August 6, 2013
- Domestic oil shrinks trade deficit: Two of our experts go head-to-head on the profit possibilities getting oil from the well to the refinery
- Here we go again: Taper talk (theoretically) whacks every asset class
- Click. Print. Key. How 3-D printers can help unlock handcuffs, prison doors, citywide circuit breakers
- After an epic recovery, where do housing stocks go from here?… End of the line for a $7 million gold stash… Privatized profits, socialized risk, nonbanker version… and more!
The United States just notched its smallest trade deficit since 2009.
The number plunged more than 22% in May — from $44.1 billion to $34.2 billion. “The sharp narrowing of the trade deficit reflected higher exports and lower imports,” says a Marketwatch summary.
“Gee,” says an email from Byron King this morning. “What could possibly be helping to shrink the U.S. trade gap? Could it be… domestic oil production? Darn, those evil oil companies!”
“Refineries in the U.S. imported less petroleum,” Bloomberg affirms.
Still, there’s a problem moving that new domestic supply to market… which unearths a couple of investment possibilities…
“After many decades of deterioration,” says Byron, “there’s a new boom happening in the rail industry. In large part, it’s being driven by the need to move oil from fracking operations.”
That is, a variation on the Re-made in America theme.
The numbers are staggering: In 2010, fewer than 10,000 carloads of oil moved on U.S. railways. By last year the number exceeded 600,000. And it’s still growing.
“New oil supplies from the ‘shale gale,'” says Byron, “have far outstripped the ability of established pipelines to move product. The country lacks a pipeline system to move raw crude from the wellhead to the coastal refineries. So absent some means of transporting oil, the product is stranded in remote locales.”
“Rail shipment offers advantages,” Byron suggests, “as well as drawbacks.
“Rail gives operators new flexibility in terms of destinations. That is, with a pipeline from Point A to Point B, you’re stuck moving product from A to B. But with rail, the seller can shop around, find the best price and ship product to where the market values it the most.” Bakken oil from North Dakota travels by rail to Philadelphia… and to Long Beach, Calif.
“Also consider that the cost of a pipeline comes upfront, in the form of land acquisition, permitting, design and building. But with rail shipment, the tracks are there and the main ‘new’ requirements are loading and unloading terminals, as well as storage facilities.”
True, rail shipment costs more than pipelines — substantially more. “But the fact is that rail shipment is still very economic under many circumstances,” concludes Byron. “It’ll be around for a long while, I suspect.”
“The market,” objects our income specialist Neil George, “is pricing trains out of contention for economical shipping of crude oil.”
See, this is the problem when we hire lots of smart and opinionated editors. They don’t always agree. But as we’ve said before, we don’t enforce a “company line” around here. We respect your intelligence enough to present opposing opinions and let you reach your own conclusion.
As evidence, Neil points to the Lac-Megantic disaster, one month ago today…
Lac-Megantic, Quebec: July 6, 2013
A train hauling oil from the Bakken to the Canadian Maritimes derailed in Quebec and set off a fireball. The toll: 47 dead. “The Lac-Megantic disaster could mean the end of an era in oil transport,” Neil declares.
The economics of rail transport, says Neil, are already shifting: “It costs approximately $15 per barrel to send oil by rail — compared with $1 a barrel by pipeline and $2 a barrel by ship.”
Until recently, refiners didn’t mind paying that $15 premium. The alternative was imported oil that was more expensive to refine and cost more to acquire in the first place because Brent crude from overseas traded at a premium of $20 a barrel or more over the domestic West Texas Intermediate (WTI) variety. But as we’ve chronicled in recent weeks, that differential has all but disappeared.
At the same time, U.S. pipeline capacity has surged this year — up 38.5%, to about 900,000 barrels a day.
“That’s given more refiners access to the cheaper-to-refine WTI and Bakken petrol,” says Neil. “And it costs only $1 a barrel to ship oil via pipeline, making it more attractive than Brent.
“So it’s a good time to be a pipeline company.”
Neil has a handful in the Lifetime Income Report portfolio. Some of them confer significant tax advantages. Neil’s always on the lookout for ways to shelter your hard-earned money from the IRS. For access to his favorite strategies, take a look at this link.
Oh, here we go again…
Return of the tapir…
“Taper Worries Clip Stocks,” says the headline on Barron’s website. Atlanta Fed chief Dennis Lockhart gave an interview suggesting the Federal Reserve could start cutting back on its bond purchases/money printing at any of the remaining Fed meetings this year.
Of course it’s the taper sending stocks down. It has to be. The media always need a reason: If it’s not the taper, it’s the embassy scare or A-Rod’s suspension. God forbid that stocks retrench a bit after hitting all-time highs yet again….
Actually, every asset class is getting knocked down a peg or two today…
- Major U.S. stock indexes are all down at least a half percent. The S&P has slipped below 1,700
- Treasuries are also down, and yields rising; the 10-year note commands a yield of 2.65%
- Gold has tumbled below $1,300. At last check, the bid was $1,284
- Crude is down more than 1%, to $105.23
- Even the greenback isn’t a safe haven relative to other fiat currencies; the dollar index is down a skootch, to 81.7.
Strangely, “Dr. Copper” is holding its own; the price of the red metal is all but unchanged at $3.16 a pound.
So much for “high security” keys…
“I need to have a key copied,” Janet G. wrote in 2008 in Yelp.com’s message board, “but it is a Primus ‘Do Not Duplicate.'”
After being refused by two separate keymakers in her town, Janet turned to the Interwebs for help.
“You can not,” Theo R., an apparent locksmith immediately responded, “and should not be able to make a duplicate of that key.”
“Unless you have a blank key from the same batch,” Jim D. says in tune, “you are SOL.”
But of course, that was way back in 2008…
These days, as two MIT students proved last weekend at the DEF CON Hacking Conference in Las Vegas, the locks praised to be secure enough for government buildings, health care facilities and detention centers can now be picked up by anyone for about $5.
“In the past if you wanted a Primus key,” 21-year-old Eric Van Albert, one MIT student involved in the project told Forbes, “you had to go through Schlage. Now you just need the information contained in the key, and somewhere to 3-D print it.”
Left: CAD model of the Primus Right: Outdated advertising
And procuring the information contained in the key is easier than one might think: “All you need is a friend that works there,” Van Albert’s MIT classmate David Lawrence told Forbes, “or to take a picture of their key, or even a picture of the key hanging off their belt.”
In need of police-grade handcuff keys in case you find yourself in a jam? How about NYC’s Fire Department master keys, with the power to shut down elevators, open subway gates and open the city’s electric circuit breakers? With the help of 3-D printing, a quick Google Images search just might do the trick.
“If we show that mechanical locks are vulnerable to key duplication just by having a handful of numbers you can download off the Internet,” Van Albert says, “hopefully, they’ll be phased out more quickly.”
“Either that,” adds Lawrence, “or make 3-D printers illegal.”
[Ed. Note: 3-D printing already killed the gun control debate with 86 rounds in a few short minutes. What else is possible? Our tech arbiter Ray Blanco has proof that we’re only at the cusp. After much contemplation on where the money will flow when the tipping point is hit, Ray has released the verdict. Today, he’s willing to show you… for free… how to play it like the pros. Click here for all the details.]
“The much-heralded housing recovery is over,” declares Greg Guenthner in today’s Rude Awakening.
“The rebound in the real estate market isn’t a secret anymore. People all over the country can see the pickup in sales and construction in their respective towns. They’ve bet big on the homebuilding stocks. Now it’s a crowded trade.”
Greg doesn’t see another collapse on the horizon, but “it’s not a stretch to say that homebuilder names could keep falling for some time.
“In fact, the broad market is absolutely trouncing the housing sector stocks right now. The iShares Dow Jones U.S. Home Construction ETF has dropped 10% over the past three months. It’s up less than 6% on the year, compared to a 20% gain in the S&P 500.
“Unless you’re extremely patient and willing to sit through another leg lower, you should ditch homebuilder stocks until they begin to show signs of life once again.”
“It was enough to fill two wheelbarrows,” AP reports.
Two wheelbarrows of gold, that is.
Astute 5-ers may recall our brief scout of mainstream’s “rich guys with no life” fling, where it seemed for a while that nearly all gold owners were lonely, conspiratorial, recluse nut cases.
If you recall, one of the gold-hoarding psychopaths mentioned was Walter Samaszko Jr., who was found dead of natural causes in his Nevada home last September.
All the press seemed to know, or cared to share, about Samaszko was that he was clearly “anti-government,” and that his house was littered with conspiracy theory books, guns, and lots and lots of gold: an estimated $7 million worth.
One batch was auctioned off in February for $3.5 million. The remaining 2,600 coins are in the process of being sold in six sets as we write.
“These are the rated coins; the collector types,” Alan Glover, the Carson City Clerk-Recorder who is handling the estate, told AP yesterday of the remaining gold. Glover estimates the value of the collection at $3 million.
After the tax man gets his share, the fortune will go to Samaszko’s only surviving cousin, Arlene Magdanz, a substitute teacher in San Rafael, Calif.
“Regarding your story of the leveraged buyout and subsequent bankruptcy of Rural/Metro Ambulance,” a reader writes after yesterday’s episode, “I wonder how many executives of Warburg Pincus will have to pay up or go to jail for creating such an unstable business model. Not many, I expect. They’ll probably brag how much ‘equity’ they were able to get for the shareholders.
“Having been part of a leveraged buyout in my career (TWA), saddling the company with debt (three bankruptcies), having my pension robbed (now being paid by the Pension Benefit Guaranty Corp.), and the ‘owner’ (Carl Icahn) being paid to leave (by allowing him to sell discounted tickets providing him with cash flow but preventing the company from making a profit), I feel for the employees who will now undoubtedly be blamed for the mismanagement and have to give up salary, benefits and pensions in order to help others survive.
The 5: Privatized profits, socialized risk: It’s not just for bankers!
And the PBGC — the agency that serves as a sort of FDIC for private-sector pensions — is woefully underfunded…
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Have you taken the 60-day challenge? Either you double your money… or you get $1,000.
That’s a real win-win. All you give up is a few minutes of your time over the next 60 days. Details here.