Stick with Gold and the Oil Stocks 48 comments
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Americans awoke yesterday morning to scenes of G20 protests in London. There was literally blood on the streets. The talking heads on CNBC scoffed at such “anarchy” and discussed the unmitigated audacity of the common man on the streets to protest in such fashion. I don’t support the smashing of windows, destroying of property, or taking of hostages but I can’t say I’d be beyond tossing an egg or tomato at the bond rating folks at Moody’s, S&P, or Fitch. If I saw Joe Kernen on the golf course, I might even aim a 2-iron in his direction. Of course Joe wouldn’t admit it, but look how he supported policies over the last 8 years which resulted in the biggest decline in US capitalism and democracy in the over 200 year history of the US. Yesterday morning, he even gave himself the title of “capitalism enabler”. What a joke. He’s never produced anything worthwhile in his life unless you own a hot-air balloon.
The CNBC celebrity stars acted as though such protests aren’t possible in the US. Certainly over the past 30 years Americans have lost their zest for protesting in spite of the many reasons why they should have. However, as more and more Americans lose their jobs (and their healthcare along with it…) we just may see more public displays of discontent. After all, if you can’t feed your family or keep a roof over your head, what do you have to lose? Desperate times call for desperate (drastic?) measures. More and more Americans are becoming wise to the fact that US policymakers have been funneling huge sums of money to the ultra wealthy while the middle class tax-payer picks up the tab. They are tired of seeing huge deficits rung up while getting nothing tangible in return (no health care, education, or infrastructure for example).
Meanwhile, their tax dollars are paying for schools, hospitals, roads and bridges in Iraq and we’re heading over to Afghanistan to repeat the blunder there. There is no financial regulation in the US – in fact just the opposite: we have financial policies and regulations that are tools of the ultra wealthy. This isn’t capitalism – it's fascism. It won’t take much more to push Americans over the edge. Unfortunately, the outrage should have come years ago as the game has largely already been played. I can make a small mistake on my income tax form and it’s caught. Yet Madoff can move billions around unnoticed? Please, it was noticed – but tolerated.
Americans are also exasperated with the lack of a strategic long-term comprehensive energy policy. The result is not only higher energy bills, but knowing that they are in effect funding both sides of the war on terror. Meanwhile, Obama and Congress haven’t yet figured out that the solution is abundant, clean, and cheap US produced natural gas and natural gas transportation. So instead of paving the way to a reinvigorated and reindustrialized country, the natural gas industry is going through another washout reminiscent of the 1980’s. What a wonderful reward for all their new technology and bringing to market the huge shale energy supplies. This is not only sad, but strategic and economic suicide.
The CNBC “tools” also spent a great deal of time wondering why the Chinese are making statements “to devalue the US dollar”. Hello? Congress, the Federal Reserve, and the Treasury Department are doing a fine job of that on their own! China isn’t trying to devalue the US dollar - they are trying to figure out how to protect their existing and future investments in US dollars. As they see more financial hijinx coming out of Washington, DC with little attention being expended on the US’s real problem (oil), who can blame them? If I were in their shoes, I’d be promoting a world currency based on a basket of Euros, Yen, Sterling, etc as well. Being connected at the hip to the US dollar is the same as being connected at the hip to ignorant US policy makers. Meanwhile, the Chinese use their US dollars to pick up Russian and Brazilian oil and natural gas on the cheap.
Meanwhile, you’d expect gold to be skyrocketing in this environment, but it is not. Of course, it’s pretty hard to find an American Gold Eagle to bid on these days. As I wrote in a previous article, it’s always very interesting to watch Kitco.com or APMEX.com to see what is available in US Mint Gold coins (not much). I am fond of smaller US Gold Eagles (1/4 or ½ oz) pieces. I mean if we are going to the barter system, you better have some small denominations, right? I like Silver Eagles too. For those of you who don’t like burying the coins around the yard (after all, the safe is the first place an armed robber would look), better to stick with the GLD and SLV ETFs. Send me an email the next time any of you see a quarter or half ounce US gold eagle for sale on either of these two websites. Kitco cracks me up - they label which coins are available for shipping “outside the US only”. What a panic.
Inflation in 2008 was driven by demand. Now, I see some supply problems on the horizon. Anybody look at the dry shipping data lately? Man, there is next to nothing on the high seas these days, hey? The next round of inflation will not be due to a falling US dollar (I am still amazed at the strength of the dollar) as it will be due to a lack of supply of dry goods. That said, there certainly are a lot of automobiles available (heh heh), however, they are the wrong kind of automobiles. How I’d love to see one of those huge shipping tankers full of these headed to the US.
Won’t happen though, Toyota (TM) won’t build them, and Obama won’t even utter the words “natural gas transportation”. Meanwhile, the gun of peak oil is pointed squarely between the eyes of the US. Talk about supply problems…it’s gonna be interesting a few years from now to see all these gasoline powered cars and trucks sitting idle. Today, people are sinking cars and trucks in lakes and ditching them in deserts because they can’t make their payments and hope the insurance will get them out of the bind. Imagine how many vehicles will become a problem as we get further along the peak oil path. Maybe someday we’ll have a tanker of natural gas conversion kits coming over to the US. Not likely.
So, I continue to recommend most people get out of the S&P500 and stick with oil stocks like COP, CVX, and XOM. Anybody note the dividend yield on StatOil (STO) or BP for instance? Just buy them, collect the dividends, and wait for the next peak oil spike. It’s gonna be a doozy.
If you want some comedy while you wait, tune into the CNBC Comedy Channel. They continue to be the funniest act on TV. Meanwhile, you may want to invest in a wood stove, shovel, hoe, and rake and build yourself a garden. Not only will it get you out of your easy chair and outside to enjoy the beautiful spring weather, it will keep you healthy, keep a steady supply of highly nutritious food on your table, and give you a sense of accomplishment. I’d also recommend a chicken coop for fresh eggs but make sure you don’t live in an uppity neighborhood with covenants & restrictions – they frown on that kind of thing. At least for now…
Disclosures: The author owns STO, COP and some gold and silver investments.
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I would just like to comment on your response to Cetin Hakimoglu that US Citizens get what they deserve because we aren't vocal enough with our politicians. If you want to change that, the only way for them to get the message is to institute term limits! Until such time that congress is prevented from making a lifetime career, we won't be able to push them out. I firmly believe that.
Gold demand is falling too, India the largest buyer/importer/consumer of gold, typically imports about 600 Tons+ year, peak of 850 tons in ’07. Guess what the imports are for the first 3 months of this year – negative, it exported by some estimates – 50-70 tons. Dubai, the gold conduit to India and rest of Asia, gold sales down 60% for the first quarter. Indian import forecasts for ’09 are down to 100-150 tons. GLD cannot offset the fall in consumer gold demand. And of course IMF just decided to sell about 400 tons of gold this year.
Gold falling is illogical based on economic premis. The IMF dumping gold is a direct desire to manipulate the currency market and uphold "value" in thee fiat/mononpoly paper money the world is fooled by. Gold should in theory be going up exponentially in value, as the value of the dollar should be going down.
But there is a lot of manipulation at hand by the higher ups, including those very people behind the IMF, the Federal Reserve, and every other bullshit institution that is openly robbing the masses.
This trickery, however, will not last long. The people are realizing the larceny that has been going on for ages. The people are waking up. The protests in London are a testament to that. As one of the individuals stated, take away the ability to feed a child and house a family, and what else does someone have to lose? These bastards who are looting the world will come to light.
Watch the video OBAMA DECEPTION on youtube. Wake up. Realize that we have been fooled but we can stop it.
God bless.
Hope you don't get brainwahed by the medias.
To say such things meaning that you're the one
who don't understand the facts.
Keep it to yourself.
Dr. O: yes, i believe that gold is somewhat of a fear trade. all i know is that as the crisis unfolded last year, even when gold went down due to the liquidity crisis, it was one of the few holdings i owned which i was comfortable with.
SB-tiger: yes, indian consumption of gold is way down. however, don't discount a couple things: all the monetary stimulus by the world's governments, and also, look how gold performed during the great depression. the other thing is, the dry bulk shipping tonnage is also way down, as are US inventories. i don't know how you get big time deflation when the goods arent there, and the government is printing money. but i'm certainly no economist, and could be dead wrong ("i ain't often right, but i've never been wrong" - scarlet begonias - greatful dead).
cyrus: to hedge in on this conversation, it's just so interesting to me to watch the availability of american gold eagles on kitco and apmex....
What do they know that you don't?
On Apr 03 09:07 AM dcb wrote:
> I disagree with the keep with gold. As the market stabilizes and
> currencies in other countries stabilize they will see their gold
> holdings because their currency is rising. this will drop gold and
> the dollar together. if you are looking for the inflation trade it
> is in materials because this has been beaten down.
On Apr 02 10:06 PM optionsgirl wrote:
> Yes, it is called Tamar, and it is located off the coast of Haifa.
> Very tough drilling conditions, far under water and under a deep
> bed of salt. Noble Energy owns 36%. They think it will be huge, eventually.,
> but there are formidable challenges.
>
> I would just like to comment on your response to Cetin Hakimoglu
> that US Citizens get what they deserve because we aren't vocal enough
> with our politicians. If you want to change that, the only way for
> them to get the message is to institute term limits! Until such time
> that congress is prevented from making a lifetime career, we won't
> be able to push them out. I firmly believe that.
HR1835 if not aware, see latest news release from CLNE
cleanenergyfuel.com
Here's a scenario that keeps running through my mind. Imagine the great Northeast Blackout of 2003 happening in January when the temperature is hovering below zero. Imagine it lasts two days instead of one. How many of the 55 million people affected have backup generators or adequate fireplaces? How much violence would result in major cities as backup generators "change hands"? What would the cost be for frozen plumbing? When frozen plumbing thaws it can literally destroy a house ... how many homes would be lost? How many accidental fires would start as people try to stay warm? What about the riots as refugees overwhelm warm-up centers? How many people would die of carbon monoxide poisoning? How many people would freeze to death?
It's a pretty easy scenario to imagine, since a catastrophic blackout has already happened in the summer. Our antiquated, inefficient power grid is run by local monopolies that have absolutely no financial incentive to change. Smart grid initiatives are a joke when our tax dollars are going to dumb monopolies.
The solution to this danger is simple and it solves a lot of problems at once--reduces dependence on foreign oil, reduces green house gas emissions, reduces air pollution, reduces overall energy consumption by 30 to 40 percent, creates a dynamic new green business.
Home fuel cells running on natural gas with battery backup systems.
Deregulate the monopolies. Use incentives to create a consumer market for power generation. In a consumer market, gas powered fuel cells that provide heat and electricity would be no more expensive than a furnace and water heater is today. Over a 20 year period most homes need to replace these appliances anyway. Fuel cells like to run at a constant speed, so battery systems would handle peak loads, excess could be sold back to a nationalized grid. Home energy production is 30 to 40 percent more efficient than our current system so even though it would run on NG the CO2 would be greatly diminished. A battery system with enough capacity to handle summer air conditioning would get a home through a day or two running the furnace blower if the NG pipeline is disrupted. Cheap back up tanks of LP could substitute.
The technology is here now. These systems are already on the market in Japan. It won't happen unless we can develop the political willpower to reorganize the local power companies. With deregulation there would be a free for all of capitalism developing lots of better ideas.
We would all be richer, safer, and healthier for it.
optionsgirl: yeah, i tell ya, this chinese currency suggestion scares me. the reason it scares me (other than the obvious fact that china and other foreign countries own 44% of all outstanding US debt) is the fact that not only russia supports this move, but i have been reading that india and brazil are seriously considering supporting this proposal as well. that is the entire "BRIC" community! and that is where the growth is. russia and brazil have the oil...it's serious...i keep thinking of jim rogers when he moved to singapore: "china is where it's at, and the US economy and its currency is history". i am paraphrasing rogers, but you see the point. the question is, how do americans protect themselves from the dual problems of US currency and foreign oil addiction? other than moving out of the country, what do u do? 3Gs? (gun, garden, gold)? that's why the natural gas transportation is so important. i truly believe if the rest of the world saw us go bigtime to nat gas transportation, stop the oil wars, and solve our foreign oil addiction, the US dollar would soar and there would be nothing holding the country back. as long as we stay addicted to foreign oil, and sending our money out of the country, we're just hosed. now that we're a bankrupted country with a fiat currency, it's even more important we fix that problem now. meanwhile, all obama does is talk about "clean coal", an oxymoron if ever there was one and even if it wasn't, that still doesn't solve our foreign oil addiction. pathetic.
L-I-V? they don't have that yet? ;)
fran: that link is broken and CLNE's site doesnt have a search funciton, so i still haven't read the article.....
creativforce: someone in a past comment, or perhaps it was a private email, sent me an article about home natural gas micro-generators. these have been used as home backups for years, but the twist this company was doing was using the heat from the generator to provide home heating and hot water. it's a very interesting system in that the overall efficiency is very high: you get the electricity from the generator and the heat the generator produces when the nat gas is combusted is basically recycled. currently, i have been looking for a low-cost natural gas generator to replace my gasoline emergency backup system. they are very hard to find. i can get a 7500W gasoline generator for under $700 bucks, but a natural gas one? much much more expensive. anyhow, i think your concerns about electricity outages, while real and very possible, will pale in comparison to the peak oil problem of no gasoline. imagine what the US will be like when gasoline is either too expensive for most people to buy, or not available at all. meantime, our natural gas industry is contracting because our "leaders" haven't figured out we have an abundance of cheap and clean natural gas that could SOLVE our foreign oil addiction. anyhow, with these micro-generators, and with battery backup and a rectifier, one could basically use the electric company as the backup, and run everything off natural gas.
skopros: free-loaders are right. career politicians that care more about re-election than the best interest of the country. that is why optionsgirl hit the nail on the head: TERM LIMITS.
The world still runs on oil. We have oil ourselves. We should be drilling in our own back yards. You want to become free from the Putin, Chavez, Iran, et al... we have to drill. That is the real answer. We have to use our own abundant resources ( including crude, nat gas and coal) and, above all, we have to insist on nuclear power. (Check out the Thorium story, if you are not already aware of it). Ticker: THPC ( Got that one from another Seeking Alpha reader named Paul Taut). I wouldn't buy this one yet, but I will follow it for awhile.
There is a new biofuel plant being erected by Tyson Foods and Syntroleum Corp (SYNM is the ticker). They turn chicken fat into jet fuel. Our military will buy it.
Interested in a speculative Canadian gold co., mining in China? Check out JINFF ( Jinshan). Highly speculative penny stock. Pick some up for the price of a pizza. They do have gold in the ground.
China Ag growth: Check out SEED,FEED,HOGS.
Agree with you.
The best is to start with new cars using Natural Gas instead of gasoline.
Many countries started doing that long time ago except this USA.
We are finding more and more natural gas in this country, so far it's said to last for at least 200 years.
Why the Big 3 not think about that and be the leaders.