May 22, 2014
- When a coup is not a coup
- Who is Khalifa Hifter? And how will he impact the oil price this summer?
- Iraq, Iran, Nigeria — a world of trouble for global oil supply
- Future Pfizers: Riding the coattails of “Billionaire Biotech Moguls”
- Intriguing gold buzz from India
- A startup’s epic court battle, updated… “market-beating performance” that’s not… surviving the end of reserve currency status… and more!
Hmmm… As we write, the day is young, but we’re already anticipating an exercise in Orwellian “Newspeak” coming from Washington soon…
You and I and even The New York Times would call it a coup. But not the U.S government. That’s because the Pentagon has deep ties with the Thai military. Under U.S. law, labeling the event a coup would require suspending U.S. aid. Can’t have that.
Last year, the White House said straight up it was “not in the best interests” of the U.S. government to notice a coup had taken place in Egypt. So there.
Ditto in Libya — where an attempted coup has been going down all week.
“Coup” might indeed be too strong a word in this case. It presumes the existence of a functioning nation-state that can be overthrown in the first place. That hasn’t existed since the White House decided to take out Col. Gaddafi in March 2011.
When she was still secretary of state, Hillary Clinton justified that decision by saying, “First the Tunisians kicked out Ben Ali, then the Egyptians removed Mubarak. All our bought-and-paid-for dictators were dropping like flies, and we were starting to look like the bad guys in the Arab Spring. We had to do something to change perceptions.”
OK, those weren’t her actual words. But the implication was clear when she said, “Fundamentally, there is a right side of history. We want to be on it.”
Fast-forward to the present and a “rogue general” named Khalifa Hifter has carried out attacks in Tripoli and Benghazi, taking control of the parliament building on Sunday.
Gen. Hifter is an — um — interesting character.
He was once one of Gaddafi’s top officers until he switched to the opposition in the late 1980s. In the early ’90s, he moved to Virginia — practically within spitting distance of CIA headquarters in Langley. A self-described lifelong friend told McClatchy Newspapers he wasn’t sure how Hifter supported himself.
Once the operation to remove Gaddafi was underway in 2011, Hifter returned to Libya — declaring himself one of the rebel leaders. The rebels have been fighting among themselves ever since.
Officially, “we do not condone or support” Hifter, said a State Department flunky on Monday.
Did he wipe his feet before stepping on that nice rug?
The Pentagon dispatched 250 Marines to Sicily even before Hifter’s forces took over the parliament building last weekend — ostensibly in case the U.S. Embassy needs to be evacuated.
“At current rates, Libya is exporting 220,000 barrels of oil per day,” says Matt Insley of Real Wealth Trader, bringing us around to the investment implications.
That number is one-fifth of Libya’s total export capacity of 1.2 million barrels per day. Fortunately, the wells and the pipelines remain mostly intact.
For now anyway. “If things go bad (and let’s be honest, it looks like we’re headed that way), exports could grind to a complete halt and oil infrastructure could be completely wiped out,” says Matt.
“It takes only a few rocket-propelled grenades or improvised explosives to wipe out millions of dollars of oil infrastructure — processing plants, loading facilities, pipelines, etc. And those things don’t get built overnight.
“The market looks to be pricing in a long-term conflict and potential total loss of Libyan crude oil. That’s why we’re seeing stubbornly high prices — currently perched at $103.”
“And it’s not just Libyan oil disruptions having an effect on the market,” Matt reminds us…
- Production growth in Iraq is slowing to a near crawl
- Sanctions remain in place against Iran while nuclear talks with Western powers are underway
- Nigeria is in turmoil, facing the “worst oil crisis in five years,” according to the Financial Times.
“When you add in Iraq, Iran and Nigeria,” says Matt, “we’re looking at 3 million barrels per day in ‘disrupted’ oil production. That’s a lot of oil off the world market.”
Meanwhile in OPEC’s leading producer Saudi Arabia, the princes are engaged in a power struggle. King Abdullah turns 90 this year. He might not have one foot in the grave… but a banana peel was recently seen in his immediate vicinity.
“You probably know where I’m going with this,” says Matt.
“It is a godsend that while havoc slowly rises in the Middle East, the U.S. has seen massive production growth to the tune of some 3 million barrels per day, helping to ameliorate any global oil pinch due to Middle East disruptions.”
And if Saudi Arabia blows up too? “That would be much to the dismay of oil buyers the world over, but much to the delight of well-run U.S. oil producers.”
[Ed. note: No matter what happens in the Middle East, Matt has a bead on how to tap America’s newfound oil bounty for seemingly instant riches. Using his proven method, a starting stake of less than $1,000 can be transformed into a million-dollar fortune in less time than you can imagine. It’s a once-in-a-century opportunity, Matt says… but as he shows at this link, it won’t last forever.]
Stocks are catching their breath after yesterday’s run-up. The major U.S. indexes are in the green, but not much. The S&P 500 sits at 1,891.
Traders are weighing a raft of economic numbers: First-time unemployment claims jumped big-time; the number is becoming so noisy as to be nearly useless. Existing home sales ticked up for the first time in four months.
As mediocre as everything looks, a new recession is still not in view: The Chicago Fed National Activity Index has presaged all but one recession going back to 1970, and the latest figure out this morning, while hardly robust, is at least all right.
“One day, these companies are going to be the next Pfizers and Mercks,” says our investment director Paul Mampilly. “Many of these companies’ founders are going from struggling entrepreneurs to billionaires.”
Paul has a label for their CEOs — “Billionaire Biotech Moguls.” Now, if you’ve been with us regularly for the past month or so, you know Paul has no great love for Pfizer — a company that’s gotten fat and lazy. But before it got fat and lazy, it was bringing blockbuster drugs to market like clockwork… and making its investors crazy wealthy.
That’s what the Billionaire Biotech Moguls are doing right now. “These are premier biotech companies that I’ve known for nearly 20 years. I watched these companies grow up, from infants with stock market values of a few hundred million dollars to titans valued at billions of dollars today.”
“You can expect these companies to generate returns of 15-20% per year on average,” Paul adds. “The Biotech Billionaire Mogul stocks have billions of dollars in sales, profits and cash in the bank. Even if a couple of drugs in their pipeline fail, it won’t crash the stock.”
In other words, they’re key to a well-balanced biotech portfolio — and an excellent complement to the small fry that can rocket 100-200% in short order on results of a drug trial or an FDA approval. And rest assured, Paul has several such recommendations.
Paul’s service is new, but already getting kudos from readers: “I just joined a couple of weeks ago,” reads one email that landed in our inbox this morning, “and I am up approximately 20% with a 5% trailing stop on [ticker symbol redacted]. This at the worst case will right now pay my membership and stick a grand in my pocket on just the first trade. This has been two weeks.”
Fair warning: We’ve had a charter-member rate going all month; we’re taking it off the table as of midnight Monday night. Before you get too busy with Memorial Day plans, we encourage you to check out the offer and decide whether it’s for you.
Gold poked its nose about $1,300 this morning, but has since retreated to $1,397.
There’s growing buzz the incoming government of India will relax the steep import duties on gold that took effect last year. In addition, the central bank might ease up on the 80:20 rule, in which 20% of all new shipments have to be re-exported before the other 80% can clear customs.
But as we warned two weeks ago, don’t expect either move to send the gold price soaring unless Indian investment demand takes off.
Call it a partial victory for Airbnb.
Airbnb, the ingenious website that links up travelers with people willing to rent a spare room, has been slugging it out in court with the state of New York — a battle we chronicled last month. New York’s attorney general suspects many Airbnb hosts run afoul of laws written to protect landlords and hotels from competition.
Under relentless pressure, Airbnb “agreed” yesterday to hand over the data on thousands of its New York users. The good news is Airbnb gets to redact users’ names, Social Security numbers, email addresses and apartment numbers.
Alas, the story’s not over: “A much more important battle to watch for its long-term outcome,” says BusinessWeek, “is the 2010 state law that prohibits New Yorkers from renting out space in residential buildings for less than 30 days unless a permanent resident is present.”
Airbnb has had to rapidly transform itself from plucky startup to savvy wheedler, hiring the lobbying firm Bolton-St. Johns to get the law changed. Oy…
“We are fortunate to have exceptional talent that delivers market-beating performance,” says James Rothenberg.
Mr. Rothenberg is the treasurer at Harvard and chairman of the board at Harvard Management Co. — the firm that manages the university’s $32.7 billion endowment, the nation’s largest.
The claim seems, well, a little curious — based on the latest numbers Harvard Management has disclosed. Investment gains were flat for the fiscal year ending June 2012… while the S&P 500 eked out a 2% gain. The endowment notched 11% gains in the fiscal year ending June 2013… while the S&P jumped 18%.
Well, if the performance isn’t exactly market-beating, at least it’s compensated accordingly: Harvard Management chief Jane Mendillo earned $4.8 million in 2012 — down from $5.3 million the year before.
“If the U.S. government eventually stops gun manufacturing in the U.S.,” a reader writes about Operation Chokepoint and the squeeze on gun dealers’ payment systems, “people will just get the guns they want illegally.
“Then, there will be no way to track who has what in their possession. And chances are the guns won’t have serial numbers for the purchasers to worry about.”
“The end of the dollar as the world’s reserve currency,” a reader writes on an ongoing theme, “doesn’t mean the end of the world, nor the end of the USA, and reverting back to a gold standard may or may not be possible, but either way, we can make things move again here in the USA.
“That is, if the government ceases to chase away the manufacturing base in this country with their endless regulations and taxes.
“Without citing numbers, I think everyone understands the things we buy and use every day are for the most part imported. This has to stop. Then the federal government has to stop ‘printing’ to allow prices to stabilize, then the average American can afford to spend on discretionary items.
“This 50-year run of inflation and the endless government regulations are the main culprits behind the loss of our middle class in America. Stop the money printing, let Corporate America put people back to work, let free market capitalism work and all of us will be better off. This may not be perfect, but it is certainly better than what we have and where we are headed. The only losers will be the faceless politicians, who won’t be able to cover the promises they would otherwise make.”
“Geez, Dave, a $550 throne?” writes one of our regulars after our item yesterday about the purloined toilet tank at a Seattle Subway. “They ain’t shopping at the big box home improvement store I’m shopping at! What business owner in their right mind would put in that expensive of a toilet in a Subway?”
The 5: We too raised an eyebrow at the value assigned to the toilet tank. Then again, maybe that includes full replacement costs — we imagine union plumbers don’t come cheap in Seattle…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. A word to the wise, in case you missed the news: eBay got hacked. It’s urging users to change their passwords.
“Hackers gained unauthorized access to a database that included eBay customers’ names, home addresses, dates of birth and encrypted passwords,” says a Huffington Post story. “EBay said that financial information like credit card numbers were stored separately and were not compromised.”
We guarantee you’re going to hear more stories like these. And as we said as we signed off yesterday, cybersecurity is a sure-growth sector. For now, it’s government picking the winners and losers, because it’s government throwing around the most money.
Wouldn’t you like to have someone who’s plugged into both government and industry who can help identify the winners — even before they win fat juicy contracts and their share prices leap up?
As it happens, we have that someone on our team. Best check this out now.