U.S. to remain the top oil producer this year...

U.S. to remain the top oil producer this year... Rail traffic is soaring... This industry will be 'wiped out'... Driverless trucks in Germany... Trouble at Coca-Cola... What egregious compensation plans mean for public shareholders... A wildly popular series...
 

 Last month, the U.S. became the largest producer of oil and natural gas liquids (NGLs).

 

According to the International Energy Agency (IEA), the U.S. surpassed Saudi Arabia for the top spot. The surge in production is due to the massive amounts of oil and gas being produced in the various U.S. shale plays, thanks to hydraulic fracturing.

 

According to Bank of America, the U.S. is "very likely" to continue to hold that spot through this year. The U.S. produced more than 11 million barrels of oil and NGLs in the first quarter, making it the world's top producer.

 

 The IEA says U.S. production will hit 13.1 million barrels a day in 2019 before plateauing. And it believes we'll lose the top spot in 2030.

 

For now, we largely have the oil boom to thank for our economic recovery... "There's a very strong linkage between oil production growth, economic growth, and wage growth across a range of U.S. states," Bank of America's head of commodities research, Francisco Blanch, told Bloomberg. He said annual investment in oil and gas reached a record $200 billion, hitting 20% of the country's total private fixed-structure spending for the first time.

 

 This development is nothing new for Stansberry's Investment Advisory subscribers... Porter and his team of research analysts have covered the shale boom for years.

 

They've made subscribers a fortune: 200% on Targa Resources (TRGP), 81% on Energy Transfer Equity (ETE), 57% on Dominion Resources (D), and 37% on Devon Energy (DVN)... to name a few.

 

 Porter and his team primarily recommended oil producers, infrastructure firms, and some "picks and shovels" companies to profit from the oil boom. But they also recommended railroad company Union Pacific (UNP). (Shares are up 87% in two-and-a-half years.)

 

Porter's argument was that we're producing so much oil, pipelines have reached capacity. So companies are shipping oil via trucks and rail.

 

 In 2010, rail transportation in North Dakota's Bakken Shale was used to ship out 8% of production. That grew to 28% of production in 2012.

 

According to the Association of American Railroads, the amount of oil and other refined petroleum products transported by rail hit 356,000 carloads in the first half of 2013, up 48% over the same period in 2012.

 

Rails are now hauling around 700,000 barrels of oil per day in the U.S. Companies are working to expand pipeline capacity, but it takes a long time.

 

 And according to the latest American Association of Railroads numbers, rail demand from the oil industry is still booming.

 

In June, total weekly rail carloads averaged 294,414 – the highest average for June since 2008. And the carload growth in the quarter from March to June was the highest average for any four-month period since December 2010.

 

 The number of cars used for "petroleum and petroleum products" was 15,894 in the week ended June 28 – an 18.5% increase from 2013. The oil industry showed the biggest growth of any sector for the time period. Grain was next with a 12.9% increase.

 

 "It's going to get wiped out..."

 

Last month, on episode 159 of our weekly Stansberry Radio show, Porter discussed the economic implications of Google's self-driving cars. If you're not familiar, Google has been developing a car that can drive around cities safely without a human behind the steering wheel. It uses GPS, video and sensor technologies, etc. to monitor the environment and avoid accidents.

 

In May, Google announced it would build 100 prototypes of these vehicles for further testing.

 

 Porter worried these driverless vehicles would disrupt many industries, namely trucking. From that episode...

 

Google has these cars that will drive themselves safely, and they don't require sleep, they don't get tired, they don't make mistakes, they don't run red lights... They're much better than human drivers.   So the question I (Porter) immediately thought of – I don't think people are going to buy these systems for passenger cars because they're expensive, and driving isn't that big of a task for most people. But for trucking companies, this is a no-brainer. You're going to get rid of half of your overhead and you're going to be able to run your trucks 24/7 – except for when they're being fueled or maintained. So for truckers, this is a serious issue.   I mean, how many times have you guys seen truck drivers doing stupid things on the highways? The public is going to get behind the idea that computers are going to be better truck drivers than people, and there are 3.5 million truck drivers in America. Now, I'm not saying that all of them are going to lose their jobs tomorrow. But there's no doubt in my mind that my kids – ages six and three – if they wanted to be a truck driver, that job's not going to be available by the time they turn 18. It's going to get wiped out.

 

 Last week in Germany, Daimler brought Porter's prediction closer to reality.

 

The automaker demonstrated what it calls the Mercedes-Benz Future Truck 2025 (the date it hopes to launch the truck) on a stretch of the Autobahn. According to the New York Times, the truck "is capable of responding to traffic while driving completely autonomously down a freeway at speeds of up to 85 kilometers per hour, or 52 miles per hour."

 

 For now, the trucks still require a driver... But the driver in the demo, Hans Luft, admits the benefits.

 

"It's strange at first," he said at the demonstration. "But you quickly learn to trust it and then it's great."

 

 Volvo is also working on self-driving trucks as part of the European Union's Safe Road Trains for the Environment program. The company wants to create a caravan of trucks that would drive in a line, reducing wind drag and fuel costs. Only the leading truck would require a driver.

 

 One of the world's most respected companies just made a scary move...

 

In a proxy statement, Coca-Cola proposed issuing a slew of new shares to pay employees. One of the most shareholder-friendly companies in the world was going to dilute its shareholders to give its employees more cash. More specifically, Coke was going to strip its public shareholders of up to one-sixth of their equity to give extra money to 5% of the company's employees.

 

The news made major headlines... And the investing world called on Coke's largest shareholder – investment legend Warren Buffett – to stop the madness.

 

Historically, Buffett has taken a huge stand against egregious executive compensation and institutional compensation reform. In his 2007 annual letter to Berkshire Hathaway shareholders, he wrote...

 

Compensation reform will only occur if the largest institutional shareholders – it would only take a few – demand a fresh look at the whole system.

 

 When the issue arose with Coke, Buffett postured in the press saying he disagreed with Coke's compensation plan. As the company's largest shareholder, he could do something about it. But Buffett didn't vote on the measure. He told CNBC at the time...

 

I love Coke. I love the management. I love the directors. So I didn't want to vote no. Kind of un-American to vote no at a Coke meeting.

 

 Extreme Value editor Dan Ferris wrote a wonderful issue on the ordeal in May. In it, he noted the thoughts of Coca-Cola shareholder David Winters of Wintergreen Advisors...

 

Winters is the most articulate and vocal critic of the compensation plan and Buffett's response to it. (You can read his letter to the SEC against the equity plan here.) Buffett said Winters' math was "wildly inaccurate," even though Winters – like me – merely quoted the numbers Coca-Cola published in its 2014 proxy.   Despite the 10%-16.6% dilution figures Coke reported, Buffett said he expects 1% or 2% annual dilution – and that it was still too much. So it almost doesn't matter what the numbers are. Buffett knows they're too high. And yet he didn't do anything about it.

 

 Winters recently spoke with Barron's and discussed his thoughts on Coca-Cola. He's still against the plan... But he went further...

 

If the Coca-Cola plan became the norm for all companies in the S&P 500, it would be terrible for investors' returns. If companies dilute their shares and it becomes normal for management to take several percent of returns every year for themselves, investors will do less well. That's one thing that worries us... that this scourge will affect the investment system throughout the U.S. and the world.   We're very concerned about what's going on at Berkshire Hathaway. I've been a fan [of Buffett] ever since I was a kid. This whole sequence of events at Coca-Cola has not only shocked me, it seems inconsistent with everything he's ever said or written.

 

 This hypocrisy is one of the reasons Dan advised Extreme Value subscribers to sell their shares in Berkshire Hathaway – a stock they had held since 2005 for 124% gains.

 

 Last week, Steve Sjuggerud wrote a wildly popular series of essays in DailyWealth talking about the most important book we've read this year – Jim Rickards' The Death of Money.

 

He wrote about the battle between inflation and deflation... How the dollar's demise can take one of three paths... And what you should own when the dollar "dies."

 

 You might wonder why we're making such a big deal about this book. The truth is, we have a huge amount of respect for Rickards.

 

He served on the front lines of many financial crises... He was general counsel for hedge fund Long-Term Capital Management (LTCM), which collapsed and nearly brought the economy down with it... Rickards led the bailout talks for LTCM with the Federal Reserve.

 

He's a 35-year Wall Street veteran. And when the government has questions about currency and finance, it calls Rickards. He has seen what happens to currencies in times of crisis... And he has a rare inside perspective.

 

 Steve continued his discussion of Rickards and The Death of Money in today's DailyWealth. In it, Rickards recounts when President Nixon abandoned gold convertibility. "Foreign creditors no longer trusted the U.S. dollar as a store of value," Rickards wrote. He noted the U.S. Treasury was forced to issue government bonds denominated in Swiss francs.

 

The selloff in the dollar didn't stop until the Federal Reserve head at the time, Paul Volcker, raised interest rates to 19% in 1981 to stop inflation and make the dollar attractive to foreigners.

 

 We have a similar situation today. From today's DailyWealth...

 

Rickards says a "similar constellation of symptoms to those of 1978 can be seen in the world economy today." In recent years, the U.S. dollar index hit an all-time low – below the 1978 level. And gold hit an all-time high, around $1,900.   Today, U.S. government debt is at a record high, and the Fed continues to print money at a record pace. There's no doubt this will end badly, as my colleague Porter Stansberry has predicted. The only question is when. You can't ignore the possibilities of a potential collapse in the dollar.   In his book The Death of Money, Rickards puts the dollar under the microscope, and then explains the signs to watch for as the dollar – as we know it – heads toward what he believes is an inevitable death.

 

 We like Rickards' book so much, we bought a few thousand copies to give to our readers for free. We simply ask you to pay for shipping and handling (which is less than $5).

 

Thousands of S&A subscribers have already taken us up on our offer. To make sure you still receive your copy before we run out, click here for the details.

 

 

 New 52-week highs (as of 7/3/14): Alcoa (AA), AllianceBernstein (AB), Activision Blizzard (ATVI), Bank of Montreal (BMO), Berkshire Hathaway (BRK), Discover Financial Services (DFS), Eni (E), ProShares Ultra MSCI Emerging Markets Fund (EET), Freeport-McMoRan (FCX), 1st United Bancorp (FUBC), Corning (GLW), iShares Dow Jones U.S. Insurance Fund (IAK), Intel (INTC), SPDR S&P International Health Care Sector Fund (IRY), KLA-Tencor (KLAC), 3M (MMM), PowerShares Buyback Achievers Fund (PKW), PowerShares QQQ Fund (QQQ), ProShares Ultra Technology Fund (ROM), ProShares Ultra Health Care Fund (RXL), Southern Copper (SCCO), ProShares Ultra S&P 500 Fund (SSO), Cambria Shareholder Yield Fund (SYLD), and W.R. Berkley (WRB).

 

 In today's mailbag, a great piece of feedback from a subscriber who is taking control of his financial future. How are you doing on that front? Let us know here at feedback@stansberryresearch.com.

 

 "Welcome back Goldsmith – looking forward to your daily words of wisdom. After coming back from a business trip, I've been catching up with Porter's nine day series. What an epic – 70-pages of material with over 32,000 words! I went through every line and highlighted the key parts and also summarized the learnings. It's a great primer for people new to investing actively like myself. I've only started to actively take responsibility for my own future investments this year. Since February, I've spent over 220 hours learning about investing. Since deciding that S&A offered the best range of resources to expand my learning, I started with the S&A Resource Report as I thought that resources were coming back cyclically.

 

"Then I expanded to the Private Wealth Alliance as I wanted to experience the range of different approaches and opinions. It can be overwhelming at first but I stuck with it. I loved the options trading tutorials from Jeff Clark and got interested in trading for income, so I signed up for DailyWealth Trader. The combination of education and advice is really important to me. Although I've been cautious about entering the markets and am keeping back cash, I have unrealized gains of 27% as well as some income (Thanks for the LO tip!). More importantly, I know how to position size, adjust trailing stop losses and reduce trading risk with options. All this in less than six months.

 

"When I ask my peers about what they invest in, I'm now surprised that very few people are actively taking responsibility for their future beyond real estate. Thanks for the learning. I know for some reason Porter likes vitriol but I can't find any yet. I spend about 3 hours a day reading and have cut down watching TV and feel much more in control of my financial future. I'm starting to help my brothers to get set up too." – Paid-up subscriber Warwick J Fahy

 

Regards,

 

Sean Goldsmith

July 7, 2014