I've just arrived at the Bedford Springs Resort, a place I would have never known existed were it not for a series of meetings I was invited to here. When I learned the resort was recently renovated and it boasted a golf course designed by the legendary architect A.W. Tillinghast, I decided to bring my family with me for one last summer weekend getaway.
Value investors take note: The place reminds me of The Homestead in Virginia and The Greenbrier in West Virginia... but it's much less expensive and has a much better golf course. So far, I'm enjoying it more, too. Watching my two-year old running down the great hall was worth the three-hour drive and the expense.
"The outlook for US natural gas storage in the next few months is quickly approaching a trainwreck," said James Crandell of Barclays Capital. Even after natural gas' 77% plunge from its July 2008 high of $13.69 per mBTU, fundamentals are still deteriorating.
Energy companies are storing excess gas in salt caverns, aquifers, empty oil wells... anywhere they can find storage capacity. By the time the winter heating demand begins, analysts predict gas will be backed up into pipelines.
Already, the gas-rich region stretching from Alabama to New Mexico has hit a record 1,074 billion cubic feet – two months before the end of gas-storage season. The U.S. Energy Information Administration (EIA) predicts stored gas will reach 3,800 billion cubic feet by the end of October – the highest ever.
Natural gas is down nearly 4% to $3.09 mBTU.
Morgan Stanley released a fantastic chart showing the four stages of a secular bear market, based on its study of 19 global bear markets from 1929 to today. As you see below, the average bear market consisted of a 56% decline over 29 months, followed by a 70% rebound in 17 months. The "next correction" was a 25% decline over 13 months, followed by 5.6 years of a 52%-wide trading range...
From peak to trough of the most current bear market, the S&P 500 dropped 56.8% in 17 months (a much faster decline). Since the March 9 bottom, the market has rallied 52.8%. According to Morgan Stanley, we're more than halfway through the "rebound rally."
So what should you own to capitalize on the rest of the rebound rally? Dan Ferris would say buy World Dominators – strong companies that can withstand any market declines. These are companies like Coca-Cola and Wal-Mart, which can actually gain market share in bear markets as competitors falter. You can access the full list by subscribing to Extreme Value. Learn more here.
While World Dominators are a great addition to any portfolio, you're not likely to make any 100% gains... In my latest newsletter, I recommended a group of stocks that will earn record profits as inflation inevitably takes hold of our economy. We only have a one- or two-year window to take advantage of this windfall. This is one of the few trades you can count on in this unsure market. To learn more, click here...
T. Boone Pickens is back in the headlines... this time calling for $300 oil. Pickens says oil supply is permanently stuck at 85 million barrels per day, but by 2019, demand will reach 90 million barrels a day. "The only way if you peak on supply that you can kill demand is with price," Pickens said. That's what happened in 2007 when oil hit $147.
While Pickens' prediction of higher oil in the future is probably correct, he's talking his book in a big way here. Pickens has invested billions in natural gas and wind farms, and even started a special-interest group, Pickens Plan, to help stop U.S. dependence on foreign oil... and instead get us hooked on his alternative-energy projects. Take whatever this guy says with a grain of salt.
For our best ideas on how to play the energy market (and other commodity markets), check out Matt Badiali's S&A Resource Report. You can learn more about Matt's latest ideas here.
New highs: PowerShares Insured National Muni Bond (PZA), QLT (QLTI), Sino Gold (SGX.AX).
In today's mailbag... Our readers have a scary knowledge of how to kill people... especially in Florida. Send your, ummm, insights to feedback@stansberryresearch.com.
"If you combine your look for farms with hiding gold, you could buy a few of those cheap swine to keep in a pen. When you shoot someone trying to steal your gold you could just feed them to the pigs and save yourself the trouble of burying them! Cheap feed for cheap pigs, you may just turn a profit when you sell the pigs!" – Paid-up subscriber Robert
"Comment on Dan Ferris' comment, 'Maybe I should just shoot them'. If you do, be sure to put a weapon – knife, ball bat, crow bar, pipe, etc. – in their hands. Then it's self defense." – Anonymous
"In FL you don't have to worry about burying them in your backyard, (which is nice, because your dogs won't dig them up). The Castle Doctrine now says you can shoot 'em even as they retreat." – Paid-up subscriber Roxie
"If you lived in Fl. you could just shoot the dirt bag that came for your gold. The 'Castle doctrine' will cover it. Just don't execute the bastard. The sheriff's office will investigate and you will be cleared, you can use deadly force to protect your life and property. I mentioned to a Deputy that goes to my gym I was going start sharpening my martial art skills, he said just carry a gun. Remember make sure it's a registered weapon. Hollow points are ok." – Paid-up subscriber Robert S.
"As one reader attested, he buried [his gold] and now can't find it. At least his gold is where it belongs, in the ground. Isn't it ironic that we pay big money to mine it out of the ground only to re-bury and possibly forget it?" – Paid-up subscriber Erich Kellner
Porter comment: I've heard this argument many times. Gold is a "barbaric relic" they say. It's a waste of time and resources to mine gold, then bury it again in bank vaults.
I disagree completely. It's completely illogical to expect the utility of sound money would come from anything easy or cheap to produce. You wouldn't say it's a waste of time and resources to quarry stone, then bury it again for the foundation of a building, would you? Of course not. But really, what's more important? The foundation of a single building or the foundation of our economy and our ability to save, invest, and exchange?
The reason people bury gold in vaults and in their backyards is because it's precious. It holds its value. It is respected universally as a medium of exchange. It cannot be printed. And that's why it's worth mining.
Regards,
Porter Stansberry and Sean Goldsmith
Bedford, Pennsylvania, and Baltimore, Maryland
August 28, 2009