September 4, 2014
- Oil rebounds: Time to claim your share of a $1 million jackpot
- Something you should know before you heed one billionaire’s bearish call…
- The danger of military improvisation: Byron King on the NATO summit
- How to profit from relentless assault of political ads this fall
- Colorado’s weak buzz of pot revenue… second thoughts on “starving the beast”… reasons to get out of Dodge other than taxes… and more!
Crude has bounced up and down and all around this week. At last check, a barrel of West Texas Intermediate fetches $95.07.
Hmmm… Oil appears to have found a floor around $93 — right where Matt Insley of our energy desk said on Aug. 21 it would hold the line.
This morning, he tells us that’s great news for companies in the middle of the U.S. energy revival. “If we continue to see stabilization in the $95 range, there’s still a lot of reason to like domestic producers that can pull oil out of the ground for $40-60 per barrel.
“Most well-run shale producers are down 10-15% since the end of July. It’s only a matter of time before these shares start to rally again.
“At the same time, oil service companies, pipeline plays, rail plays and refiners continue to have a strong wind at their back. America’s energy renaissance is still in the early innings. And I’m sure we’ll see more timing opportunities in this space.”
Speaking of America’s energy renaissance, check out this infographic of population flows among the states from 2010-13.
Deloitte University Press crunched some numbers from the Labor Department and found the largest inflows to the Dakotas, Colorado, Texas and the District of Columbia.
Of course, you can write off D.C. to the metastasizing federal government. But nearly all the other hot locales are where energy is big.
[Click map to enlarge…]
“Texas alone added more than 400,000 people from other states (1.5% of its 2013 population during this period,” Deloitte says.
The Lone Star State has a high percentage of its population working in the mining sector (including oil and gas extraction). But Deloitte says other sectors have “benefited from the catalyst provided by oil and gas.”
As we’ve said for months now, there’s no reason you shouldn’t share in this bounty. Which brings us to Matt Insley’s $1 million challenge. He’s out to show our readers how they can pull down a total $1 million in profits from America’s new energy boom before year-end.
Don’t bother looking at a calendar — that’s less than four months from now. With his typical closed position this year up 80% in only 59 days, the goal is absolutely attainable. For your chance at a piece of $1 million in energy booty, follow this link.
All the major U.S. stock indexes are in the green this morning. The S&P 500 is back in record territory, at 2,010. But the standout performer is the small-cap Russell 2000, up two-thirds of a percent, to 1,180.
For lack of any better explanation, the financial media are latching on to the European Central Bank’s decision early this morning to slash its benchmark interest rate by two-thirds — from a crazy low 0.15% to a crazier low 0.05%.
Not that it matters, says Chuck Butler at EverBank World Markets, if the object is to goose a moribund eurozone economy: “Once rates are so low, cutting them further has little to no effect. I just wish the central banks around the world understood that!”
In addition, the ECB will take a cue from the Federal Reserve and start buying packages of bank loans.
And with that, the euro has fallen to its lowest level against the dollar since July of last year. As we write, it clings to $1.30 by the slenderest of threads.
Gold is holding up well in the face of dollar strength. At last check, the bid is up a tad, to $1,272.
“The stock market is at an all-time, but economic activity is not at an all-time,” says billionaire Sam Zell.
Zell was cautious during an interview with CNBC yesterday. “This is the first time I ever remember where having cash isn’t such a terrible thing.”
“I don’t remember any time in my career where there have been as many wild cards floating out there that have the potential to be very significant and alter people’s thinking.”
We’re the first to acknowledge Zell is a genius when it comes to commercial real estate. But we’re also compelled to point out he seemed oblivious to many of the “wild cards” we were writing about during The 5’s earliest days in 2007. That year, as the credit markets were already hiccupping regularly, Zell stepped out of his comfort zone in office buildings and such to try becoming a media tycoon.
He closed on the purchase of Tribune Co. in December 2007 — just as the official “recession” was getting underway. The firm landed in Chapter 11 bankruptcy a year later.
Cash might’ve been a good thing then, too. Just sayin’…
“Another great plan that has no chance of succeeding,” says our military affairs analyst Byron King, picking apart the NATO alliance’s plan for a “rapid reaction force.”
NATO leaders have the city of Newport, Wales, on lockdown the next two days for a summit. On the first day’s agenda — huffing and puffing about Russia exerting a “destabilizing” influence in eastern Ukraine.
With that backdrop, word leaked earlier this week about the rapid reaction force of 4,000 troops that could be deployed in nations on Russia’s doorstep at a moment’s notice.
“Poorly thought out,” is Byron’s assessment — “as if some staff flunkies came up with it over an all-nighter, after the politicians called from the golf course to say, ‘Do something!’
“Who will have the authority to deploy it? Under what criteria and conditions? Is this just a tripwire, like the U.S. troops on the DMZ in South Korea? They get killed in the first couple of days, and then give the politicians an excuse to go big or go home?”
Geez, Byron, you think it’s a problem if they just make it up as they go along? (Heh…)
In any event, let’s just hope the new cold war stays cold…
“If you’re sick of political ads, keep in mind that there is an upside,” says our income specialist Neil George.
Oy… 61 days remain until the midterm elections.
“It seems that there’s always an election coming up,” says Neil. “Primaries and referendums are all over the place, leading up to the midterm elections coming this November… when the process will start all over again.”
But all that bickering is great for companies that own local TV stations. “Candidates,” Neil explains, “need to buy airtime for their commercials… then more airtime to counter their opponents’ commercials… then even more airtime to counter the counter-commercials.”
Allow your editor, who toiled in the local TV news trenches for two decades, to add some perspective: For the longest time, the bread and butter of any local TV station was car commercials. Then auto sales went south with the economy in 2008.
In 2010, the Supreme Court unintentionally gave the broadcasters a lifeline with a decision called Citizens United. We’ll spare you the intricate details: The bottom line was it allowed many more third parties, not directly connected with a candidate, to buy commercial time on behalf of a candidate.
There’s a demographic factor at work, too: Older people vote a lot more than younger people. Older people also watch a lot more TV than younger people. We might be in the Internet age, but if you want to sway voters, you still have to buy TV time.
Put it all together and the volume of campaign commercials has exploded. And now that the auto sector has recovered, local TV stations are feeling flush.
Neil’s favorite player is Sinclair Broadcast Group (SBGI), headquartered not far from our own Baltimore home base. His readers who bought in during early 2013 are collecting a respectable yield of 5.38%… and they’re sitting on 173% capital gains.
[Ed. note: We got a hearty response yesterday when we unveiled Neil’s “ghost income” strategy. As a reminder, this strategy delivers fat yields of up to 7.2% — tax free. You don’t have to do anything fancy to collect, either. A plain-vanilla discount brokerage account does the trick.
Neil shows you exactly how it works when you click here.]
From Colorado, an object lesson in tax evasion.
As you likely recall, voters in the Centennial State approved a referendum two years ago legalizing recreational marijuana. Some of the referendum’s supporters resorted to a dicey argument — it would create more revenue for state government because of how legal pot would be taxed.
They even ran the numbers and projected $33.5 million in revenue during the first half of 2014.
In the event, the figure was almost two-thirds less — $12 million.
The taxes are so high — 27% — there’s still a thriving black market in pot. The Marijuana Policy Group estimates only 60% of people who want weed in Colorado will buy it through legal channels.
“If the price is too high,” says Ron Kammerzell of the Colorado Department of Revenue, “then we can’t compete with the black market, and that was our ultimate goal with Amendment 64 — we wanted to eliminate the black market.”
Whoops…
“A few comments on state residents wanting to leave because of high tax rates,” a reader replies to Neil George’s comments here yesterday.
“On the map included in the article, you mentioned only some notoriously liberal northern/northeastern states as having high taxes as a reason to leave. I also see dark green in Georgia, Mississippi, Louisiana, Nevada and Arizona. Seems not so clear-cut if you include those states as well. Seems these Southern/Western five tend to run in the low tax band from what I read anecdotally.
“I’m actually living in Florida currently (against my will, to care for an aged parent), and when I’m able, the FIRST thing on my list is getting the hell out and further north. Florida has no income tax, but one of the most corrupt governors and state legislatures north of the Rio Grande — they are truly redefining the meaning of ‘corporate state’ in terms of corporations being first-class citizens and actual natural persons being second-class under our pay-for-play political system.
“Low taxes are counterbalanced by such things as high electric rates, as utility consumers are virtually unrepresented by the ‘Public Service Commission, which actually represents the interest of the corporate utilities. I’d like to know if these dark-green states are correlated with high tax rates as well, or if public corruption tends to go with low-tax states.
“And what about all the news that everyone is leaving California for Nevada? Are Nevadans leaving Nevada for someplace else and being replaced by ex-Californians? Do Nevadans want to leave BECAUSE of all the new ex-Californians?
“Seems that the low-tax criterion is only one aspect of why some residents wish to flee or not — not necessarily definitive.”
The 5: Point taken. We suspect the desire to get out of some of those lower-tax states has more to do with a lack of jobs, or good-paying ones anyway.
With that in mind, we compared yesterday’s map with the one we published above today. Turns out all the states where people are moving for work also have a low percentage of people trying to get out…
“Starve the beast?” a reader writes. Yesterday, a reader offered up the hoary argument about how limiting government’s tax receipts might limit government’s power and/or make government more fiscally responsible.
“That was tried during the Reagan administration, and was part of the ideas behind the three government shutdowns since.
“So far, it hasn’t worked one little bit — government spending continued, and as with any addict worth his addiction, ‘justifications and reasons’ abounded for continuing the behavior.”
“I rather like the idea of ‘starving the beast’ from its wanton lust of our tax dollars,” another reader writes, “until it occurred to me that starving beasts are not likely pleasant at all. Downright scary, actually; should give pause for thought.
“What then? American Revolution/Civil War II? Great… just as I’m nearing retirement age…”
The 5: We don’t think it’ll be quite that bad… but a few prudent preparations aren’t out of line.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. We know it’s eight months away, but you might want to avoid making any plans for May 13 of next year. Otherwise, you might miss out on the potential for 50% gains in a single day.
How can we identify that kind of an event, this far away, with such precision? Check this out.