July 30, 2014
- War in Gaza: “Mowing the grass,” or a battle over natural gas?
- How today’s Middle East headlines trace back to a strategic blunder decades ago
- Waiting on the Fed… Yawning at a “big” economic number
- Fraudclosure revisited: Why some people can’t sell their homes now
- “Live for today,” die early tomorrow?… ethical investing and where to draw the line… giving the IRS its due and not one penny more… and more!
“Why hasn’t anyone covered the natural gas angle with Gaza?” said the email from our executive publisher and 5 founder Addison Wiggin.
Strictly speaking, we made that up. But he did ask that question about Ukraine in late February — a question we proceeded to explore early on in the crisis there.
And it’s worth exploring now in the Gaza Strip. Once again, the elite media have failed to furnish context. Shocking, we know.
In 2011, we spilled a fair amount of digital ink on a natural gas field off the Israeli coast called Leviathan — one of the biggest gas finds worldwide in a quarter-century. “The geology off the coast of Israel,” said our Byron King, “has analogues with other of the world’s best hydrocarbon-rich areas.”
Here’s some context: Israel needs natural gas, and a lot of it; the country’s gas usage tripled from 2004-2011.
Some 40% of Israeli gas comes from Egypt, which has been an unreliable supplier in the midst of revolution, counterrevolution and occasional acts of sabotage. Thus, in 2011, Israeli leaders ramped up their efforts to develop Leviathan.
As you see on the map, some of the most lucrative gas fields are not actually offshore Israel. They’re offshore the Gaza Strip, in disputed waters.
Gaza turns up in the news every couple of years as Israeli leaders take to “mowing the grass.” That’s the inelegant term they use to describe their periodic bombardments of Gaza since 2006, when the territory came under the nominal control of Hamas. Hamas has been designated a terrorist group by Israel and the United States.
Now a bit of essential history: Hamas is a monster of the Israeli government’s own making.
Back in the 1970s and ’80s, the champion of the Palestinian cause was Yasser Arafat’s Palestine Liberation Organization (PLO). Israeli leaders made a fateful decision at that time to give direct and indirect financial aid to the forerunners of Hamas. It was better, the Israelis figured, to channel the passions of ordinary Palestinians away from secular nationalism and toward fundamentalist Islam instead.
Well, it seemed like a good idea at the time… Heh.
This is not wild-eyed conspiracy theory, by the way: Israel “aided Hamas directly — the Israelis wanted to use it as a counterbalance to the PLO,” said Anthony Cordesman in 2002. Cordesman is an analyst at the Center for Strategic and International Studies; in the world of Washington think-tankery, you don’t get more mainstream than him.
Arafat himself labeled Hamas “a creature of Israel.” He said he brought up Israel’s backing for Hamas during peace talks in the early 1990s with Israeli Prime Minister Yitzhak Rabin. Arafat recalled Rabin telling him it was “a fatal error” on the part of Israeli leaders.
Fast-forward to 2007: The prospect of Palestinian access to Leviathan gas had become a hot political topic in Israel.
The worry for some Israelis was that Gaza gas would give Palestinians more economic clout and make a Palestinian nation-state more viable.
But Moshe Ya’alon, former chief of staff for the Israeli military, had a different worry: “Proceeds of a Palestinian gas sale to Israel would likely not trickle down to help an impoverished Palestinian public. Rather, based on Israel’s past experience, the proceeds will likely serve to fund further terror attacks against Israel.
“Without an overall military operation to uproot Hamas control of Gaza,” he added, “no drilling work can take place without the consent of the radical Islamic movement.”
The following year, Israel undertook Operation Cast Lead. It didn’t uproot Hamas from Gaza, but it did “mow the grass.”
Ya’alon is now the defense minister overseeing the current Operation Protective Edge.
“The Israel-Palestine conflict is clearly not all about resources,” writes Nafeez Ahmed in The Guardian. “But in an age of expensive energy, competition to dominate regional fossil fuels [is] increasingly influencing the critical decisions that can inflame war.”
The investing takeaway? That’s easy. Our Byron King has long counseled steering clear of energy firms with big exposure to the Middle East.
As a former CEO at Shell quipped earlier this year, “Hydrocarbons don’t work well with exploding rocket grenades and tracer bullets.”
Iraq is still a mess, even if it’s Gaza grabbing the Middle East headlines these days. Washington is shipping 5,000 Hellfire missiles to Baghdad.
The resumption of exports from Libya? That’s on hold now: “A huge fuel depot in Libya’s capital burned out of control on Monday, set ablaze in fighting between rival militias that has driven the country to chaos three years after the NATO-backed revolt that toppled Muammar Gaddafi,” Reuters reports. “Foreign governments have looked on powerless as anarchy sweeps across the North African oil producer.”
It’s easy — and much more desirable — to invest in companies developing America’s newfound energy riches. And Byron has pieced together a “road map” to oil riches — six steps that can turn a $500 grubstake into a six- or even seven-figure fortune. You can begin following those six steps at this link.
Major U.S. stock indexes are in a holding pattern until the Federal Reserve issues a “policy statement” later today.
The Dow and S&P are slightly in the red. The Nasdaq and the Russell are slightly in the green. Gold is likewise moribund, at $1,293.
Traders could barely yawn when the Commerce Department issued its first guess at GDP for the second quarter — up an annualized 4%. Maybe that’s because the first quarter’s figure was down an annualized 2.9%. The average works out to an anemic 0.55%.
As for the Fed, chew on this when the news comes out later today: “The Fed… has manipulated us into a period of quite eerie stability and measured volatility,” says Jim Grant, the bow-tied proprietor of Grant’s Interest Rate Observer. The condition, he asserts, is temporary: “The central bank-imposed interest rates are the source of global financial instability now and in the future.”
Grant still likes gold. And he’s sticking with a call first reported in our virtual pages seven months ago: Russian stocks, he tells CNBC, “stand to do very well.”
“My whole life is in up in the air,” says Qiong Dai. “I didn’t do anything wrong. Why would I suffer?”
Ms. Dai and her husband had sold their home and were buying a nicer one. But the sale of the old house fell through: “They had purchased their Southborough Colonial in a foreclosure sale in 2007,” reports today’s Boston Globe, “and the title to it was among the hundreds in Massachusetts muddied because of sloppy paperwork by previous lenders. That made the house hard to sell now.”
Not only in Massachusetts, but everywhere: We warned as far back as 2010 how the scandal known as “robo-signing” or “fraudclosure” would foul up the title on millions of American homes.
Recall that during the go-go days of the housing bubble, mortgages were getting sliced and diced into securities so quickly that banks frequently ignored the niceties of properly recording title.
Once the bust hit, banks often foreclosed on properties they didn’t own the note to; indeed, they might have already sold off the note to someone else. Bank of America tried more than once to foreclose on homes whose buyers paid cash.
By tomorrow, the Massachusetts legislature might pass a bill aiming to remedy the situation: “It would reduce the amount of time people would have to challenge the legitimacy of a foreclosure and sue for the title from 20 years to about three,” reports the Globe.
As with most government solutions, this one will create a new problem: Victims of fraudulent foreclosure will have less time to challenge the fraud in court.
Nor will Ms. Dai get much relief: “Her title insurance company is trying to find the previous owner of her Southborough home,” says the paper. “But she is also fighting the insurer to cover her costs for holding onto the property in the meantime.”
Where’s the justice, you wonder? Gone fishin’. In early 2012, five of the biggest mortgage lenders coughed up $26 billion in penance to the feds and were released from any further liability.
“And the problem is,” reads the subject line of a reader email. One of our regulars is responding to our item yesterday about the explosion in student debt and subprime auto loans.
“The problem with all these ‘eat, drink and be merry, for tomorrow, we die’ uber-borrower types is that they don’t die. They wake up with a headache, enlarged liver and bloated MasterCard bill… and wanting the nanny state (meaning me, the saver) to take care of them.”
The 5: Hmmm… We’ve been mulling over life expectancy figures while researching a possible article for Addison Wiggin’s Apogee Advisory.
They’re an eye-opener: Researchers at the University of Illinois at Chicago find life expectancy is falling among the least-educated Americans. White women who didn’t graduate from high school could expect to live to 78 in 1990. By 2008, only 73.
“Just have to weigh in on the recent controversy,” a reader writes.
[Gee, which one?]
“First, I am a paid-in subscriber, and at way more than $49 a year! I enjoy reading The 5 and all the other newsletters I’m subscribed to. I’ve learned at the elbow of your experts about high-tech, medical and other innovations well before they were in the general news. I’ve learned about the real workings of the economy and been informed of trends, salubrious as well as dangerous, in a timely way. I really appreciate the expertise of your writers and the education I’ve gotten from Agora. I’ve read some of your books and seen your movie. I’m also very far to your left, politically, BUT I still can appreciate some of your humor. I read The 5 daily.
“I do believe that every moment and action in our lives is an opportunity to act morally. I surely do not think that the world is black and white. There are plenty of nuance, hidden agendas and straight-out b——t to contend with. As you acknowledge, Dave, there are businesses a moral person would not want to be associated with. There are companies that profit from activities I can’t support in good conscience. Hence, even after a strong recommend from your team, my own due diligence includes a review of the company’s products and history so that I don’t find that I (am hoping to) benefit from activities I deem immoral.
“For example, I love reading Byron King. He’s a great writer, and his lifetime of experiences is amazing. But I don’t pay attention to his military-related investment advice. Also, I know I could’ve made — and still could make — money investing in fracking, but I think that we’ll realize eventually that we’ve wasted a lot of good water and wish we’d waited till we had the technique a little safer and more secure. As a Californian, I am so aware of the need for clean, fresh water.
“My point here is that we all have the chance to live a moral life. To do so, we must participate in our own lives and make decisions. When we pretend that stock decisions are amoral, we are really saying that we just don’t care because we want to make money. Even churches sometimes divest from some of their investments for moral reasons.
“It’s true, as some of your other readers point out, that to live in this modern world, we have to do business with some firms we’d rather not associate with, or else we won’t have access to those products/services. Some of your readers seem to suggest that we’re fools to do anything other than look out for No. 1, get our best price and maximize our profits. I think we can work to minimize our reliance on those we come across that don’t have decent standards of conduct. I think we can work to live our lives with an eye toward justice. I think we can live so that we limit our negative impact.
“By the way, I feel pretty good about myself, and I also know that I am far, far from the person I’d like to be. Still a work in progress. So thanks for your service.”
The 5: It’s a tough call. As we said yesterday, everyone draws a line somewhere. Some people have a problem buying U.S. Treasuries. And they have a point: Treasuries help finance deficit spending. Besides, why would you willingly finance the welfare-warfare state beyond what you’re forced to pay in taxes?
But woe to anyone who didn’t hold long-term Treasuries during the Panic of 2008. They were the only asset class that rallied. A well-balanced portfolio of stocks, bonds and gold emerged from that year nearly unscathed. Treasuries also outperformed stocks and gold during the first half of this year, confounding mainstream expectations.
Different people have different ethical standards. So as editors and publishers, we tend to be agnostic — even as we’d never try to be all things to all people. We put our best ideas out there. The final call is yours.
Thanks for your thoughtful letter, for your continued patronage… and for understanding why we do what we do.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Only 259 more days before Tax Day 2015.
Yeah, sorry to remind you.
But we have good reason to bring it up: We have a comprehensive rundown of 97 “underground” methods you can use to slash your tax bill up to $18,000. And the sooner you act, the more you can save. Time is money, so check it out right now.