March 28, 2014
- In which every car on the road is part of an ongoing criminal investigation…
- A six-figure check every month: Real-life tales from the new American oil patch, and how to claim your share
- New Ukraine jitters… and why we’re not buying the narrative
- Boring stocks are good: Where the hot money is going now
- Gold manipulation so blatant it’s embarrassing, says Jim Rickards
- Another cautionary tale of undersea cables… the eat-the-rich crowd pipes up in The 5 mailbag… and more!
Heads-up: If you drive anywhere in Los Angeles — even in a rental car on a business trip — you’re part of an ongoing criminal investigation.
Maybe you’ve heard about the police agencies and even private companies whose camera technology scans license plates and dumps the information about who’s-driving-where-at-what-time in a database.
The good folks at the Electronic Frontier Foundation are trying to figure out what the LAPD does with all that information. So they recently asked the department for a week’s worth of the data it collects.
“In their reply brief,” writes Cory Doctorow at Boing Boing, “the LAPD argues that it can’t turn over any license plate data because all the license plates they collect are part of an ‘ongoing investigation,’ because every car in Los Angeles is part of an ongoing criminal investigation, because someday, someone driving that car may commit a crime.”
Presumably, the same “logic” applies at all the other police agencies doing the same thing. Now you know.
No, there’s not much you can do about it, but we figured it would be a public service to pass along the information. You’re welcome.
Moving on to events within your control — like how to profit from the great American energy boom…
“Mining, quarrying and oil and gas extraction industries were the most rapidly growing part of our nation’s economy over the last several years,” says Census Bureau chief John Thompson.
From 2007-12, revenue in those industries grew 34.2%, to $555.2 billion. The number of jobs grew 23.3%, to 903,641. The fastest-growing metro areas of the country are in the heart of the boom — like Bismarck, N.D., and Midland-Odessa, Texas.
Meanwhile, the Energy Information Administration reckons the United States now produces 10% of the world’s crude. The boom is creating new — and unlikely — millionaires across the Lone Star State.
“There are literally thousands of people out here who are millionaires, and some who are going to be billionaires,” Richard Dockery tells USA Today.
He ought to know; he’s one of them. He used to be a real estate and insurance broker in Three Rivers, Texas, getting by. Now he leases his property to oil companies and co-owns wells. A six-figure check arrives in his mailbox month after month.
He hasn’t let it get to his head; his new 2,400-square-foot home isn’t much bigger than the national average. He has, however made sure his adult daughter won’t be saddled with any debt from going to medical school.
“It’s crazy,” he says. “And I’m small fry.”
Another beneficiary — the massive endowment that supports both the University of Texas and Texas A&M.
The Permanent University Fund manages about 2.1 million acres of state-owned land in the Permian Basin. Royalties from that land totaled $279 million in fiscal 2009. By fiscal 2013, that number shot up to $648 million.
Oil wealth has helped propel the size of the combined Texas/Texas A&M endowment to $29.4 billion. Only Harvard’s is bigger… and probably not for much longer.
Thomas McGowan is one of the most unlikely Texas oil millionaires.
He spent 23 years in prison for a rape and robbery he didn’t commit. DNA evidence cleared him in 2008. The following year, with the Texas oil boom underway in earnest, the state legislature passed a law guaranteeing exonerees $80,000 for each year they spent behind bars — “by far the nation’s most generous package,” The Associated Press reported at the time.
That makes McGowan’s payout $1.8 million. Strictly speaking, he’s not a millionaire; he’s getting a lifetime annuity worth $40,000-50,000 a year. But “It’s something I never had, this amount of money. I didn’t have any money — period.”
Here’s the good news for you: You don’t have to be wrongly imprisoned… or happen to own the right piece of property… to get millions in Texas oil wealth. As we’ve said for a couple of weeks now, you can be “Texas Rich in 60 Days.”
You can get started with a grubstake of only $500… and a special report we’ll release on Sunday…
After a week of oscillating around $100 a barrel, oil is pushing $102 this morning.
There’s no obvious news; it might be another case of traders who simply don’t want to be short crude going into the weekend with things heating up again between Russia and Ukraine.
Or so we’re told. “The thinking in the U.S. government is that the likelihood of a major Russian incursion into Ukraine has increased,” says one of those anonymous “senior U.S. officials” to Fox News. A congressman from Ohio claims as many as 80,000 troops are poised to invade. The chief of Ukraine’s national security council goes even bigger: “Almost 100,000 soldiers are stationed on the borders of Ukraine.”
Uh… we’ll believe it when they show us the satellite photos.
We remember in 1990 one of the talking points in the run-up to the Gulf War was that “Saddam has 250,000 troops and 1,500 tanks massed on the Saudi border, ready to invade!” The Tampa Bay Times proceeded to buy two private-sector satellite photos (from Russia, ironically) showing only empty desert.
“It was a pretty serious fib,” recalled the reporter who broke the story. Ah, journalistic understatement.
Stocks are showing signs of life this morning. The Dow and the S&P are up a little less than 1%; the Nasdaq and the Russell 2000 are up a little more.
Even some of the momentum names like Tesla and LinkedIn are bouncing. “But it’s tough to say at this point if any moves higher will become anything more than a relief rally,” says Greg Guenthner of our trading desk.
Instead, Greg sees rotation out of the “mo-mo” stocks into stodgy names like Coca-Cola and Clorox, both up smartly this month. Johnson & Johnson is up even bigger — 5% in three weeks.
Gold remains mired a hair below $1,300 this morning at $1,295.
“The manipulation of the gold market is not something that’s really debatable any longer,” says Currency Wars author Jim Rickards.
Indeed, he’ll furnish evidence in his new book The Death of Money, due for release in less than two weeks… but still more evidence emerged since it went to press.
“I’ve seen some private research on this,” Rickards tells Sprott Money News, “and what it shows is that, for example, if you could go back 10 years and have two hypothetical accounts, then one of them would buy the open on the Comex every day and sell it at close, so you would basically own the Comex trading hours. And the other account would buy the spot market after Comex closes and sell in the spot market just before Comex opens the next day.”
The performance should be nearly identical, but no. “The Comex accounts showed massive losses and the after-hours accounts showed massive gains, both deviants from the overall market. And what that tells you is that the Comex is being manipulated, and the price is being suppressed, mostly with large sell orders at the close.”
“If I were running the manipulation,” Rickards says, “I would actually be embarrassed at this point because it’s so blatant.”
[Ed. note: Mr. Rickards arrived in Melbourne, Australia, today. “Just had sushi w/ sauvignon blanc & Davidoff cigar at a sidewalk cafe,” he tweeted. Starting Monday, he takes part in a one-of-a-kind conference hosted by our friend Dan Denning, head of The Daily Reckoning’s Down Under edition.
Other speakers include Marc Faber, Richard Duncan and Agora Financial’s own Byron King. The setting is Australian, but the topics are global… and they’ll have a profound impact on your financial future. Watch this space next week for updates… and a chance to snag recordings of this event.]
“If you want to see what would happen in the event of a failure of cable-based communications at choke points,” a reader writes after yesterday’s episode, “just look at the undersea quake of 2006 that cut some cables off the southern Taiwan coast.
“Several days of blackout hit Asia almost instantly, resulting in global chaos. Eventually, rerouting took up the slack, but the cost to commerce was in the billions.”
The 5: We forgot about that one. The reader sends along a New York Times account: “The quake disrupted telecommunications in Taiwan, Singapore, Hong Kong, South Korea and Japan, and a ripple effect was felt in other parts of the world. Financial companies and businesses in the region were hit hard, as access to online banking and communications between financial markets and traders were affected.”
According to Wikipedia, the volume of spam that made its way to the United States fell significantly… heh.
But the earthquake is another vivid reminder how much of modernity relies on these undersea cables. No wonder they’re such a vulnerable target in what we’ve come to call “Web War I”…
“There is no such thing as a ‘fair tax,’” a reader writes… and we hope this brings a merciful end to the flat-tax-fair-tax thread this week.
“I make it a point never to support anything with which the word ‘fair’ is associated. ‘Fair’ is the most dishonest word in the world. Everyone is sure what’s ‘fair’ (generally whatever benefits him most in any given situation).
“‘Fair’ is what the world socialist movement is based upon, and with it, the world communist movement, which is what socialism morphs into when you have to get out the guns to enforce ‘fair.’”
“All the speculation about how those with money would quit working if they were taxed more, etc., can be put to a real-world test,” writes another reader.
“Back in the time of the Eisenhower and Truman administrations, I believe the marginal tax rate was 90%, with high inheritance taxes. It is pretty easy to see by reading a little history that there was no strike by the better-off folks. In fact, it is looked back upon as a golden age for the American economy.
“And my rule of thumb is that when there is a question about an issue, it always makes sense to consider who stands to gain or lose the most. In this case, it is the obscenely wealthy (or their spawn) who stand to gain or lose most.”
The 5: It’s easy to have a “golden age for the American economy” when the rest of the developed world’s industrial base had been bombed to kingdom come during World War II.
More to your point… Yes, the top rate was 91% from 1946-64. But there were many more deductions, loopholes, etc., than exist today.
The problem now is that what you call the “obscenely wealthy” — especially the Buffett types calling for more progressive taxation — have tax-dodging vehicles simply not available to, say, a prosperous small-business owner.
Warren Buffett knows “full well this burden [for higher progressive taxation] would fall primarily upon members of the upper middle class, who have not yet achieved the threshold that would permit them to shift income to tax-minimizing structures,” our friend Bill Baker wrote in Endless Money.
The head honchos at Google can pay themselves $1 a year in W-2 income while piling up millions or even billions in unrealized capital gains.
Meanwhile, the self-employed — the job creators of the future — now make up the smallest share of the workforce in post-WWII history…
Have a good weekend,
The 5 Min. Forecast
P.S. While we’re on the subject… “Nearly half of all tax filers are over 45,” says a CNN Money story.
“And they are paying the lion’s share of federal income tax revenue — 74% in 2011. That’s up from 61% in 1997, according to an analysis of IRS data by the Tax Foundation.” Makes sense, as the baby boom generation is now in their 50s and 60s.
If you fall into that age group, you’re liable to get the maximum benefit from our special report, Vanishing Point: How to Disappear From the IRS This Tax Season and Save a Boatload of Money in the Process. If you haven’t gotten your copy — packed with 97 tips and tricks that can save you up to $20,000 this year — what’s holding you back?