian” who runs the Harvard economics department and was chairman of the White House Council of Economic Advisers under George W. Bush.

A few weeks ago, a friend asked him if gold belongs in his investment portfolio. “My instinct was to say no,” but instinct wasn’t enough. So Mankiw dug a little deeper and made several shocking discoveries. To wit:

  • “All the gold ever mined amounts to 174,100 metric tons. If this supply were divided equally among the world’s population, it would work out to less than 1 ounce a person.”
  • “Its price is largely uncorrelated with stocks and bonds. Despite gold’s volatility, adding a little to a standard portfolio can reduce its overall risk.”

Yes, we know. Your mouth is agape at such revelations.

Wrote Mankiw, “A small sliver, such as the 2% weight in the world market portfolio, now makes sense to me as part of a long-term investment strategy.”

Well, it’s a start…

  “I like the way [gold is] acting,” says the dean of newsletter men, Richard Russell — who began penning his Dow Theory Letters the same year Mankiw was born, 1958.

Mr. Russell has noticed the gold stocks — represented by the GDX ETF — are now trading above their 50-day moving average for the first time all year.

“Since the miners tend to move before bullion,” he concludes,”I consider this action bullish for the whole gold universe.”

[Ed. note: Timing is everything… and now’s an excellent time to add to your metals stash. Especially since the Hard Assets Alliance is offering free storage through the end of 2013.

We’ve been singing the praises of the Hard Assets Alliance ever since launch a little over a year ago. Its website interface is the simplest we’ve ever encountered… and with a choice of six locations for storage, four of them outside the U.S., it’s easier than ever to achieve “geographical diversification” in your portfolio.

The free storage offer comes off the table tomorrow at midnight… so act now. Note we may be compensated once you fund your account, but we wouldn’t bring this offer to your attention if we didn’t stand behind it.]

  Private equity is finally catching on to “the biggest fire sale in history.”

It was 18 months ago that our Chris Mayer tipped us off to the opportunity: “There is no better, more reliable way to make money than to buy something from someone who has to sell.” And depending on which estimates you believe, Europe’s banks need to unload $3.8 trillion in assets to raise cash.

“Led by a host of large U.S. funds, including Blackstone, TPG and KKR, private equity investment in offices, hotels and shops in Europe hit $4.2 billion during the six months to July,” says the Financial Times, citing research by the Jones Lang LaSalle consulting firm.

That’s a 56% increase from a year earlier.

You don’t have to be a moneybags private-equity type to take advantage. From the start of this trend, Chris has identified the ideal way to seize the moment. It’s up 59% from his initial recommendation, but he says it still has a long way to run.

In fact, you could salt it away for the next 10 years and potentially grow your money 20-fold. And Chris has four other picks just like it, with that same long-term potential. To learn more about this lazy man’s road to riches, follow this link.

  “I vote to keep the yearly Agora Financial Investment Symposium going,” a Reserve member begins a flood of thoughtful emails, pro and con.

“I went to one a few years back. I can’t afford to attend every conference, but I hope to go again in the future. It’s the best financial conference I have attended.”

  “As a rookie attendee, I had a wonderful time!” another reader adds. “Very aggressive and lively agenda, professional presenters, well organized!

“I was impressed by the tenacity and stamina of the participants. Please continue to offer this fine event in Vancouver — I don’t believe you will find a more delightful, energetic, perfect-weather locale anywhere else this time of year!”

  “I have attended for the last four years and it has been a ‘do not miss’ event since the first.

“I feel that focusing future events around a more focused theme — say, resources — would degrade the effectiveness, and fewer attendees in the aggregate.

“We all want to grow our wealth and protect it in this fast-changing economic and political environment. It is helpful to hear from several speakers at the same time during the year rather than spread out over a broader time frame as the data is current. In addition, multiple seminars are certainly more expensive from a travel perspective, and I suspect more costly from your standpoint. Don’t fix it if it is not broken.”

  “I like the idea of shorter, more geographically diverse conferences,” a longtime Reserve member demurs. “My job does not allow me to be away in late July, so I’ve never been to Vancouver. The one-day meeting in Baltimore two years ago was very valuable.”

  “I have never been to a Symposium,” a reader writes. “Would I go to one? Hopefully, one day. Why haven’t I been to one? Cost — financial and time. Although I receive a generous amount of flexible time off, I have a family and they have a say in how I spend it (so does the homestead, which requires regular maintenance). On the cost side, the registration fees are high, and Vancouver is not cheap.

“Maybe I’m an example of a person who would be more likely to attend a two-day workshop. Chances are good if the cost is under $500 and it is arranged over a weekend or a Friday-Saturday combo. Chances increase if it is someplace interesting (sorry, Vancouver doesn’t do much for me) but not overly expensive. Interesting from the perspective of keeping the wife and kids entertained while I attend the conference.”

  “I was one of those who wrote strong remarks against the change,” writes one of this year’s attendees, “primarily because all anyone heard was a reduction to two days with different times and places to meet.

“Assumptions ran from smaller numbers not drawing good speakers to cost of travel to not having the mining companies, etc., at the conferences. If I knew more specifics about what you’re considering, I would be more open to change. But it seems like shorter meetings on specific sectors would have us traveling more to get what we can get in four days.

“Some suggestions: Have the conference in Seattle. Close enough for the vendors to drive to, cheaper than Vancouver (B.C. taxes are high), the weather is about the same and domestic flights are a little cheaper.

“You know that perception is reality sometimes. The general feeling was you did not think enough of your customers to tell us what your thinking was on this. That was expected.

“I really enjoyed the conference and look forward to coming again.”

  “I’d like a four-day conference. I don’t care where you hold it as long as it is a reasonably safe and interesting place.

“Vancouver was great! Las Vegas or Chicago would be OK. Rancho Santana or Managua would be interesting. You pick the place and I’ll decide whether or not I want to go.

“Airfare is important. It seems a pity to pay the high price for airfare and then only spend two days at the conference.”

  “I have attended from 2009-2013.

“I did like the mixture of both resource and income/growth. Attendance was down this year, as was the number of exhibitors. I do not know if that is due to the resource market or whether something fresh is needed at the conference.

“I have enjoyed the longer conference, as I feel I get a lot out of it and it gives me the opportunity to speak to my Sprott Global broker in person as well as with some of the exhibitors.

“The panel on Friday was especially good and those that bugged out early made a mistake.

“I would also be interested in other conferences.”

  “Although I would love to go,” a reader writes, “it’s not something I can afford.

“Having smaller engagements in different locales makes sense, but I have to agree that one week in Vancouver should still be a part of the education/presentation process. I can always obtain the videos/audios.

“Who knows, maybe someday the affordability will be in my court (or you hold a smaller event anyway on the East Coast).”

  “I have never been to the Symposiums but have been thinking about going.

“What would appeal to me is discussions on how to help retirees like myself who are looking to have enough income to survive until final payroll closing. I listen to your audios and this year will be no different. I enjoy the types of speakers you have and I believe in general you provide a great service.

“Without you guys, the last few years would have been more difficult than they were. Thanks for all you do. I think four days is a great way to do it.”

The 5: Thanks to everyone for the feedback.

Cheers,

Dave Gonigam
The 5 Min. Forecast

P.S. Final reminder: The price of audio and video recordings from the 2013 Symposium rises dramatically after midnight tonight. Secure the best deal right here, right now.

rspertzel

Recent Alerts

Here Comes the AI Cartel

Maybe you saw the news earlier this week: An outfit called the Center for AI Safety issued a 22-word statement — as dire as it is terse. Read More

A Deal in D.C., a Wipeout on Wall Street

Debt ceiling deal, U.S. Treasury auctions, Wall Street liquidity, Fed policy reversal, BlackRock recession call, gross domestic income, GDI, Maryland license plate snafu Read More

Climate, Carbon… and Control

“The climate change agenda is not about climate change,” says Jim Rickards. “It’s about total political and economic control of the population.” Read More

White House’s New Witch Hunt

Go figure: The stock market is at nine-month highs, but the Biden administration is amping up its jihad against short sellers Read More

The Biden Bleed

Presidents have meddled with the SPR for political purposes. But Biden is really leveling up. Read More

Natural Gas Gets Blacklisted

The EPA — with Team Biden’s blessing — proposes an overhaul of U.S. power plants by 2042. Read More

Green Smokescreen

Ray Blanco is on the lookout for presumed do-gooders… blowing “Green Smoke” up our collective rear ends. Read More

“No Blood for Chips!”

Fair warning: This edition of The 5 might be the most controversial issue we’ve ever published. Read More

The Dollar’s Death March

Nine years after The 5 started writing about “de-dollarization,” you can’t get away from headlines about it now. Read More

The “F” Word

No sooner did G7 leaders sit down yesterday than they declared they’re doubling down on sanctions targeting Russia. Read More