A Paradox of Riches

March 21, 2014

  • How one man’s satire and a common Irish name can land you on the no-fly list
  • Proof positive: Cheap natural gas is reviving urban manufacturing
  • Professor eyes a “paradox of riches” in the U.S. energy patch: Will you claim your share?
  • Mortgage your house to buy stocks? A sure sign it’s getting frothy out there
  • The stock that doubled in a day today… The 5 confronts a reader’s hard-nosed question… giving alchemy a bad name… and more!

  “The government gave us a subpoena. We have to take down your article, and you’re going to have to talk to the Secret Service. What are you doing down there?”

So with that conversation began an odyssey that landed Daniel O’Brien on the no-fly list — and in The 5’s customary Friday foray into weirdness.

Some years ago, Mr. O’Brien wrote an article for Cracked — the one-time knockoff of Mad magazine that’s now a satire website. The article advocated — satirically — committing certain crimes against the president.

“I know it’s a comedy website. I know you’re doing jokes,” O’Brien recalls one of the Secret Service agents telling him. “It just so happens that it’s my job to pay attention when certain… concepts are brought up online. That article, combined with your fascination with fighting presidents… well, that’s the kind of thing I need to know about.”

In the end, Mr. O’Brien faced no charges. But “in addition to having to take the article down,” O’Brien writes, “I also get stopped and pulled aside at airports five out of six times that I fly. I get ‘randomly stopped,’ which might truly be random, or maybe my passport gets flagged because I’m on some government list and I have to go through an additional round of questioning.”

Oy. Take note if you have the not-uncommon name of Daniel O’Brien. A decade ago, nearly everyone named David Nelson got hassled at the airport for reasons the feds never disclosed.

Footnote: Mr. O’Brien is out with a new book called How to Fight Presidents. No living president is featured.

Moving on to more prosaic matters…

  “More and more, manufacturers are relocating to America’s cities,” declares Virg Bernero — mayor of Lansing, Mich., and the head of a manufacturing task force on the U.S. Conference of Mayors.

The task force issued a report yesterday affirming the “Remade in America” thesis we introduced more than two years ago: As CNBC summarizes, “the U.S. shale boom is beginning to ripple outward to American cities.”

Cheap natural gas is reviving urban industry — steel, iron, fabricated metals, machinery, plastics, rubber, resin, organic chemicals.

“The shale extraction industry is itself driving growth through its hunger for steel pipeline, extraction machinery and other materials needed at domestic shale deposits,” CNBC goes on. “The availability of cheap fuel has in turn allowed these energy-intensive manufacturing industries to cut costs and compete better with foreign imports.”

Findings of the report include…

  • From 2010-12, urban areas saw a 17% increase in real sales of steel, iron, fabricated metals and machinery manufacturing — all extremely energy-intensive
  • Employment grew 9.7% in those same sectors
  • Tens of thousands of new jobs in the Chicago metro area alone — including 64,536 in fabricated metals.

Now we know why Chicago, for all its fiscal and pension problems, hasn’t completely gone the way of Detroit. Heh…

“We are energized,” says Waterbury, Conn., Mayor Neil O’Leary, “to see that employment in this area will continue to grow, which means new jobs locally for residents in our cities.”

And tax bases that have finally stopped collapsing. Of course, he was too diplomatic to say that.

 “The numbers here are staggering,” says BP executive Mark Finley. He spoke on Tuesday in Baton Rouge, at an energy forum held by something called the Grow Louisiana Coalition.

Finley put a new spin on a few of the energy statistics we shared earlier this week: The U.S. will be a net exporter of natural gas by 2018. Meanwhile, the increase in U.S. oil production last year is the fourth-biggest annual increase by any country ever. (Saudi Arabia holds the top three spots.)

The challenge in Louisiana, said another forum speaker, will be recruiting skilled workers for the state’s energy and petrochemical industries. “It’s everything, and how we’re going to get everybody to meet these requirements, it’s going to be a paradox of riches for us,” said LSU professor David Dismukes.

“A paradox of riches.” We like that…

  Crude’s dip below $100 didn’t last long — 10 days, to be precise. At last check this morning, a barrel of West Texas Intermediate fetches $100.19.

  One more note about an energy number that generated some reader skepticism this week — the projection that U.S. oil production will grow another 4.4 million barrels a day from present levels of 7.5 million.

“Where’d that 4.4 million number come from in the first place?” says our Byron King. “Well, that’s the forecast from the Platts oil conference I attended in Houston a few weeks back. I did not make it up.

“It’s astonishing, yes, but based on expected cumulative new output from Bakken, Eagle Ford and Permian Basin, mostly… with various other new plays… Denver-Julesburg, Utica, ‘wet’ Marcellus… and, of course, offshore from the Gulf of Mexico.

“And consider this… What if California gets its energy act together and decides to go for energy production, versus letting the resource base sit idle for a few more decades?

“This is the kind of thing that’ll drive energy investment for at least a decade or more… enough time to make serious money if you invest in the right things along the way. Don’t like it? Put solar panels on your roof and go ‘prepper.’ Keep a few cows in the backyard and grow your own veggies.”

Do the wells deplete quickly, as the skeptical reader said? “Yes, along the way, we’ll see lots of depletion and frustratingly high decline rates. Enjoy the party while it lasts, for another generation or two…

“Meanwhile, this is all investable if you can wrap your head around the magnitude.”

[Ed. Note: Investable, indeed. We’ve seen an overwhelming reader response to the latest strategy we’ve developed to help you profit from America’s energy boom — the one we call “Texas Rich in 60 Days.”

If you missed the exclusive briefing we put online yesterday afternoon, you can watch it in full right now and learn how to parlay as little as $500 into a seven-figure fortune. Click here for a step-by-step description.]

  Stock traders have shaken off the heebie-jeebies Fed chief Janet Yellen gave them on Wednesday. At last check, the S&P 500 was up to 1,880. If that can hold by day’s end, it tops the record close set two weeks ago.

  “The idiots are coming,” says Greg Guenthner in today’s Rude Awakening. “After waiting on the sidelines for years, the average investor is getting drawn back into the stock market.”

And to think a reader called Greg a “permabull” the other day. Sheesh…

Check out this flow chart of market sentiment: It’s not a hard science, but Greg reckons we’re somewhere between enthusiasm and exhilaration.

For anecdotal evidence, Greg points to a real headline he saw this week: “3 Reasons to Tap Home Equity to Buy Stocks.”

“The article explains that rates are low and, hey, stocks are much more liquid than real estate. Turn that debt into cash!

“What could possibly go wrong? After all, if you make a bad trade here or there, just ditch the house and hit up your broker for a loan. The discount brokers could even make little ‘Hoovervilles’ for broke traders who took one too many gambles with borrowed money.”

  Gold is regaining a bit of ground, the bid $1,337 at last check.

 A victory in the fight against lung cancer just delivered a windfall for some of our readers.

Shares of Endocyte Inc. doubled this morning after the release of a study showing one of its experimental drugs can slow lung cancer’s progression.

“Endocyte’s platform technology,” our Ray Blanco explained to his readers last year, “is described by the acronym SMDC — small-molecule drug conjugates.

“Using a proprietary chemical-linking technology, Endocyte can construct a therapeutic molecule incorporating a ‘targeting’ component and a ‘payload.’ For the treatment of cancer, this means Endocyte can create a molecule that homes in on cancer cells and releases a powerful toxin only once it is taken in by these cells.”

The same drug also won approval from a European Union panel to treat ovarian cancer. That, along with the lung cancer study, caused the stock to double in a day.

For access to all of Ray’s picks, look here. And keep your eyes peeled in the days ahead: We’re about to launch a premium trading service that scouts out opportunities just like these — stocks with short-term catalysts that can double your money as quickly as you can snap your fingers.

  “I enjoy The 5,” a reader writes, “and know that the subscriptions you advertise are among your best thoughts of the day.”

[We’ve been at this long enough to anticipate the inevitable “but”…]

“But I was surprised to read the latest Breakthrough Technology Alert and see that the current writer thinks your constant plugging of APDN last year was tantamount to gambling and not investing, since the stock will forever be just a penny stock. Is there no review of what you suggest in The 5?”

The 5: We’ll send this one straight to executive publisher Addison Wiggin:

“It’s a fair question,” says Addison, “and we’ll begin with your subject line, ‘Integrity?’

“Yes, integrity. That’s our goal.

“We may be alone in the publishing world. We have a policy that allows our editors to pick the stocks they believe in most. And manage their own portfolios accordingly. We feel that suits your needs best. Rather than making recommendations according to some arbitrary publishing schedule or marketing promotion, you get their best ideas when they are ready to publish them.

“Sure, it’s a source of tension between the editors and those of us charged with running the business. On occasion, like now, you get a glimpse behind the scenes and see what kind of challenge we’re faced with dealing with real-life personalities across several continents and varying time zones.

“For what it’s worth, we were delighted to have Patrick Cox on our team for five years — not least because of his passion for certain companies. Last year, his passion reached a point where he wanted to invest in those companies more than he wanted to continue working for us. As you may know, our policy forbids writers from owning positions in the firms they recommend — a policy we maintain on your behalf. We wished him well and began searching for a new editor. We did our best to bring you along for the ride.

“It’s worth noting we have been equally enthused working with Stephen Petranek, whose CV is as long as your arm — including a lengthy stint as editor-in-chief of the premier science magazine Discover. With his first several issues under his belt, it’s clear he brings his own passion to everything from private-sector space travel to solar energy and med tech.

“Alas, Stephen and Patrick are distinct. Stephen’s passion does not reach the pitch his predecessor’s did for some of his previously recommended stocks. As our philosophy goes, we did not use the current portfolio as criteria in our discussion with Stephen prior to him taking the helm at Breakthrough Technology Alert. We simply asked that he consider all stocks equally, make decisions about which stocks to hold and which to sell carefully and express those ideas to you very clearly. On that score, we believe Stephen has been conscientious and performed his new role with remarkable professionalism and patience.

“Of course, we hope you agree. If you do not, we understand. Ours is a voluntary relationship. If you do not like the changes we’ve made, you are free to amend your relationship in the way you find the most beneficial. We’re always here to help. Send an email to customerservice@agorafinancial.com.”

  “Is the East still on daylight time?” a reader writes, evidently curious about the launch time yesterday for our “Texas Rich in 60 Days” briefing.

“Most of us went back to standard time a couple weeks ago. Or do you want us to log on an hour early for the program? Just wondering.”

The 5: Daylight is the new standard, you might say. Daylight time went into effect on Sunday, March 9, in most of the country.

The politicians keep moving the start back and the end forward, to the point where we’re now on daylight time nearly eight months of the year.

In any event, the briefing is available for viewing in full, right now. Here’s where to go.

  “The prognostications of and predictions by the Federal Reserve, its policies and the controls it exerts (basically free money to bankers) all seem to be done in a bubble,” our final contributor writes, “blithe to the fact or recognition that globalism ‘happened’ or is still happening.

“Economic theory about M1, M2 or job creation doesn’t work when investors feel they have other options.

“Also,” the reader implores, “please don’t use phrases like ‘the alchemy of central banking,’ because it gives alchemy a bad name.

The 5: Heh… Duly noted!

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. “During the past century, the IRS has grown into a vicious, hydra-headed monster, a bureaucratic despot, completely out of control and in principle uncontrollable,” writes Lawrence Hunter in a new book called Taxed to Death.

We haven’t read it, but from the reviews, it sounds as if it’s long on outrage and short on solutions.

If it’s solutions you want, it’s solutions we provide in our guide Vanishing Point: How to Disappear From the IRS This Tax Season and Save a Boatload of Money in the Process. It’s packed with 97 completely legal and above-board methods to slash your tax bill this year by as much as $18,000. Don’t miss out.


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