The greatest president in history?... Buffett and Badiali make the same prediction... Why our country desperately needs energy infrastructure... California oil imports are going up (for now)... Does Stansberry Research offer kidnapping insurance?... S&A Global Contrarian is visiting Venezuela...
"Hillary is going to win... I'll bet money on it."
One of the world's richest men, Warren Buffett, was speaking at Fortune's Most Powerful Women's Summit this week... He believes Hillary Clinton will take the presidency in 2016.
S&A Resource Report editor Matt Badiali also believes Hillary will take the presidency... He made the prediction a few days before Buffett. And even though we don't agree with her politics, we know she's going to ride the wave of the most important economic force in America today. By simply riding this wave, Hillary could go down as one of the greatest presidents in history. We know a politician's only job is to get reelected... And getting in the way of this economic force is political suicide.
We've been writing about the advent of hydraulic fracturing ("fracking") and the subsequent oil and gas production boom for years... well before the U.S. became the world's largest energy producer, pumping out 11 million barrels of oil per day (bpd) in the first quarter of 2014.
Despite the explosion in energy production across the U.S. shale plays, skeptics don't think this will last. It's true that production from shale wells typically falls 60%-70% in the first year, compared with a 50%-55% production drop from traditional wells in the first two years. But producers are working to make the wells more efficient. You can read more about it here.
Still, some organizations say the boom won't last... The International Energy Administration (IEA) says production will peak at 13.5 million bpd in 2019. (While we think production will likely rise past then, that would still give Hillary three years of huge economic benefits.) The World Energy Outlook says the U.S. will hold its top spot until 2030.
Hillary knows the best way to make the country happy is to create jobs and line the country's coffers. And an energy-independent America means we don't have to rely on Saudi Arabia or Russia for our oil... we become a major supplier to China... and the U.S. gains a huge amount of political clout.
Plus, Hillary has already hinted that she is happy to work alongside the major oil producers. Soon after she was appointed Secretary of State, Hillary told a crowd at Georgetown University...
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As Secretary of State, Hillary persuaded foreign governments to give U.S. oil majors exclusive exploration contracts... And she accepted money from our nation's largest oil companies for her 2008 presidential bid.
We know U.S. oil production will change the global energy landscape and improve our domestic economic situation. But there's a major problem... We're actually producing too much oil. And eventually our refining, transport, and storage facilities will no longer be able to keep up with production... Industry experts call this American energy's "Reckoning Day." We could reach this point as early as next year.
Just consider what's happening in California...
Over the last decade, the U.S. as a whole has reduced oil imports by 30%. But it hasn't helped California... Over the same time period, oil imports to California rose more than 33%. The state is now importing more than half its oil supply, according to the Wall Street Journal.
It costs more to import oil than it does to move shale oil from Texas to the West Coast. That translates to higher fuel costs – among other costs – in California.
So why is California importing more than half of its oil when we're in the middle of an energy renaissance across the U.S.? There aren't any pipelines connecting the major production areas to California.
We've also written about the increasing amount of shale oil being transported by rail...
As we wrote in the January 14, 2013 Digest...
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Today, rails transport shale oil to the East and Gulf Coasts. The railroads run to California, but there aren't any terminals to unload the oil from tankers and transfer it to refineries (which happens via pipelines and trucks). So California is left out.
Currently, only 500,000 barrels of oil a month – or 1% of California's supply – enter the state by rail. But with new terminals, it could transport the same 500,000 barrels each day, says the Journal.
Oil from North Dakota's Bakken Shale is, on average, $15 a barrel cheaper than imported oil, according to energy-information provider Platts. Research firm Argus estimates it will cost $12 a barrel to transport the crude oil from North Dakota to California. The profit incentive is there.
New oil-train terminals could be up and running by 2016 if proposals go through.
Already, oil refiner Alon USA Energy (ALJ) received clearance to build California's largest oil-train terminal in Bakersfield, which will be able to process 150,000 barrels a day.
That's just one example of our country's desperate need for more infrastructure to harness the full potential of our energy boom.
And again... Matt believes Hillary will do everything in her power to make sure that happens.
Matt has just published a full report explaining more about why he thinks Hillary Clinton is White House-bound... And he shares more details about our country's need for oil infrastructure (including the names of several companies currently working to plug that gap). You can view Matt's free presentation by clicking here.
As we become better able to transport and use domestic oil, we can stop doing business with corrupt countries like Venezuela.
Venezuela has more proven oil reserves than any other country. It should be one of the wealthiest countries in the world. But years of policy mismanagement and corruption have turned it into the poster child of economic dysfunction.
Annual inflation is running at 63%, the highest in the world, and the government has quietly devalued the currency by 61% over the past year. And that's just the official exchange rate. The black market rate is around 100 bolivars to the U.S. dollar, compared with an official rate of between six and 12.
Just getting to Venezuela's capital city of Caracas is tricky... Currency restrictions make it unprofitable for many air carriers to fly to Venezuela, so they have pulled their flights. A few weeks ago, consumer-products giant Clorox announced it was ceasing all operations immediately in Venezuela because it was losing money hand over fist. The government's price controls have resulted in shortages of basic goods and riots. Plus, the country has the second-highest murder rate in the world.
It should come as no surprise that we're sending S&A Global Contrarian editor Kim Iskyan to Venezuela to see if there are any opportunities for profit. In recent months, Kim has been to Iran, Ukraine, Mongolia, Thailand, Argentina, and Macau. But Venezuela could be the most harrowing adventure to date...
When Kim told his father he was going to Venezuela, the first thing his father asked was, "What kind of kidnapping insurance does your job have?"
We need your help. We would appreciate any contacts you may have in Venezuela. Please see the following personal note from Kim...
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If you know anyone in Venezuela who Kim should meet, please drop us a line at feedback@stansberryresearch.com.
New 52-week highs (as of 10/7/14): Becton Dickinson (BDX), CF Industries (CF), Invesco Value Municipal Income Trust (IIM), Coca-Cola (KO), Nuveen AMT-Free Municipal Income Fund (NEA), Nuveen Municipal Opportunity Fund (NIO) and ProShares Ultra 20+ Year Treasury Fund (UBT).
In today's mailbag, one subscriber shows the importance of limit orders... and another shares a funny investing quote. Send your thoughts and comments to feedb "I remember reading a suggestion a few months ago that placing a very-low-priced offer for shares of a company that you wouldn't mind owning, because, you might get lucky and get the shares at a very low price. The idea is that if someone enters a sell order at market price, and your buy order at a ridiculously low price is the only buy order out there, then you get the shares at a ridiculously low price.
"The strategy hasn't yet worked for me, but the opposite just did. A few weeks ago, I placed a sell order at double the then-going price for relatively volatile priced shares I own. I was down about 30% on the shares, but decided to hold on to them because I could tolerate the loss (if it came to that) given that the upside potential is huge. To my surprise, last night I received a trade confirmation from my broker, and saw that somebody must have entered a buy order at market price, and my sell order at double the going price must have been the only one out there. In fairness, the amount of shares wasn't exceptionally large, and it was an odd number, but I made a nice 30% profit on the trade, and someone out there is a little dismayed that they didn't enter a purchase price when they entered their buy order. Thank you for all the great learning you enable!" – Paid-up subscriber Mark Lenhardt
"Hello over there, I feel compelled to share a quote by Mark Twain that came across my desk today; perhaps you are already familiar... 'October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.' – Mark Twain. Always grateful I found you folks." – Paid-up subscriber Donny C. Dunn
Regards,
Sean Goldsmith
Baltimore, Maryland
October 8, 2014
How to master the resource market's cyclicality...
If you plan to invest one dime in natural resources like gold, oil, and uranium, today's Digest Premium is a must-read. Stansberry Research sat down with legendary resource investor Rick Rule to discuss how one can master the giant cycles in natural resources.
Catch one of these big cycles early, and you may never have to work again. Catch one at the wrong time, and you'll lose a fortune. If you're looking to make life-changing profits from commodities or resource stocks, read on...
To subscribe to Digest Premium and recieve a free hardback copy of Jim Rogers' latest book, click here.
How to master the resource market's cyclicality...
Editor's note: If you plan to invest one dime in natural resources like gold, oil, and uranium, today's Digest Premium is a must-read. Stansberry Research sat down with legendary resource investor Rick Rule to discuss how one can master the giant cycles in natural resources. Catch one of these big cycles early, and you may never have to work again. Catch one at the wrong time, and you'll lose a fortune. If you're looking to make life-changing profits from commodities or resource stocks, read on...
Stansberry & Associates: Rick, most readers are aware of how profitable investing in commodities and natural resource stocks can be. The gains on individual positions can run into the thousands, even tens of thousands of percent. But many people are unaware of the cyclical nature of resources... and how to use this aspect to efficiently invest or speculate in them. Could you explain how a resource cycle works?
Rick Rule: Sure. Resource markets are cyclical for two primary reasons... They are extremely capital-intensive, and they are extremely time-intensive. In other words, resources tend to take a great deal of time and money to produce, mine, or extract.
So when supply and demand imbalances occur, the resource sector isn't able to react as quickly as other markets. This long lag time creates huge price swings... extreme highs and extreme lows you don't see in most other markets.
When demand exceeds supply in most markets, you see a relatively quick reaction from producers to meet the new demand. Compare this to resources like copper or gold... Before you can produce it, you have to go find it and build a mine. The exploration cycle – the pre-development cycle – can take up to 10 years. In the meantime, prices can soar, while the market waits for that increased supply.
On the other side, after supplies come onto the market, prices peak and start to fall. What happens is that the industry comes to regard their sunk costs as just that... sunk costs. So they're hesitant to slow production, in spite of high supplies and falling prices. They'll continue to produce even when prices fall below the level at which they would be profitable. In fact, they'll often produce even below the marginal cost of production for a while in a contest known in the resource industry as "the last man standing."
The reasoning here is that it might cost them more to shut down a project and restart it than it would to continue operating at a loss. And each producer wants to be the first in the game when the cycle turns back around. This drives prices even lower than they otherwise would go.
So you have this extraordinary cyclicality as a consequence of the capital- and time-intensive nature of the business.
S&A: Can you give us a couple examples of resource cycles in action?
Rule: Sure... To give your readers a feel for the extremes of commodity cycles, let's look at uranium.
In the 1970s, uranium prices kept pace with other energy sources, escalating tenfold. And uranium share prices exceeded those commodity price escalations.
But the decline in energy prices that accompanied the worldwide economic slowdown in the early 1980s – along with the "Three Mile Island" mishap – delivered a staggering blow to uranium markets. Then the Chernobyl disaster finished them off.
The uranium bear market – beginning in 1992 and ending in 2002 – saw the uranium price decline from $35 per pound to $7 per pound. At the bottom of the market, the industry was selling the stuff for $7-$9 per pound and producing it for $18 per pound. They were losing $10 per pound and trying to make it up on volume!
Worldwide, however, we were producing 90 million pounds and consuming 150 million pounds, with the consumed surplus coming from prior excess utility inventories, and conversion of weapons-grade stocks. So the price had to rebound, and it did.
In the period from 2002-2006, the spot price soared from $7 to $130. Meanwhile, production costs approximately doubled to $40 per pound. Since then, the price of uranium has continued to fluctuate dramatically.
The reaction of investors to these cycles is amusing, if tragic.
At the periodic highs, investors were crowding frantically into uranium equities, although the stage was set – through price-induced increases in supply and reductions in demand – for a price collapse. And of course, investors sold in disgust at market lows, when inverse conditions argued for dramatic increases in the uranium price.
Editor's note: Many of Stansberry Research's best-performing recommendations of all time have come from natural resource stocks, including Seabridge Gold (995%), ATAC Resources (597%), Silver Wheaton (345%), Jinshan Gold Mines (339%), and Northern Dynasty (322%).
That's why several commodity experts teamed up to create the most comprehensive guide to resource investing that Stansberry Research has ever published. Whether you're just starting out in resources or looking for ways to reduce your risk while increasing your profits, this guide is a must-read. Click here for the details.
How to master the resource market's cyclicality...
If you plan to invest one dime in natural resources like gold, oil, and uranium, today's Digest Premium is a must-read. Stansberry Research sat down with legendary resource investor Rick Rule to discuss how one can master the giant cycles in natural resources.
Catch one of these big cycles early, and you may never have to work again. Catch one at the wrong time, and you'll lose a fortune. If you're looking to make life-changing profits from commodities or resource stocks, read on...
To continue reading, scroll down or click here.
Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)
As of 07/21/2014
| Stock | Symbol | Buy Date | Return | Publication | Editor |
| Prestige Brands | PBH | 05/13/09 | 411.6% | Extreme Value | Ferris |
| Enterprise | EPD | 10/15/08 | 316.2% | The 12% Letter | Dyson |
| Constellation Brands | STZ | 06/02/11 | 310.5% | Extreme Value | Ferris |
| Ultra Health Care | RXL | 03/17/11 | 268.2% | True Wealth | Sjuggerud |
| Ultra Health Care | RXL | 01/04/12 | 222.2% | True Wealth Sys | Sjuggerud |
| Altria | MO | 11/19/08 | 210.2% | The 12% Letter | Dyson |
| Targa Resources | TRGP | 12/13/12 | 187.6% | SIA | Stansberry |
| Blackstone Group | BX | 11/15/12 | 179.1% | True Wealth | Sjuggerud |
| McDonald's | MCD | 11/28/06 | 178.1% | The 12% Letter | Dyson |
| Automatic Data Proc | ADP | 10/09/08 | 158.2% | Extreme Value | Ferris |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals |
| 3 | Extreme Value | Ferris |
| 3 | The 12% Letter | Dyson |
| 2 | True Wealth | Sjuggerud |
| 1 | True Wealth Sys | Sjuggerud |
| 1 | SIA | Stansberry |