My new Surface tablet...

My new Surface tablet... Windows 8 works fine... Supply and demand still rule... More gas than we know what to do with... The American Industrial Renaissance... A blue-chip, high-yield, tax-advantaged income stock... Chesapeake Energy's $100 share price?!... Porter's most outrageous prediction yet...

 I (Dan Ferris) received my Microsoft Surface tablet on Tuesday.

The first thing I noticed about the Surface is that it's made of metal… just like an iPad. It feels solid and valuable, and it looks cool… just like an iPad.

But unlike the iPad, it runs the Windows 8 operating system. Early reviews of this were so bad, hedge-fund managers dumped the stock. They said it's nothing like previous versions of Windows and will utterly disorient and alienate the Windows user. Windows customers will probably want to use something else, they said.

For the life of me, I have no idea what they were talking about. Windows 8 is every bit as easy to use as any Apple device. The only difference is that I can do real work on the Surface, which I can't do on the iPad. If the Surface were the only device I owned, I could still do my job as effectively as I can on my laptop.

I bought both available keyboards for the Surface. One is the "touch" keyboard. The other is the "type" keyboard. The touch keyboard is flat and light. The keys are simply raised squares on a felt surface. There's no action. The type keyboard is a real keyboard, like you find on a laptop. It's one of the slimmest keyboards you'll find anywhere, but it works just as well. I can easily see myself taking this device on the road and leaving my massive 17-inch laptop at home...

 The operating system on my new Surface tablet isn't full-blown Windows 8. It's a scaled-down version called Windows 8RT. It's optimized for thin, light computers with ARM-based semiconductor architecture. (ARM Holdings is a UK-based firm that designs and licenses chips widely used in mobile computing devices.)

The versions of Microsoft Word, Excel, and PowerPoint that came with the Surface are previews of Office 2013, due out next year. Again, I can do everything I normally do on these versions. All three look like the version I'm using now.

This device fills a hole in the tablet market. Other tablets are consumer devices. They're like giant phones, not small computers. The Surface is a real computer. Rumors of Microsoft's imminent demise are overstated.

I'll have more to report to Extreme Value and 12% Letter readers after I attend the Microsoft shareholders meeting later this month in Bellevue, Washington. I recently wrote Microsoft's board of directors a letter – which I shared with Extreme Value readers – addressing the huge amounts of cash it keeps offshore and what ought to be done with it.

 The laws of economics remain inviolable... Oil had its biggest drop in a year yesterday, falling 4.8% to less than $85 a barrel. According to the Department of Energy, Hurricane Sandy halted shipments to the East Coast and forced refineries to shut down.

Gasoline stockpiles rose by 2.9 million barrels last week... And East Coast demand fell 6%. Falling demand and rising supply add up to lower prices. That's Economics 101 (the best economics primer is Henry Hazlitt's classic work, Economics in One Lesson).

"The market was surprised by the gasoline build," said Gene McGillian, a broker at energy brokerage Tradition Energy. "There's ample supply."

 While Sandy may have had a short-term impact on oil prices, a larger trend is in play. We've written a lot this year about the huge amount of oil and gas coming from U.S. shale plays, like North Dakota's Bakken, Texas' Eagle Ford, and now, Oklahoma's "SCOOP."

For a good primer on the shale boom, and the booming U.S. oil production, make sure to re-read the October 24 Digest.

 The massive production from the shale plays could also drive down the price of natural gas even lower than it already has. Natural gas is down to less than $4 per thousand cubic feet (mcf) from its highs of around $14 in 2008. But the fundamentals aren't there for a rally…

Natural gas is a byproduct of oil production... And the shale plays are producing more than they know what to do with.

The International Energy Agency recently reported that another 65 billion cubic feet (bcf) of natural gas moved into storage. Natural gas inventories now sit around a record 4 trillion cubic feet...

 One of our most trusted advisors in the oil business sent us a note this week about the "massive amounts of natural gas" being produced... Right now, drillers are producing so much gas (as a byproduct of oil) that they're either flaring it off (safely burning the gas off) or venting it (releasing it into the atmosphere). There's simply nowhere to store it...

 If there truly is no market or storage facility, the cost of natural gas could go negative... There's nobody to buy the commodity (zero bid), and the producers would have to pay to have it flared or vented.

Gas has already been crushed... But it can always go lower...

 This natural gas situation is, of course, a good thing. It means natural gas is far more abundant today than in past years. That makes it cheaper. So everything we make that uses natural gas is cheaper, too. For example, fertilizer maker CF Industries recently reported record third-quarter earnings on Tuesday. The company said its gross profit margin rose 16% over last year's third quarter. Management said low natural gas prices were much of the reason.

Other businesses are benefiting not only from low natural gas prices, but low prices for natural gas liquids (NGL) like propane, the fuel many folks use for their backyard barbecues. We're producing so much propane, we're going to start exporting large amounts of it soon. Propane and other NGL prices are down approximately 50% from a year ago, according to a recent article at natural gas industry information provider ShaleDaily.com.

 In my weekly update to 12% Letter readers yesterday, I reminded readers of a great opportunity to earn a growing, high-yield, tax-advantaged income by owning one of the top blue-chip pipeline stocks in America.

The company grows its dividend just about every quarter. Shareholders got an 8% annual raise in income this year. I think they'll see a similar raise next year.

The company recently acquired a chemical plant that'll make thick profit margins from low propane prices. The huge economic benefits of lower natural gas and NGL prices is a wealth-creation trend I've been covering in The 12% Letter since September 2011. I call the trend the "American Industrial Renaissance"...

 All over the country, lower natural gas and NGL prices are making it more profitable to do business in the U.S. For example, not long ago, the U.S. was the highest-cost producer of ethylene, a chemical used to make polyethylene, the most widely used plastic in the world. It's highly likely you're surrounded by products containing ethylene wherever you're reading this right now.

Now, the U.S. is the second-lowest-cost producer of ethylene in the world, next to the Middle East. Why the big reduction in costs? Well, the second-biggest component of natural gas is ethane. And ethane's one and only use is to make ethylene.

That's not all that's happening... New steel tubing plants are being built in Ohio to serve the boom in natural gas production. Billions of dollars are being invested by companies like BP and Dow Chemical to build and expand chemical plants in the Gulf Coast and other areas. And of course, pipelines are being built all over the U.S. to bring vast new supplies of natural gas, crude oil, and NGLs to market.

If you want to know more about this incredible trend and how to earn high, growing, tax-advantaged income from pipeline stocks, you should check out the 30-page report we recently published about it...

 The report features our seven top pipeline stocks (including the one mentioned above), information about tax advantages of owning pipeline stocks, and our proprietary, seven-part model for picking the safest and most lucrative high-yield pipeline stocks.

The report is called "An A.O.P. Retirement," and it's available free with a no-risk trial subscription to The 12% Letter (one of our lowest-cost products). It's no-risk because if you let us know within the first four months of your subscription that The 12% Letter isn't for you, you'll get a full refund. We want you to be happy. That's how we like to do business. Click here to get access now (without sitting through a long promotional video).

 Not everyone benefits from lower natural gas prices. America's most active natural gas driller and second-largest natural gas producer, Chesapeake Energy, is at the other end of the spectrum of low natural gas prices. It reduced the value of its natural gas reserves by $2 billion last quarter. That basically wiped out 4.9 trillion cubic feet of gas and led to the company's biggest net loss in three years.

Chesapeake founder and CEO Aubrey McClendon said on a conference call last Friday, "We've been battling natural gas headwinds driven by relentless supply growth." As usual, the ever-charismatic McClendon spins it his way... Though oil is just 14% of the company's production today (up from 9% last year), McClendon insists, "Chesapeake today is more of an oil story than a gas story."

Chesapeake plans to reduce its $15.8 billion debt load to $9.5 billion. With production levels falling and gas prices scraping the bottom, how does it plan to generate the cash to reduce debt? Management expects to sell $17 billion to $19 billion of assets by the end of 2013. McClendon says the company is cutting "to the core of the core" of its assets. Chesapeake expects to close on the sale of its midstream business (natural-gas-gathering pipelines and processing plants) by the end of the year.

 With Chesapeake selling so many assets, it makes you wonder how it's going to produce the huge gains in the stock price McClendon suggested a couple years ago...

Chesapeake's founder spent a fair portion of his 2010 letter to shareholders telling them why he thinks the company will have a $100 share price by 2015. That's a weird focus for a shareholder letter, but McClendon has never worried about being a little different.

The stock is around $17 today. If McClendon is right, the stock will produce a profit of nearly 500% by 2015. If McClendon is even half-right about his company's share price, it's an awesome contrarian play staring the whole wide world straight in the face.

 Porter has gone even further than I did with the American Industrial Renaissance… Porter predicted the jobs and prosperity created by the U.S. shale revolution would put Obama in office for a second term... And sure, enough, our glorious Komrade Obama won the election.

But you know Porter... He didn't stop there. He recently made one of his most outrageous predictions to date. Porter believes Obama could be elected for a third term. Yes, we're aware the 22nd Amendment currently bars him from being elected again… You'll have to read Porter's work to learn how he expects things to play out…

We know from the feedback we received following the election that you're worried about the state of our nation. And if you think Obama's re-election is bad for the country, you'll want to see Porter's latest research. Click here to learn more...

 If you've dismissed a third term for Obama as a crackpot idea... you should know, a major mainstream news outlet is also speculating about the possibility. The Washington Post's website posted this essay recently...

It's a scenario you shouldn't ignore.

 New 52-week highs (as of 11/7/12): None.

 In the mailbag... Another Jeff Clark devotee chimes in... and one reader responds to the election and Porter's comments on voting (or not voting). Send your comments to feedback@stansberryresearch.com.

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