Archive for the ‘Energy, Oil, Coal’ Category

Energy Front: New Battery Technology

Tuesday, August 18th, 2009

One of the biggest things to impact not only our finances but every other aspect of our lifestyles is the upcoming changes in the energy landscape.

The IEA reports that we are losing oil production capacity at a rate of 6% to 8% a year and will continue to do so unless the equivalent of six new Saudi Arabia’s are found.

This technology will be very interesting to watch:

Ceramatec says its new generation of battery would deliver a continuous flow of 5 kilowatts of electricity over four hours, with 3,650 daily discharge/recharge cycles over 10 years. With the batteries expected to sell in the neighborhood of $2,000, that translates to less than 3 cents per kilowatt hour over the battery’s life. Conventional power from the grid typically costs in the neighborhood of 8 cents per kilowatt hour.

New battery could change world, one house at a time

Ceramatec

Ceramatec

In a modest building on the west side of Salt Lake City, a team of specialists in advanced materials and electrochemistry has produced what could be the single most important breakthrough for clean, alternative energy since Socrates first noted solar heating 2,400 years ago.

The prize is the culmination of 10 years of research and testing — a new generation of deep-storage battery that’s small enough, and safe enough, to sit in your basement and power your home.

It promises to nudge the world to a paradigm shift as big as the switch from centralized mainframe computers in the 1980s to personal laptops. But this time the mainframe is America’s antiquated electrical grid; and the switch is to personal power stations in millions of individual homes.

(more…)

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China Gets More Agressive On Buying Raw Materials Producers

Friday, August 14th, 2009

Some people think the Chinese have no way to sell off their dollar reserves.

Its happening.

Media needs to spin another excuse.

China - energy and minerals

China - energy and minerals

China May Boost Energy, Mining Acquisitions by Half

Aug. 14 (Bloomberg) — China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.

State-owned Yanzhou Coal Mining Co. yesterday agreed to buy Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), a day after Sinochem Corp., China’s biggest chemicals trader, offered to buy Emerald Energy Plc for 532 million pounds ($881 million) to gain oil fields in Syria and Colombia.

China National Petroleum Corp.’s plan to buy Repsol YPF SA’s Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48 percent increase on 2008, according to data compiled by Bloomberg.

“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper,” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview yesterday. “There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day.”

(more…)

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China continues to diversify reserves

Tuesday, August 11th, 2009

The Chinese are continuing to stockpile raw materials, companies that produce them, and mineral rights all around the world.

They are fully aware that inflation is going to send prices of real goods through the roof, and we are heading into a long and strong bull market in tangible assets.

Yanzhou close to Australian coal deal

By Peter Smith in Sydney

Published: August 10 2009 07:47 | Last updated: August 10 2009 18:37

China’s Yanzhou Coal Mining is in advanced talks to buy Felix Resources in a cash takeover that is expected to value the Australian coal mining group at about A$3.7bn (US$3.1bn).

If the deal is agreed and cleared by regulators, it would be one of China’s largest foreign takeovers and the country’s biggest Australian deal to date.

(more…)

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Greenspan Thinks OPEC Should Depeg

Wednesday, February 27th, 2008

While I have to applaud Mr. Greenspan for wanting to assist the poor nations of OPEC in managing inflation, it also is a bit concerning to see that my prior predictions are indeed coming true: The Oil Producers are going to de-peg and take payment for Oil in non-Dollar currencies.

Why is this an issue? Because we have front row seats to round 5 of the death spiral of the dollar.

Depegging from the dollar and then choosing to take payment for oil in non-dollar currencies will be a one-two punch for the worlds ailing reserve currency the US Dollar. By de-pegging, it signals a lack of confidence in the good ‘ole US Dollar. And a lack of confidence not from just anyone, but one of the Dollars biggest customers. If the US Dollar were a product (which it is), and the US were a corporation, we just lost our second biggest customer. The effect? The world is not likely to ‘not notice’ this. OPEC is a massive consumer of USD, as we pay for oil in Dollars, and have for many years. As the world notices that some of the USD’s largest customers have decided to move on, so will the rest of the world. Result? Continued lack of demand for the USD, and continued devaluation.

JEDDAH/ABU DHABI (Reuters) – Former Federal Reserve Chairman Alan Greenspan said on Monday near-record Gulf Arab inflation would fall “significantly” were the oil producers to drop their dollar pegs, in contradiction to Saudi policy.

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Where Has All The Money Gone?

Saturday, February 23rd, 2008

Through your gas tank into the hands of the United Arab Emirates.

From Mish’s Blog:

Dubai in 1990

The same street in 2003

Dubai 2007

Dubai is said to currently have 15-25% of all the world’s cranes.

The Dubai Waterfront.

When completed it will become the largest waterfront development in the world.
All of this was built in the last 5 years.

The Palm Islands in Dubai

New Dutch dredging technology was used to create these massive man made islands. They are the largest artificial islands in the world and can be seen from space. Three of these Palms will be made with the last one being the largest of them all.

The Palm Islands in Dubai

Upon completion, the resort will have 2,000 villas, 40 luxury hotels, shopping centers, movie theaters, and many other facilities. It is expected to support a population of approximately 500,000 people. It is advertised as being visible from the moon.

The Palm Islands in Dubai

The World Islands

300 artificially created islands in the shape of the world.
Each island will have an estimated cost of $25-30 million.

The Al-Arab hotel in Dubai

The worlds tallest hotel. Considered the only ‘7 star’ hotel and the most luxurious hotel in the world. It stands on an artificial island in the sea.



Hydropolis, the world’s first underwater hotel

Entirely built in Germany and then assembled inDubai, it is scheduled to be completed by 2009 after many delays.

The Burj Dubai

Construction began in 2005 and is expected to be complete by 2008. At an estimated height of over 800 meters, it will easily be world’s tallest building when finished. It will be almost 40% taller than the the current tallest building, the Yaipei 101.

Downtown Dubai rendition 2008-2009

More than 140 stories of the Burj Dubai have already been completed. It is already the worlds tallest man made structure and it is still not scheduled to be completed for at least another year.

The Al Burj

This will be the centerpiece of the Dubai Waterfront. Once completed it will take over the title of the tallest structure in the world from the Burj Dubai.

The Burj al Alam or The World Tower

Upon completion it will rank as the world’s highest hotel. It is expected to be finished by 2009. At 480 meters it will only be 28 meters shorter than the Taipei 101.

The Trump International Hotel & Tower

The Trump Tower will be the centerpiece of one of the palm islands, The Palm Jumeirah.

Dubailand

Currently, the largest amusement park collection in the world is Walt Disney World Resort in Orlando, which is also the largest single-site employer in the United states with 58,000 employees. Dubailand will be twice the size. Dubailand will be built on 3 billion square feet (107 miles) at an estimated $20 billion price tag. The site will include a purported 45 mega projects and 200 hundred other smaller projects.

Dubailand Rendition

Dubailand Site Location

Dubai Sports City

A huge collection of sports arenas located in Dubailand.

Currently, the Walt Disney World Resort is the #1 tourist destination in the world. Once fully completed, Dubailand will easily take over that title since it is expected to attract 200,000 visitors daily.

The Dubai Marina

The marina is an entirely man made development that will contain over 200 highrise buildings when finished. It will be home to some of the tallest residential structures in the world. The completed first phase of the project is shown.

Most of the other high rise buildings will be finished by 2009-2010. The Dubai Mall will be the largest shopping mall in the world with over 9 million square feet of shopping and around 1000 stores.

Ski Dubai

Ski Dubai already open, is the largest indoor skiing facility in the world. This is a rendered image of another future indoor skiing facility that is being planned.

Some of the tallest buildings in the world, such as Ocean Heights and The Princess Tower, which will be the largest residential building in the world at over a 100 stories, will line the DubaiMarina.


Other Facilities (Not Shown)

The UAE Spaceport would be the first spaceport in the world if construction ever gets under way.

The Dubai Metro system will become the largest fully automated rail system in the world.

The Dubai World Central International Airport will become the largest airport in size when it is completed. It will also eventually become the busiest airport in the world, based on passenger volume.

There are more construction workers in Dubai than there are actual citizens.

Disclaimers and Credits

This amazing set of images came from a reputable source. It is impossible to know if any have been doctored in Photoshop but a check on Snopes shows these are likely to be the real deal. Obviously some are artists renditions.

Snopes Check

Ski Dubai Snopes

Infinity Tower Snopes

Solid Silver Car Snopes

Not solid silver but it sure looks like it.

Sky Tennis Snopes

Andre Agassi plays sky tennis

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Iran launches oil products bourse with petrochemical deal

Monday, February 18th, 2008

The Associated Press

TEHRAN, Iran: Iran established its first oil products bourse Sunday in a free trade zone on the Persian Gulf Island of Kish, the country’s oil ministry said.

A statement posted on the ministry’s Web site said 100 tons of polyethylene consignment was traded at the market’s opening on the island, which houses the offices of about 100 Iranian and foreign oil companies.

Oil and petrochemical products will be traded in Iranian Rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said.

“The bourse provides an economic opportunity for Iranians, other countries and foreign customers,” Nozari was quoted as saying.

Iran produces more than 20 million tons of petrochemical products per year.
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Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic’s economy.

A bourse official, Mahdi Karbasian, told the IRNA official news agency that such an oil market would begin operating within the next year.

While most oil markets are traded in U.S. dollars, Iran first floated the idea of trading oil in Euros in the early 2000s during the tenure of reformist president Mohammad Khatami. It gained new life after the nationalist Mahmoud Ahmadinejad was elected in 2005.

As the fourth largest oil producer in the world, Iran has a measure of influence over international oil markets. The country ranks second for output among OPEC Countries, and controls about 5 percent of the global oil supply.

Tehran also partially controls the Persian Gulf’s Strait of Hormuz, through which much of the world’s oil supply must pass.

Iran has sought to wield its oil resources as a bargaining tool in its ongoing standoff with the West over its nuclear program.

The U.N. Security Council is considering imposing a third set of sanctions on Iran for defying a request to halt uranium enrichment. But Tehran has expressed doubt that the world body would impose sanctions on the country’s oil sector, because such a move would likely drive global oil prices higher.

Beginners Guide to Gold and Silver Investing – Free

http://www.iht.com/articles/ap/2008/02/17/business/ME-FIN-Iran-Oil.php


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BHP’s Rio offer may spark $170 billion bid war

Saturday, November 10th, 2007

By James Regan

SYDNEY (Reuters) – Rio Tinto Ltd/Plc’s (RIO.AX) rejection of a $140 billion all-share offer from BHP Billiton Ltd/Plc (BHP.AX) is likely to trigger rival bids from resource companies awash with cash from record commodity and stock prices.

A marriage of BHP (BLT.L) and Rio (RIO.L) would create the world’s biggest mining force, capable of controlling the global flow of fleet loads of iron ore, copper, coal and other commodities for industrial use.

Analysts said BHP Billiton’s approach may be just the first shot in a battle that could draw in other parties and push up the bidding for Rio above $170 billion.

A host of interested parties, from Chinese oil companies to Siberian nickel miners, have the potential to launch rival offers after massive stock market floats have brought companies excess funds, supplying the capital needed to finance a bid.

“If you put together a consortium of Chinese, they could be out there, as well as the Russians, given there’s a lot of oil money being generated,” said Shaw Stockbroking analyst John Colnan.

Global mining leader BHP said on Thursday it had approached third-ranked Rio with a 3-for-1 share offer, but Rio was quick to rebuff the offer as too low.

The BHP offer was initially pitched at a 14.4 percent premium. Rio shares gained nearly 16 percent to A$130.90 in Australian trade, while BHP fell 1.8 percent, putting Rio about 3 percent above the indicative offer price.

Rio would not say whether it had received other approaches, although analysts said the company’s broad range of operations and healthy profit outlook made it an attractive target.

The Rio board was open to other offers and a higher BHP bid, said a source familiar with the deal, who asked not to be named.

Only hours earlier, Rio had mopped up the last of the shares in Canadian aluminum maker Alcan, which it acquired for $38.1 billion after trumping an offer by Alcoa Inc. (AA.N).

Credit ratings agency Moody’s said it may put BHP’s rating under review for a possible downgrade if a formal offer is made for Rio, reflecting uncertainties about integration risk, regulatory restrictions and financial policies.

The global mining boom means both companies are generating piles of cash, with BHP Billiton expected to post 2007/08 net profit of $15.7 billion, while Rio is expected to post profit of about $7.6 billion.

At current prices, Rio trades at a forward earnings multiple of 17.6 times, and BHP at about 14.3 times.

REGULATORY CONCERNS

BHP has not said how it would address potential anti-trust issues, particularly in iron ore where the two companies command 30-35 percent of the seaborne market, say analysts. BHP and Rio mine a combined 277 million tonnes a year and are expanding rapidly. Only Brazil’s CVRD (VALE5.SA) mines more.

However, Rio’s acquisition of Australian and Canadian iron ore miner North in 2000 raised few alarms with regulators.

Given neither BHP nor Rio sells much into the highly regulated U.S. and European markets, Tim Barker of BT Financial Group said he doesn’t see any anti-trust issues.

“The scarcity and the difficulty of bringing on new projects, sourcing people, makes these sorts of consolidations attractive,” said Denis Donohue, senior portfolio manager of Suncorp Metway Investment Management, which owns shares in BHP and Rio Tinto.

Rio’s rich iron ore, coal and copper mines, as well as its ranking as the world’s top aluminum maker, would offer diversification from oil for China’s PetroChina (601857.SS), which has a market value exceeding that of Exxon Mobil Corp (XOM.N) and Royal Dutch Shell Plc (RDSa.L) combined.

“One possibility would be Chinese sovereign funds taking a blocking stake in Rio Tinto,” said FW Holst analyst Rob Craigie.

In Russia, the world’s biggest nickel miner Norilsk Nickel (GMKN.MM) has said it will look overseas for more assets after completing the largest foreign acquisition by a Russian company.

Norilsk already explores with Rio Tinto in the Russian Far East and with BHP in northwest Russia and western Siberia.

BHP, which merged with Billiton in 2001, almost went bankrupt in the late 1990s after a disastrous foray into copper mining in the United States, which raised the company’s penchant for spreading its commodity base far and wide.

Rio is also a combination of a merger, in 1997.

British-based Rio Tinto Co was formed in 1873 to mine ancient copper workings at Rio Tinto near Huelva in Spain. In Australia, Consolidated Zinc was incorporated in 1905 to treat zinc bearing mine waste from the outback.


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Twenty Largest Companies In the World

Tuesday, November 6th, 2007

from Tickersense

There has been much chatter recently about the market capitalization of Chinese stocks. It is true that PetroChina (PTR) is the first trillion dollar company; however, four of the five Shanghai Composite stocks appearing in our Top 20 list are also listed on Hong Kong’s Hang Seng index. Maybe not a hugely significant fact, but while the Shanghai Composite is considered “emerging,” the Hang Seng is considered “developed.”

http://tickersense.typepad.com/ticker_sense/2007/11/twenty-largest-.html


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The World’s First Trillion Dollar Company

Tuesday, November 6th, 2007

Is it a tech-stock? Is it traded on the NYSE or NASDQ? Is it even an American company?

————————————————————

PetroChina Surpasses Exxon as Shanghai Shares Surge
By Ying Lou

Nov. 5 (Bloomberg) — PetroChina Co. became the world’s first trillion-dollar company, surpassing Exxon Mobil Corp. as the shares started trading on the Shanghai stock exchange.

PetroChina’s Class-A shares almost tripled on their Shanghai debut, rising as high as 48.62 yuan from the sale price of 16.7 yuan. The listing gives mainland Chinese investors their first opportunity to own the stock.

China’s largest oil and gas producer has been listed since 2000 in Hong Kong where it advanced 78 percent this year as investors sought to profit from the world’s fastest-growing major economy. The Beijing-based company’s shares soared as the Hang Seng Index in Hong Kong rose 53 percent and the CSI 300 Index of shares listed on the Shanghai and Shenzhen exchanges increased 168 percent.

“Local investors might have a different risk tolerance level to global investors, so we may see PetroChina’s A-shares trading at a premium” to its Hong Kong stock, said Lei Wang, a co-manager of Thornburg International Value Fund in Santa Fe, New Mexico, which oversees $16 billion.

PetroChina reached 43.96 yuan at 11:05 a.m. in Shanghai, valuing the company at more than $1 trillion. Exxon is worth $488 billion on the New York Stock Exchange. In Hong Kong, PetroChina fell 7 percent to HK$18.20

`Sense Of Responsibility’

The Chinese oil producer trades at almost 60 times earnings in Shanghai, compared with Exxon’s valuation of 13 times. PetroChina’s market value is higher than Russia’s gross domestic product.

“I feel very excited today and also feel a very strong sense of responsibility,” Chairman Jiang Jiemin said at the Shanghai Stock Exchange. “This is PetroChina returning to our investors and the society.”

The company had 20.5 billion barrels of oil and gas reserves in 2006, compared with 22.1 billion for Irving, Texas- based Exxon, data compiled by Bloomberg show. PetroChina has been adding new reserves at an average annual rate of 5 percent for the past three years, a faster pace than Exxon, Royal Dutch Shell Plc and BP Plc, the world’s largest oil companies by sales.

The share sale, the world’s biggest this year, surpassed the 66.6 billion yuan generated by China Shenhua Energy Co. in September.

Mainland Chinese investors were until now prevented from directly buying PetroChina stock, missing out on a 15-fold surge as economic growth turned the nation into the largest oil consumer after the U.S. and as crude prices reached a record $96.24 a barrel in New York.

Demand For Shares

Investors applied for more than 3.3 trillion yuan of stock, almost 50 times the amount PetroChina sold. Chinese companies now represent five of the world’s 10 largest by market value, raising investor concerns that the market is too expensive.

Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. sold its stake in PetroChina this year, reaping an eightfold gain that contributed to a 64 percent increase in third-quarter profit for the Omaha-based company. Berkshire had 2.34 billion shares as of the end of 2006, the largest holding after state-owned China National Petroleum Corp.

Buffett said on Oct. 24 that Chinese share prices have risen too fast.

“It’s easy to be carried away in the stock market when things are going very well,” he said in the northern Chinese city of Dalian. “We at Berkshire never buy stocks when we see prices soaring.”

`Limited Upside’

Gains in PetroChina’s Class-A stock in Shanghai may have more to do with Chinese investors seeking returns from their $2.3 trillion in savings than the outlook for the company’s exploration and production operations, or its refining business, known as downstream, said Larry Grace, an oil analyst at Kim Eng Securities Co. in Hong Kong.

“Production is static with limited upside for the next three to four years,” Grace said. “As for the downstream, the price controls and overall regulatory trend limit the company’s earnings.”

China controls fuel prices to shield consumers in the world’s most-populous nation from accelerating inflation. The policy limits the ability of PetroChina and China Petroleum & Chemical Corp. to pass on the burden of higher crude oil costs.

UBS AG’s China venture, UBS Securities Co., Citic Securities Co. and China International Capital Corp. arranged PetroChina’s Shanghai share sale.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aixBdHxWY.po&refer=news


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Oil closes at new high of $94.53 on supplies drop

Tuesday, November 6th, 2007

By Moming Zhou & Polya Lesova, MarketWatch

In after-hours trade, crude climbs to new record high of $95.28 a barrel

SAN FRANCISCO (MarketWatch) — Crude-oil futures closed at a new high of $94.53 a barrel on Wednesday after U.S. crude inventories dropped surprisingly in the latest week to the lowest level in two years and the dollar lost ground on the Federal Reserve’s rate cut.

In after-hours trading, crude-oil futures hit a new record high, surging as high as $95.28 a barrel on the New York Mercantile Exchange. Crude oil for December delivery was last up $4.84, or over 5%, at $95.22 a barrel.

Earlier Wednesday during the regular trading session, crude settled up $4.15, or 4.6%, at $94.53 a barrel, the highest closing price for a front-month contract.

Futures prices of petroleum products also surged.

U.S. commercial crude oil inventories, which are inventories excluding those in the Strategic Petroleum Reserve, fell by 3.9 million barrels to 312.7 million barrels in the week ending Oct. 26, the lowest since October 2005, the Energy Information Administration said Wednesday. Analysts surveyed by Platts expected on Tuesday a build of 1.25 million barrels in stocks.

The dollar hit a record low of $1.4503 per euro after the Federal Open Market Committee, the Fed’s rate-setting arm, cut the fed funds rate by 0.25% to 4.5% on Wednesday afternoon. See The Fed.

“This is another bullish report for crude oil,” said James Williams, an economist at WTRG Economics, an energy research firm. “Since the Fed cut met expectations, this is fairly neutral. The oil stock decline, not the Fed, is ruling today’s market.”

“This market continues to trade on fear and short term news,” Williams added.

Low inventories

EIA’s data showed that out of last week’s 3.9 million barrel drop, 3.1 million barrels were from Cushing, Oklahoma, which is the delivery point for crude traded on Nymex.

“The large decline at Cushing stocks adds to the upward pressure,” said Williams.

Mexico’s oil exporting ports closures will probably affect next week’s import and inventory data, according to WTRG’s Williams.

Crude imports over the last four weeks have averaged 9.7 million barrels per day, or 481,000 barrels per day less than the same period last year, the EIA said. Last week’s imports averaged 9.4 million barrels per day, up 278,000 barrels per day from the previous week.

U.S. imports nearly 70%, or 10 million a day, crude oil. Mexico is the second largest supply country after Canada, shipping 1.66 million a day to the U.S., according to EIA.

Fierce storms in the past few weeks forced Mexico to close its main oil exporting ports in the crude-rich Gulf of Mexico, cutting off most of the country’s crude shipments to the U.S. Over the weekend, Mexico’s state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S., halted production of 600,000 barrels a day due to inclement weather.

The impact from Mexico will “be made up in the coming weeks,” said Williams.

Fed rate cut

“The Fed cuts were pretty much as expected, but it’s more bad news for the dollar, which means oil will likely rally even more,” said Kevin Kerr, president of Kerrtrade.com and Editor of Dow Jones MarketWatch’s Global Resources Trader.

A rate cut will weaken the dollar and raise the appeal of oil as an alternative investment. A weaker dollar also undermines the value of crude for its producers since the commodity is priced in the U.S. currency, putting upward pressure on crude prices as producers move to raise prices to limit the impact of the weak dollar.

“With a weaker dollar, one cannot expect prices to decline much if at all this week,” said John Person, president of National Futures Advisory Service, a futures brokerage. In fact, he said, the $100 dollar a barrel oil target becomes more of a reality in this scenario.”

“At this point if there were any news-driven shocks to the market that would indicate a supply disruption, oil would certainly be targeted at $120 per barrel, especially in this environment,” Person added.

Drop in refinery capacity

In the same report, EIA, which is part of the Energy Department, also said refinery capacity utilization fell sharply by 0.9% to 86.2%. Analysts expected a 0.5% point increase. The utilization was at the lowest in more than seven months.

“The severe weakness in the capacity utilization number is shocking,” said Global Resources Trader’s Kerr. “If capacity falls there will be less heating oil or gasoline.”

The EIA reported that gasoline supplies rose by 1.3 million barrels to 195.1 million barrels in the latest week, down from last year’s 206.4 million, while distillate stocks, which include heading oil, diesel and jet fuel, grew by 800,000 barrels to 135.3 million barrels, down from 144.1 million of the same period in last year.

“Without a chance to see oil inventories build we are in for higher prices at the pumps and for home heating costs this winter,” said National Futures Advisory Service’s Person.

In a separate report, the American Petroleum Institute reported that crude supplies fell by 3.3 million barrels to 311 million barrels. Distillate stocks rose by 3.1 million barrels to 136.2 million barrels, while gasoline stocks fell by 800,000 barrels to 196.1 million barrels, the API said.

On Nymex, November reformulated gasoline jumped 3.7%, or 8.29 cents, to $2.3400 a gallon and November heating oil rose 3.4%, or 8.32 cents at $2.5078 a gallon.

The EIA will release data on natural gas supplies at 10:30 a.m. Eastern on Thursday. John Kilduff, an analyst at MF Global, expects an injection of 56 billion cubic feet.

December natural gas surged 4.1%, or 33.1 cents, at $8.352 per million British thermal units.

http://www.marketwatch.com/news/story/oil-closes-new-high-9453/story.aspx?guid=%7BF078CE7B%2D5277%2D4358%2D9356%2D7A049EBBAFA6%7D


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THE GOLD PRICE AND WAR IN THE MID EAST

Tuesday, November 6th, 2007

by Clif Droke

I received an e-mail from a financial professional this week that speaks to our question in this week’s commentary:

“Am concerned there is a real crisis brewing. Oil at $95; gold at $800 (and keep in mind that’s a suppressed price!) And Sec Lend [Fed securities lending] 4 days — is it in the last 10 days – we’re OVER TEN BILLION DOLLARS?! Is that a weekly all time all time record??!

“WHY??? Most peaks in gold are covered by a war or capped by a crash, eh?!”

Let’s examine the recent spike in the gold price before we attempt to find the answer to this question.

Gold closed at a 27-year high on Friday at $806/oz. That’s one of the highest levels seen since the all-time high was made in 1980. What on earth is the runaway gold price rise telling us?

As far as stock market crash, the odds are extremely low against this happening. With the IBES Valuation Model showing a 36% undervaluation of the stock market and with insider buying and securities lending volumes this high, a stock market crash would be unprecedented at this point. There is simply too much in the way of support for this to occur.

Now what about the second alternative, namely, war? This is a more likely scenario. It could be that gold “smells” war in the very near future and is doing what gold normally does when war is in the future. The same thing happened heading in the second war with Iraq in 2003.

This time it seems Iran has come into the crosshairs of the Bush Administration as being the next target of Mid East occupation. In June, the U.S. government issued an official warning to all Americans not to travel to Iran, according to an A.P. report. A more recent headline from the Financial Times reports, “US hits Iran with financial sanctions (Rest of world urged to follow lead).” It seems there are many in Washington who desperately want war with Iran and are going out of their way to get it!

Could the gold and oil price action be foretelling us of military action soon to come?

As an aside, if war is waged in Iran in the upcoming months, this will provide the pretext for the next increase in monetary liquidity. Remember what happened in 2003 when the war in Iraq began? The U.S. was absolutely flooded with money and a series of bull markets all across the stock and commodity arenas provided distractions to keep Americans from being overly concerned with the war.

Any war that is declared in the current economic milieu is sure to be greeted with less than an enthused response. Ergo, “a priming we shall go” will be the tune the Fed sings as the next phase of Middle East war gets underway.

The headlines of the financial newspapers have also given us reason to remain bullish on stocks from an intermediate-term standpoint. Now, after all those weeks of hand-wringing over the “credit crisis,” the press has given investors yet another reason to “be afraid…be very afraid.

The new crisis of the hour? More inflation!

Tuesday Financial Times contained an article by Michael Mackenzie, “Dollar and oil swings prompt fears of inflation.” We’ve seen this recurrent inflation theme several times in the past few days in the press and it seems to be a widespread fear. This fear is just what the market needs to keep the “Wall of Worry” intact and the bull market going forward.

Mark Dodson has an interesting take on inflation from the standpoint of the global economy. He writes, “For all the talk of so many economists who now recognize and talk about the twin forces of globalization and the technology revolution and the increase in competition that results, they continue to rely on Phillips curve style models that look at things like unemployment and capacity utilization in the US to determine if inflation is coming on the scene. They are using 20th century economic models in the 21st century.

“Even if you believe in a Phillips curve model, global capacity and global unemployment should be what you are looking for, and no one has the slightest clue what those numbers are.”

Indeed, it seems everyone is afraid of a resurgence of inflation following the Fed’s interest rate cut and they’ll be even more afraid if the Fed cuts the rate again.

But inflation (properly speaking) is the last thing the stock market and economy have to worry about. The true inflation story is contained in this long-term chart showing the continuous yield on the 10-Year Treasury. The recent spike in bond prices and corresponding drop in yields has the all the marks of money going into the proverbial “bomb shelter” seeking protection from the latest crisis of the hour. It is most certainly not a sign the market is worried about inflation.

Dodson adds, “Commodities (input prices) might be through the roof, but the final goods prices that are included in popular inflation measures show inflation that is well under control. Same old story. We like the way that ISI puts it: what emerging economies (Think China) buy, they inflate; what they sell, they deflate.”

Now what about gold stocks? Here we are in the month of November, a time known for showing seasonal improvement of the mining stock sector. December-January are normally the best months of this seasonal time frame but sometimes November can be positive as well.

The XAU’s track record in the month of November going back the past 15 years is a mixed one. There have been six negative Novembers, seven positive ones and two neutral ones. The past 15-year record shows no strong seasonal tendency one way or another.

When we look at the past four Novembers, however, we see that every November since 2003 has been a winning one for the XAU as measured from the start of the month until the finish. Here’s hoping that November 2007 will make it five in a row.

Among the other major mining companies reporting quarterly earnings, Silver Wheaton (SLW, $17.11) announced Wednesday lower net earnings of $19.2 million ($0.09 per share) from the sale of 3.1 million ounces of silver, compared with $22.5 million ($0.10 per share) from the sale of 3.5 million ounces of silver in 2006. Operating cash flows for the latest reporting period were also lower at $27.1 million versus $28.3 million a year ago. SLW’s revenues fell short of consensus. However, Silver Wheaton’s earnings-per-share (EPS) beat analysts’ consensus.

I’ll leave you with this. The following headline article was discovered on the CNNMoney.com newswire yesterday. The article’s headline says:

“Gold stocks: Few gems left to unearth (The price of gold may continue heading skyward but analysts say investors need to tread cautiously if thinking of adding mining stocks to their portfolio)”

This headline holds forth bullish implications from a contrarian standpoint and is yet another anecdotal piece of evidence that the uptrend for gold and silver stocks should continue, notwithstanding a few potholes along the way.

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Thanks, Global Warming!

Monday, November 5th, 2007

“The sea route running along the Arctic coastline of North America, normally clogged with thick ice — is nearly ice free for the first time since records began.”

— “Northwest Passage Is Now Plain Sailing,” Guardian Unlimited, Aug. 28

IT STARTED WITH A RUSSIAN EXPEDITION planting the Russian flag in a polar seabed. Though largely symbolic, it touched off a scramble among a handful of nations, all trying to lay claim to the Arctic. Among these claimants: the U.S., Canada, Russia and Denmark.

Why the sudden interest in the Arctic? There are two big reasons. First, thanks to global warming, deposits of natural resources once layered over in impenetrable ice are now easier to get at. Second, thanks to melting ice, some previously icebound shipping lanes are opening up.

Today, the Arctic prize is a multibillion-dollar opportunity.

As a treasure trove of natural resources, the Arctic boggles the mind. By some informal estimates, the region holds 25% of the world’s undiscovered oil and gas. It could also hold massive amounts of crystallized methane — another potential fuel source. More formal surveys are under way by the Arctic lottery hopefuls. So in time, we’ll know more about what Mother Nature has cooked up in the oven beneath the icy Arctic crust.

Minerals galore also lie untouched below the cold blue polar sea. One day, the region could be home to the undersea mining of copper, zinc, cobalt and diamonds.

In truth, these resources are still a long way from being developed. The climate is incredibly harsh, and easier-to-get-at resources still exist on the fringes of the Arctic. As an oil and gas story, this one has a long fuse.

The Arctic thaw’s more immediate and bigger impact will be as a shipping lane. Since Aug. 21, the Northwest Passage has been open to navigation and free of ice for the first time. “Analysts…confirm that the passage is almost completely clear and that the region is more open than it has ever been since the advent of routine monitoring in 1972,” reports the U.S. National Snow and Ice Data Center.

The fabled Northwest Passage through the Arctic Ocean connects the Pacific and Atlantic oceans along the northern coast of North America. To pass through here from China on your way to Europe is about 5,000 miles shorter than going through the Panama or Suez canals.

As the Financial Times observes, “A ship traveling at 21 knots between Rotterdam and Yokohama takes 29 days if it goes via the Cape of Good Hope, 22 days via the Suez Canal and just 15 days if it goes across the Arctic Ocean.”

An oil tanker could make the trip from the Russian port city of Murmansk to the east coast of Canada in a week by crossing the Arctic Ocean. That is about half the time it takes to get an oil tanker from Abu Dhabi to Galveston, Texas.

In the early 1900s, it took the famed Norwegian explorer Roald Amundsen and his team nearly two years to pick their way through the ice and narrow waterways. Now an open passage could revolutionize shipping.

More than 90% of all goods in the world, measured by tonnage, make their way by sea. And as I’ve noted in past issues, the rapid surge in trade with China and India is putting a lot of strain on ports around the world. In recent years, the volume of container shipments has grown 5-7% annually — basically, doubling every 10-15 years.

The ships carrying those containers are getting bigger, and the old canals can’t hold these new seafaring beasts of burden as they once did. The Suez Canal can still handle the largest current container ships, but not the next generation.

The Panama Canal is even smaller. It’s too small for ships that are now common on longer shipping routes. Panama plans to deepen its channels and make them wider. But even so, the new Panama Canal won’t be able to service the next generation of ships.

So it looks like the world will have a new navigable ocean. The effects on trade could be immense. Much shorter shipping distances and quicker shipping times will lower the cost of doing business. It could lead to big increases in trade and, certainly, a major shift in sea-lanes.

A freer-flowing Arctic Ocean would also bring fish stocks north — with fishing fleets not far behind. It could mean a new boom in fishing for salmon, cod, herring and smelt. It could also mean that sleepy old ports could become important new hubs in international trade.

As the Financial Times recently opined, “Leading world powers have an unprecedented chance to win navigation rights and ownership of resources in the Arctic seabed untouched since its emergence during the twilight of the dinosaurs.” The U.S. alone could lay claim to more than 200,000 square miles of additional undersea territory.

The specific investment implications of this are still too early to say. But the cracking open of new trade routes or reopening of old ones — and their impact on global trade — always has ripple effects across financial markets. As for the Arctic, this has got to be one of the most important new developments on that front in a long time.

Sincerely,
Chris Mayer


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Credit Bubble Bulletin, by Doug Noland

Monday, November 5th, 2007

Road to Ruin (Excerpt)

Road to Ruin:
The gentlemen at Pimco are, once again, the leading cheerleaders for another round of easier “money.” Calling for the Fed to cut rates to 3.5%, Bill Gross commented Wednesday on Bloomberg television: “The nominal [third quarter] GDP number was 4.7%. Any time you get a nominal GDP growth less than 5% the economy is basically struggling. The U.S. needs at least 5% nominal growth in order to pay its bills on a longer term basis.”

I will, once again, take the other side of their analysis. First of all, 4.7% traditional nominal GDP growth would have easily in the past “paid its bills.” It doesn’t get it done today – even with 4.7% unemployment – specifically because of a long period of gross monetary excess. For some time now, the U.S. economy has been hopelessly finance-driven, and the greater and more protracted the Credit excesses the greater the “transformation” of the economic structure. And it is the underlying real economy that today cannot “pay its bills” and is therefore hooked on ever increasing Credit inflation. This should by now be recognized as the Road to Ruin. Contemporary finance and its operators should be held accountable.

The majority of contemporary “services” economic “output” is intangible in nature. The system creates various types of new financial claims (Credit), and this new purchasing power spins today’s economic wheels. It seemingly works wonders during the boom, but the end result is an endless mountain of financial claims backed by insufficient real economic wealth-creating capacity. Nominal GDP would “pay it bills” today only in the context of monetizing additional debt – or inflating the quantity of Credit to inflate “purchasing power” to inflate incomes and earnings – all in order to service previous borrowing excesses.

Admittedly, the Fed has opportunely administered several bouts of “reflation.” We have, however, reached the point where another round will be self-defeating. To throw out some numbers, from the Fed’s Z.1 “flow of funds” report we know that Total Credit Market Borrowings (non-financial and financial) expanded at a $3.75 TN annualized rate during the first half. To put the immense scope of recent Credit inflation into perspective, Credit Market Borrowings expanded on average $1.233 TN annually during the nineties (see chart above). Total borrowings accelerated to $1.694 TN in 2000, $2.013 TN in 2001, $2.365 TN in 2002, $2.767 TN in 2003, $3.085 TN in 2003, $3.380 TN in 2003, and $3.825 TN last year. It is this degree of Credit creation – and the associated Risk Intermediation – that is today untenable and unsustainable at any interest rate.

Before I dive into the U.S. Credit system fiasco, I was struck by a story by Jamil Anderlini from today’s Financial Times:

“The murder of a man who jumped a petrol queue in China’s central Henan province on Wednesday is the stuff of nightmares for the authoritarian Chinese government. Faced with worsening fuel shortages across the country Beijing raised petrol, diesel and jet fuel prices at the pump by almost 10% yesterday, in an effort to boost domestic supplies and exorcise the spectre of social unrest. The policy reversal came as shortages spread to the capital, which is usually immune from the country’s periodic supply crunches. But the government is unwilling to allow prices to rise too much because of a morbid fear of spiralling inflation, which has a history of toppling governments in China and is currently running at a 10-year high, above 6%… Soaring global crude oil prices…pose a serious dilemma for Beijing, which last raised its tightly controlled fuel prices in May 2006. China is the second-largest crude oil consumer after the US and although it was a net exporter as recently as 1993 it now relies on imports for nearly 5% of its crude supply. The current shortages, particularly of diesel, result from a combination of high global oil prices and strict government controls, causing huge losses for Chinese refiners that must pay more for oil but cannot raise prices at the pump.”

I pose the following question for contemplation: How much would the Chinese government, with their $1.4 TN stockpile of chiefly dollar reserves, be willing these days to pay for the necessary energy resources to sustain their economic boom and stem social unrest?

The legacy of years of runaway U.S. Credit excess includes many trillions of dollar liquidity balances circulating around the globe. Chinese reserves, for example, have inflated almost seven-fold in just five years. On the back of unprecedented global Credit and liquidity excess, energy, food, precious metals and other commodities now attract intense demand and virtually unlimited purchasing power. Our economy – our financially stretched consumers and vulnerable businesses – will now have no option other than to bid against highly liquefied competitors for a lengthening list of resources. Failure to recognize that this situation is a major inflationary problem is disregarding reality. The same can be said for suggesting that we can continue on this current course – with massive Current Account Deficits and rampant speculative financial outflows to the world fueling myriad dangerous Bubbles and maladjustment on an unprecedented global scale.

Today’s backdrop is unique. There are literally trillions of dollars of liquidity slushing around the world keen to hold “things” of value. Liquidity sources include the massive central bank reserve holdings as well as funds at the disposal of the sovereign wealth funds. Importantly, the more apparent becomes U.S. financial fragility, the keener they are to stockpile real “things”. There is as well a global leveraged speculating community, in control of trillions of liquid purchasing power. The speculators are also keen to acquire (non-dollar) “things” as opposed to our securities. Indeed, it should be noted that this is the Federal Reserve’s first attempt at reflation where U.S. securities are not the speculators’ or foreign central banks’ asset class of choice.

Not only is the pool of potential global buying power unparalleled in scope. It is fervidly attracted to tangible assets – as opposed to U.S. securities – and is highly speculative in character. At the same time, an unwieldy global boom is stoking unprecedented demand in China, India, Asia generally, and the other “emerging” markets including Russia and Brazil. Throw in various weather related issues and energy production constraints and the prospect for some very serious bottlenecks and shortages has developed.

Granted, these dynamics have been evolving for some time now. What has changed is the speed and breadth of financial crisis enveloping the U.S. financial system. When I read of mounting energy and food shortages and witness the unfolding run on the U.S. financial sector, as an analyst I must contemplate the likelihood we have entered a uniquely unstable monetary environment at home and abroad. In short, the backdrop exists where incredible dollar liquidity flows could be released (from myriad sources) upon key things (notably energy, food, metals and commodities) already in severe supply and demand imbalance. Again, how much are the Chinese willing to pay for energy? The Russians for food? The Indians for commodities in general? How much will investors be willing to pay for precious metals as a store of value? How aggressively will the speculators “front run” all of them? Can the Fed afford to continue fueling this bonfire?

I have so far this evening purposely avoided the unfolding U.S. financial crisis, a historic fiasco that took a decided turn-for-the-worst this week. I’ll admit that I am rather amazed that key financial stocks – including the financial guarantors, “money center banks”, and Wall Street firms – were hammered yet the market maintained its composure. NASDAQ was actually up on the week, as major technology indexes added to their robust y-t-d gains. I’ll assume there is a confluence of great complacency and gamesmanship, with operators determined to play aggressively through year-end (bonuses and payouts).

I wouldn’t bet on the stock market holding 2007 gains for another eight weeks. The Credit meltdown is now moving too fast and furious. Importantly, confidence is faltering for the entire Credit insurance industry, including the mortgage insurers and the financial guarantors. This is a devastating blow for the securitization marketplace, already reeling from pricing, liquidity and trust issues. The Credit system has lurched to the edge of meltdown, while the economy hasn’t even as yet succumbed to recession. It’s absolutely scary. Last week I wrote that subprime and the SIVs were “peanuts” in comparison to the CDO market. Well, the CDO marketplace is chump change compared to Credit Default Swaps and other over-the-counter (OTC) Credit derivatives that, by the way, have never been tested in a Credit or economic downturn.

The scale of the Credit “insurance” problem is astounding. According to the Bank of International Settlements, the OTC market for Credit default swaps (CDS) jumped from $4.7 TN at the end of 2004 to $22.6 TN to end 2006. From the International Swaps and Derivatives Association we know that the total notional volume of credit derivatives jumped about 30% during the first half to $45.5 TN. And from the Comptroller of the Currency, total U.S. commercial bank Credit derivative positions ballooned from $492bn to begin 2003 to $11.8 TN as of this past June. It today goes without saying that this explosion of Credit insurance occurred concurrently with the expansion of the riskiest mortgage (and other) lending imaginable. It’s got “counter-party fiasco” written all over it.

The stocks of Ambac and MBIA collapsed this week. I can only surmise that part of the selling pressure emanated from players caught on the wrong side of rapidly widening Credit default swap prices. Since these companies have limited amounts of bonds trading in the markets – in debt markets generally suffering acute illiquidity – those needing to hedge rising default risk in this industry had little alternative than to aggressively short the stocks. And the faster the stocks declined, the wider the CDS spreads and the more “dynamic” hedge-related selling required. This dynamic could play out throughout the financial sector and beyond. The “dynamic hedging” (shorting securities to offset increasing risk on derivatives written) of Credit risk today poses a very serious systemic issue.

The general inability to hedge escalating default and market risk has become and will remain a major systemic problem. Liquidity has disappeared, and there now exists an untenable overhang of risky securities and derivatives to be liquidated and/or hedged. Most playing in the Credit derivatives market lack the wherewithal to deliver on their obligations in the (now likely) event of a systemic Credit bust. The vast majority were “writing flood insurance during a drought, happy to book annual premiums while expecting to purchase reinsurance/hedge if and when heavy rains ever developed.” Well, it all happened at a pace so much faster than anyone ever contemplated. So abruptly, the flood is now poised to wreak bloody havoc the scope of which was unimaginable – and there’s no functioning reinsurance market.

Unlike this summer, this week saw the Credit crisis engulf the epicenter of the U.S. Credit system. Not surprisingly, the Fed rate cut only seemed to exacerbate market tension, with oil, gold and commodities spiking and the dollar faltering. Those arguing that the Fed needs to cut rates aggressively to avoid recession are disregarding the much higher stakes involved. There is today no alternative to a wrenching recession. The economy is terribly maladjusted, while the financial sector is at this point incapable of intermediating the massive amount of ongoing Credit necessary to keep this Bubble Economy inflated. Wall Street “structured finance” is today faltering badly, now leaving the highly vulnerable banking system with the task of sustaining the ill-fated boom. The least bad course for the Federal Reserve at this point would have a primary focus on supporting the dollar and global financial stability.

http://www.prudentbear.com/index.php?option=com_content&view=article&id=4812&Itemid=55


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Nicholas F. Benton: China’s Resource Grab in Africa

Saturday, October 27th, 2007

Alex’s Notes: My main reason for posting the article below is to note what the Chinese are doing in preparations for their massive upcoming natural resource needs.

Between China and India, there is a rapidly growing group of some 1 billion people with new middle class incomes. When all of these people all decide they each want a car, a microwave, a new refrigerator, a new LCD TV, and all the amenities some of us in the western world take for granted, the natural resources requirements to fuel this wave of improved lifestyle will be staggering.

This is just one more example of how China and India thinks ahead, preparing generationally, for what is to come.

Proverbs 13:22: A good man leaveth an inheritance to his children’s children: and the wealth of the sinner is laid up for the just.

By contrast, what does the USA do?

We spend trillions supporting a worldwide military complex under the mantra of ‘national defense’. I still occasionally ponder how exactly projecting military power into another sovereign nation is defending yourself, but we have fallen that far.

We do not engage in the kind of future looking programs that will adress our educational, oil and energy needs of the future. Not to mention the staggering elder care and knowledge vacuum problems we face as our baby boomers enter retirement and remove a massive pool of knowledge, experience and know how from America’s workforce.

We have lost our generational thinking and planning long ago. While highschoolers in India study crammed 100 at a time into small sweltering rooms 7 days a week just to get into a technical college, we create programs like ‘No Child Left Behind’. New Middle Class from India and China work tirelessly with hopes of profiting in the digital future economy, and have no qualms about putting in 12 hour days. What have we taught our kids to do? Lets hook it up with more MTV, and spend our time drinking, doing drugs, having sex, and playing video games. Policies that discourage competition in our schools will have the effect of producing invalid, incompetent, and non-competetive workers that are not equipped to compete nor have the work ethic to do so even if they were equipped, while hard working knowledge workers from China and India take their jobs and leave them in poverty.

The moment we allowed ourselves to create entitlement programs that would enslave future generations because we were to lazy to accept personal responsibility for our retirement needs is the moment we lost our Moral Authority, and it was then that we lost our edge as world leaders. We are only beginning to see the results now. Just wait and see what the next 20 years holds if we do not change our tune.

We have allowed our government representatives to spoon feed us a utopian future, where everyones needs are cared for, just ‘elect me and I will pass legislature that will take care of everything’. What they did not include in those slogans was all the spending they would tack on to those bills for their personal interests, nor did they include the astronomical costs and damage to future generations that their ‘utopia legislature’ would create. Social Security and Medicare are hurtling towards a trainwreck of an event that many Americans are completely oblivious of, and even worse apathetic to. Most people in America still think there is money in the Social Security fund that hasnt been plundered for some other government program. HAHAHHAHAHAHA, thats a good one.

As faithful American citizens we of course voted these people into office and cheer as they provide a means of saving us from our own stupidity. What we are seeing now is only the effects of decisions we have made, and allowed our leaders to make in the past.

The consequences of our choices to spend now by our government will also not have to be dealt with by us, but by Americans who have not even been born yet. Our future generations will be born into a world with hundreds of thousands in National Debt burden from the moment they leave the womb. In our ‘I want it now, I will spend now, regardless of the cost’ culture – we have created a generational habit of instant gratification that may feel good now, but that our grandchildren will pay the price for.

Whats the solution? To take back our personal responsibility and forward looking planning on an individual level, to elect like minded officials, and to labor to create our own financial future versus relying on someone else to do it, and forcing our childrens children to pay the bill. We need to let go of the idea that the government is going to take care of us – let me let you in on a hint, they arent there to help you, they are there helping themselves, and using your tax money to do it.

Granted, now and then we see someone in government who believes in personal accountability and taking steps to improve the future of our chidrens children such as Ron Paul, but why should it be that he is an anomaly versus the norm?

Wake up America, the entire world is surging forward while we stagnate, and its economies are largely fueled by our willingness to becomes slaves to debt. If we allow a government that has no qualms about taxing the ever-living crap out of you to do what feels good for themselves, we are asking for it. If we at some point do not rise up and take back our own future, it will be dished to us on plates that will not taste good. No, they will not taste good at all.

/rantoff. We now return you to your regularly scheduled programming.

———————————————————

Written by Nicholas F. Benton

nfbenton@fcnp.com

My exclusive interview this week with a leading health official from the U.S. working on the AIDS crisis in Zambia, Africa, revealed conditions on the ground there almost too horrible to describe. There is no one critical problem there that is not interlinked with at least a half-dozen others and the conventional wisdom is that the best case scenario for a turnaround is at least 40 years away.

But as far as the U.S. or any Western interests are concerned, that day will likely never come, since their current foreign policy vacuum in that region has left it to strident and persistent advances by the Chinese.

China is moving into the most ravaged areas of Africa with no humanitarian intent. On the contrary, the Chinese are capitalizing on the corruption at the top of governments there to trade financial payoffs for titles to massive chunks of land rich in untapped natural resources.

The U.S. has turned its back to this process, from combined diplomatic, geopolitical and financial aid standpoints, because of its preoccupation with Iraq, the official said.

So the unspeakable human crisis there is not only a matter of concern for the people in that region, but for the wider global interests of the U.S., as well. The U.S. is stuck in the Iraq quagmire, having expended over $500 billion there to date, in an intended oil grab against perceived Russian and Chinese designs. Yet because of that, it is permitting access to even more vital resources in Africa and elsewhere to the same strategic competitors, over the poverty-stricken and disease-riddled rotting bodies of millions.

It is impossible to imagine anything but a massive shift of focus by the U.S. and its allies to turn this regrettable inevitability around.

As it is now, up to 40 percent of the population of Zambia and surrounding countries is infected with the HIV virus that causes AIDS. In Zambia, because of AIDS, the average life expectancy has dropped from 57 to 37 years of age in 20 years.

One out of every two children born there today will die from AIDS-related factors before age 24.

The death rate has created a massive displaced children problem and the local government has no interest in setting up orphanages. Instead, these AIDS orphans either move in with extended family members, live on the streets or are periodically rounded up into military camps.

These children are then either recruited into the exploding trend of child soldiers used as fodder in genocidal tribal wars, or into global human trafficking networks, shipped around the world and forced to become sex workers. The primary destinations of these networks are the large coastal urban centers of the U.S., the official said.

Neither condoms nor AIDS drugs are working in arresting the spread of HIV in Zambia, she added, noting that cultural mores and a pervasive sense of despair make them ineffective.

People living in conditions of extreme poverty have no energy to think beyond how they’re going to eat from day to day, and have no sense that they could work for a better future for themselves, or their children, in the long term. There is simply no notion of opportunities for a better life.

Foreign aids organizations are treated with great suspicion, with Afro-Americans from the U.S. being considered “white.” The suspicions are fueled by local witch doctors whose prescriptions for virility encourage sexual practices by adults with young children too heinous to describe explicitly. Polygamy, without the formality of marriage or commitment, is the norm.

Corrupt local leaders hold aid efforts at bay, demanding huge bribes and diverting resources for their own uses. And there is simply no way the U.S. or any other outside nation can carry out programs in those countries without the blessings of those leaders.

There appears to be no sweeping proposal for a “silver bullet” to fix all this. The only way to start, however, would be for the global community, most importantly the U.S., to begin fixing its gaze on what’s happening there, not only from a humanitarian but from a geo-strategic standpoint.


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ADENs: Gold at 27 Year High; Platinum & Oil at Records

Sunday, October 21st, 2007

By Mary Anne & Pamela Aden

Gold is glittering, soaring more than $100 since mid-August, to a new bull market high and to its highest level since January 1980. The six year bull market is strong and solid.

Crude oil, platinum, lead and wheat have been even more impressive, reaching record highs. Lower interest rates have given the commodity markets a boost. A mega rise is underway and it’ll likely last for years.

REASONS WHY GOLD AT NEW HIGH

Weak Dollar

The most obvious reasons why gold surged higher is due to the falling dollar. The dollar index fell to a record low when the Fed cut interest rates, which helped push gold up sharply. If the Fed continues lowering interest rates to ward off a slowing economy, this could cause gold to soar as the dollar falls further.

Lower rates this year could spur other world central banks to do the same and if so, it could also boost demand for gold as an alternative to all currencies.

Uncertainty & Crisis

Once again, an economic crisis caused gold to rise. An unsound financial system with monster deficits is good for gold. Easy money is good for gold. The world is slowly moving out of the dollar, which is another plus for gold. Tensions in the Middle East are good for gold. Basically, gold rises during times of uncertainty and crisis and that’s currently what’s happening.

Inflation fears have also pushed gold up. The record high in oil and other commodities is helping to fuel these fears, which are unlikely to end any time soon.

Growing Demand

Demand for gold is growing rapidly, which is also bullish. Gold buying in Asia and India is up sharply. Our good friend Brien Lundin says that India expects demand this year to be 50% above last year’s levels. That goes along with the idea that
India’s growth is following China’s.

Physical demand from the West is robust as well, based on the massive buying in the gold exchange traded fund (GLD). Plus, some central banks have been buying, and the Fall is a strong holiday demand season when the gold price tends to rise.

GOLD’S BULL MARKET

There are several ways we’ve been measuring gold’s bull market.

When gold first turned bullish in August 2001, we identified steps for the new bull market. The steps began to develop as the 1999 and 1990-96 prior peaks were surpassed.

The big moment for the bull market was when gold broke above the $500 level in December, 2005. This took gold into the fourth and final step, which is where it’s been trading since then. This reinforced that the bull market was solid.

With gold now at levels last seen in 1980, gold is on its way to completing this step. Once it rises above $850, the fourth step will be complete and that’ll be the next big milestone. Gold will be at a record high and it will then enter a new super strong bull market phase.

Gold has been a great investment. It’s up nearly 200% since 2001 and it’s up 20% so far this year. Even so, gold could still go much higher. Within gold’s big picture, the mega bull market is still young.

GOLD TIMING: On track

Over the past year, many investors worried that the bull market was about over. Six years, as the thinking went, was a long time for a bull market to last without a decent correction.

This could be a legitimate concern but all bull markets crawl a wall of worry. Most important, gold has stayed solidly above its 65-week moving average since August, 2001. This means gold’s trend is up and it will stay up above this average now at $653. This is a simple yet very effective way to stay invested with the major trend.

Within this uptrend gold has intermediate highs and lows, which is where our timing indicator comes in (see Chart 3B). This chart helps identify when gold in at an intermediate high or low level and what’s likely to occur next.

For now, gold’s been rising in what we call a C rise since June 27. Gold held firm in mid-August when most markets fell and it’s now at a new bull market high, reinforcing that this is a strong C rise, which is very important.

Remember, C rises in a bull market tend to be gold’s best intermediate rise when it moves up to a new bull market high, and that’s been the case since 2001. So the current C rise has essentially completed its purpose.

If gold now continues on to test or surpass its record high, then this C rise will become spectacular. But if it ends and stays below $850, that’s okay too. Keep an eye on $700 this month as gold will remain strong in a C rise above that level.

http://www.kitco.com/ind/Aden/oct182007.html


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Global Exodus From US Dollar in Motion

Sunday, October 21st, 2007

by Gary Dorsch

For the past five years, the official mantra of the US Treasury has been a “strong dollar is in our nation’s interest,” while at the same time reminding traders that “currency values should be set in a competitive marketplace based on underlying economic fundamentals.” Most traders interpret that riddle to mean the US Treasury favors an “orderly devaluation” of the dollar, and won’t intervene to support the greenback as long as its descent doesn’t turn into a nasty rout.

The US dollar has lost more than a third of its value against the the Euro since 2002, and half its value against the Brazilian real. The latest blow to the “strong dollar mantra” occurred on Sept 18th, when the Bernanke Fed slashed the fed funds rate by a larger than expected 0.50% to 4.75%, knocking the US$ Index below the psychological level, and to its lowest level in 15-years.

US Treasury chief Henry Paulson is focusing on booming US exports, which rose to a record $138 billion in August, up 38% from five years ago. A weaker US dollar also inflates the earnings of S&P 500 companies, which earn roughly 44% of their revenue from overseas, mostly in Euros. And Mr. Paulson, the commander and chief of the “Plunge Protection Team,” aims to offset weaker US homes prices with an inflated stock market to keep the US economy from slipping into recession.

But the Bernanke Fed’s rate cut to 4.75% also ignited double-digit price increases for agricultural and energy commodities around the globe, and lifted gold 18% higher to $765 /oz, it’s highest in 28-years. The price of West Texas Sweet crude oil has increased by $19 per barrel since Mr. Bernanke began to flood the world with cheap US dollars. Soybeans have climbed 25% to $10 per bushel. Thus, Fed rate cuts, designed to bail out Wall Street brokers and bankers translates into sharply higher food and energy costs for the US and global consumers.

Foreign investors are rapidly losing faith in the Bernanke Fed and its cheap dollar policy, and dumped a net $163 billion of US securities in August, a record outflow. Net sales of long-term securities such as bonds, notes and equities hit an all-time high of $69.3 billion. Foreign central banks unloaded a net $29.7 billion of Treasury bonds in August compared with net sales of $6.9 billion in July.

Japan was a net seller of $24.8 of Treasuries, and China trimmed its holdings to $400.2 billion in August from $409 billion in July. Foreigners also sold $40.6 billion in US equities, a sharp reversal from net purchases of $21.2 billion the prior month. Foreigners are convinced that Mr. Bernanke has just begun a rate cutting campaign that can drive the dollar sharply lower, and are shifting their capital elsewhere.

While foreigners have nightmares about Mr. Bernanke’s control over the US money supply, which is expanding at an explosive 14.7% annual rate for M3, its fastest in history, the Bundesbank is warning that it’s too early to write off the chance of further tightening in Euro-zone interest rates. The European Central Bank has left its repo rate on hold for the past three months, but is now telegraphing a rate hike to 4.25% sometime in the fourth quarter.

“Risks to price stability are on the upside and, I would add, that they been have augmented in early September. We will do what is necessary to counter these risks. It is too early to dismiss the need for a future monetary policy response,” warned Bundesbank chief Axel Weber on Oct 18th. “Monetary policy has to do what is necessary to guarantee price stability. In a phase of robust growth around potential with little spare capacity, monetary policy no longer needs to support the economy, but instead should focus on risks to price stability,” Weber declared.

The US$’s interest rate advantage over the Euro has shrunk from +240 basis points a year ago to +37 basis points today, based on their respective six-month Libor rates. The shift in interest rates differentials in the Euro’s favor has lifted Europe’s currency from $1.260 in June 2006 to $1.430 today, a record high. The Bundesbank understands that higher food and energy prices are inflationary, and is ready to combat strong money supply growth in Europe with a tighter monetary policy, even at the expense of slowing down the local economy.

The US dollar fell to a seven year low of 1.785 Brazilian reals, after Brazil’s central bank kept its overnight Selic lending rate unchanged at 11.25% on Wednesday, pausing for the first time after 18 consecutive rate cuts. The Bank of Brazil has cut its Selic rate by 8.5% since August 2005, but has been unable to arrest the slide of the US dollar. The central bank intervenes regularly in the foreign exchange market to buy US dollars, boosting its FX reserves by $112 billion since January 2006.

The Bernanke Fed’s rate cut to 4.75% ignited a big increase in global commodity prices, which can boost Brazil’s exports and its currency. The local economy grew 5.4% in the second quarter from a year earlier, and exports in the first half of this year were $73.2 billion, up 20% from the year earlier period. The Bank of Brazil left its Selic rate unchanged at 11.25% due to higher inflation, which hit 4.15% in September, just below the bank’s 4.5% upper target.

The US dollar appears to be sliding in a bottomless pit in Brazil, and another round of Fed rate cuts would make Brazil’s high interest rates more attractive. Carry traders who borrow funds in Japanese yen to buy assets denominated in higher yielding currencies such as the real, have plowed money into the Bovespa Index, which is up 41% so far this year.

http://www.financialsense.com/Market/wrapup.htm


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Net Foreign Purchases Turns NEGATIVE

Thursday, October 18th, 2007

Alex’s Notes: Been talking about this for a while now, looks like its starting to happen.

As more and more governments wake up to whats going on and come to the realization that we will never stop inflating until this thing is a smoking train wreck, they will bail out of dollar backed securities and head for safer ground, such as energy, basic materials, and yes, I am saying it again, Gold and Silver.

——————————–

US August net foreign long-term securities purchases -69.3 bln usd
Tue, Oct 16 2007, 13:44 GMT
http://www.afxnews.com

WASHINGTON (Thomson Financial) – Foreign money invested in US securities fled the US in August when market volatility was high, led by foreign government sales of Treasury bonds and private investor equity sales, the Treasury Department reported.

Net foreign long-term securities purchases amounted to minus 69.3 bln usd in August, an outflow of foreign capital that followed three months of declining capital inflows.

Small foreign purchases of short-term securities were not enough to make up the difference, as total net foreign capital purchases were minus 163.0 bln usd in August. The large net outflow followed a net inflow of 94.3 bln usd in July.

Some economists were expecting around 60-70 bln usd in new capital inflows in August.

Net official long-term purchases were minus 24.2 bln usd in August, which mostly reflects net foreign government purchases of minus 29.7 bln.

Private foreign investor purchases of US equities were minus 39.0 bln usd for the month. However, private investors loaded up on Treasury bonds, creating a net inflow of 27.1 bln usd. Still, net private investment in long-term securities were minus 10.6 bln usd for the month.

Foreign holdings of short-term dollar securities rose 33.9 bln usd after a net gain of 56.2 in July. Net Treasury bill buying was 21.0 bln usd compared with net buying of 18.6 bln in July.

Most of the T-bill buying in August came from private investors, with foreign governments buying 3.8 bln usd worth of Treasuries in the month.

Chinese holdings of Treasuries fell sharply by 8.8 bln usd in August, and Japanese Treasury holdings fell by 24.8 bln usd.

The Treasury holdings of oil exporting countries remained unchanged, while Caribbean banking centers dramatically increased their holdings by 33.1 bln usd.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=22ec649c-cba0-42f2-878c-397b557c8582


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How Low Can the Dollar Go?

Monday, October 15th, 2007

by Greg Silberman
October 12, 2007

The US Dollar has lost 65% of its value against the Euro over the last 7 years. It’s no coincidence that a massive Hedge Fund industry has risen in its wake.

There are around 8,000 hedge funds globally managing over 2.5 trillion Dollars. All of them placing bets on global markets. Betting the market will rise, will fall, will do nothing. The vast majority are long-only which means they benefit from a rising market.

The underlying trend behind this level of speculation – the likes of which the world has never seen – is the fear of the worlds reserve currency, the US Dollar, becoming worthless. The fear of an outbreak in hyperinflation and a repeat of The Nightmare German Inflation of the 1920s (exceptionally well documented in the linked article by Scientific Market Analysis, 1970).

During the German Hyperinflation, the entire economy switched from production to speculation. In an effort to protect against a collapsing paper currency, people put their energy into speculating in things as opposed to building or producing.

As we mentioned in Using Commodity Prices as an Inflation Calculator the fact that Corn prices are at 35-year highs is a sign that inflation is boiling up from beneath the surface and the proliferation of hedge funds indicates they are the speculative vehicle of choice.

The sole question on this analysts mind as to high the speculative frenzy will go is how low the US Dollar will fall?

Chart 1 – US Dollar vs Euro

This dramatic chart shows the US Dollar versus the Euro. The Dollar has only recently broken major support below 0.60 (60 Euro cents to a Dollar). This has caused a break below a humongous multi year head and shoulders pattern. The technical target is 40 cents or 33% lower. A HUGE destabilizing move for the US Dollar lies ahead.

As in the Weimar Republic, the speculative fever today will continue to build as the US Dollar falls. That is, money will flee from devaluing cash into anything that will hold or increase its value namely Stocks with Gold and Oil Stocks outperforming. Based on the above analysis this is still quite a way away. The level and magnitude of speculation will be simply breathtaking. In the interim, the already large amount of Hedge Funds and Asset Management companies will continue to grow as will their assets!

http://www.financialsense.com/fsu/editorials/silberman/2007/1012.html


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Oil Rises Sharply on Inventory Report

Thursday, October 11th, 2007

Alex’s Notes: Some of you have heard me predict $9 a gallon for gas. Well then, here we go. Oil will likely go to $200 a barrel if we attack Iran, which I am about 100% sure we will, this is only the beginning.

Ill let you guess what that is going to do to the price of gas.

——————————
The Associated Press

NEW YORK (AP) — Petroleum futures rose sharply Thursday and oil prices passed $83 a barrel after the government reported an unexpected decline in crude oil inventories.

Prices were also supported by an International Energy Agency report that concluded oil inventories held by the world’s largest industrialized countries have fallen below a five-year average, and by concerns that clashes between Turkish forces and Kurdish rebels could affect Iraqi oil supplies.

“No news was bearish today,” said James Cordier, president of Liberty Trading Group in Tampa, Fla. “Really, that’s all investors need right now to push energy prices higher.”

The weekly inventory report from the Energy Department’s Energy Information Administration said crude supplies fell by 1.7 million barrels in the week ended Oct. 5. Analysts surveyed by Dow Jones Newswires on average expected oil inventories to rise by 1 million barrels.

While the report also concluded that refinery activity and supplies of gasoline rose unexpectedly last week, traders focused on the oil inventory number, analysts said.

In part that’s because supplies of gasoline and heating oil remain low despite last week’s increases, said Antoine Halff, head of energy research at Fimat USA LLC.

Traders may also be anticipating that the EIA will revise last week’s crude supply estimates downward, as it has done in the past, Halff said.

Light, sweet crude for November delivery rose $2 to $83.30 a barrel on the New York Mercantile Exchange, within striking distance of oil’s trading record of $83.90 set on Sept. 20. November gasoline rose 3.08 cents to $2.0644 a gallon, while Nymex heating oil rose 4.95 cents to $2.2667 a gallon.

In London, November Brent crude rose $1.86 to $80.46 a barrel on the ICE Futures exchange.

Nymex natural gas, meanwhile, fell 2.5 cents to $7.985 per 1,000 cubic feet. In a separate report, the EIA said natural gas inventories rose last week by 73 billion cubic feet, more than the 68 billion cubic foot increase analysts forecast.

In its petroleum inventory report, the EIA said refinery activity rose by 0.3 percentage point to 87.8 percent of capacity last week. Analysts expected a 0.1 percentage point decline.

Inventories of gasoline rose by 1.7 million barrels last week, countering analyst expectations that they would fall by 300,000 barrels. Distillate inventories, which include heating oil and diesel fuel, fell by 600,000 barrels, in line with expectations.

Crude imports fell by 384,000 barrels a day last week to an average of 9.9 million barrels a day, while gasoline imports rose by 169,000 barrels a day to an average of 1.3 million barrels a day.

Demand for gasoline rose last week by about 80,000 barrels, the EIA said.

The petroleum market’s move higher in the face of strong product builds is a sign speculators are plowing money into energy futures, Cordier said.

“When the funds are buying and they’re spending money, it’s really hard to put a fundamental explanation behind it,” Cordier said.

Halff thinks the market saw the EIA report as validation of the earlier IEA report, which concluded that crude inventories held by the 30 nations of the Organization for Economic Cooperation and Development fell by 21 million barrels in August to 2.66 billion barrels, 70.4 million barrels lower than last year.

The IEA left its estimate of world oil demand growth for this year and next unchanged at 1.5 percent and 2.4 percent respectively.

Despite oil’s recent rally, gas prices continue to fall. At the pump, the average national price of a gallon of gas fell 0.5 cent overnight to $2.76, according to AAA and the Oil Price Information Service. Gas prices peaked at $3.227 a gallon in May.

http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD8S74QE80


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Wow, this guy has some serious cohones.

Wednesday, October 10th, 2007

PAUL: Dollar Could Collapse To Absolute Zero
Paul Joseph Watson
Prison Planet
Monday, October 8, 2007

Presidential candidate Ron Paul warns of coming global economic depression

Presidential candidate Ron Paul has made a dire prediction that the dollar could collapse to absolute zero – precipitating hyper inflation, soaring oil prices and a global economic depression if current policies are continued.

“Once they realize the American people have awakened to the con game that’s been going on – I think those people running the banking and monetary system aren’t going to be too happy,” Paul told the Alex Jones Show on Friday.

The Texas Congressman forecasts that if current policies are prolonged, the dollar could crash all the way to nothing and be forced to start over.

“If Bush is foolish enough to start bombing Iran, that might precipitate such a crisis as oil going to $200 dollars a barrel and really dampening the enthusiasm of the whole dollar,” said Paul.

“If they continue what they’re doing, it’s gonna go to zero, we’re gonna have runaway inflation, all paper currencies eventually self-destruct and are ruined, and we’re in uncharted waters right now – this is the first time in the history of man you’ve had no solid currencies around the world and this has been going on for 35 years.”

Paul agreed that elitists would seize upon a global depression by posing as the saviors and offering more control, police state and big government as the solution.

“This was the whole thing that started in the last depression,” said Paul, “Scare people to death instead of blaming the Federal Reserve for the depression and the financial bubble of the 20’s, they said ‘well capitalism failed, it was that stupid gold standard’, therefore we have to have welfare and of course everything they did prolonged the depression.”

Paul said his warnings about the impending collapse of the U.S. economy, which stretch back years, were helping his campaign gain credibility due to the unfolding crises in the market and the credit crunch.

“When the people understand how the Fed screws up the economy and causes all the bubbles and all the changes that have to come from that, I’m getting a lot more calls,” said Paul.

The Congressman also discussed the continued success of his campaign and the establishment’s attempts to stifle its importance.

The presidential candidate said the reason that the Democrats and Republicans are trying to speed up the primaries is because they don’t like competition from third party and grass roots candidates and are trying to prevent them from gaining traction.

“The move right now is to try to close the primaries – do you think they’re sincere when they say they want to have a big tent and invite new people in? They can invite a lot of new people in but they don’t want constitutionalists evidently because they want to make it tough to vote in a Republican primary,” said the Congressman.

“It confirms the fact that the control of this whole system has been one party so to speak, it’s one group of people that control both parties and right now I think the people are getting disgusted with it and they’re starting to wake up,” he added.

The Congressman stated that the popularity of his campaign outstripped even his expectations and slammed the establishment networks for attempting to skew Paul as a fringe candidate.

“It doesn’t discourage our supporters, it enrages them,” said Paul, “They always claimed that there were just a few of us out there that cared and that they were bloggers manipulating the Internet – well you can’t manipulate to the point where you get 35,000 new donors who average about $40 dollars a piece and raise $5 million dollars and outpace many of the other candidates.”

Paul said the other candidates had initially tried to ignore his platform, before ridiculing it, to the point where they are now being forced to adopt constitutionalist rhetoric in order to compete with his burgeoning popularity.

http://www.prisonplanet.com/articles/october2007/081007_dollar_collapse.htm


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