April 30, 2007 by Ian Mathias

• Stagflation on the horizon? Recent data say “yes”
  
• Putting your money to work where it gets treated best
• Peruvian miners strike! Copper buyers beware
• “Deathanol” insights from Farmer Kerr...even cows hate it!
  
• When the oil wells go dry…and why you should care
  
• Where have all the honeybees gone?

“High inflation, and low economic growth? Uh-oh... Did I hear someone say, ‘Stagflation’?” That’s the word this morning from Chuck Butler of The Daily Pfennig. Friday’s GDP numbers came in at 1.3%…0.5% lower than projected. The Fed says consumers use their credit cards at a more aggressive rate than it had projected...

On the other hand, "The ‘emerging markets’ around the Pacific Rim accounted for more than half the world GDP,” Christopher Hancock told readers of his Free Market Investor on Friday. “They now churn out 43% of the world's exports and hold 70% of the world's foreign exchange reserves.”

“American investors must start putting more of their money in foreign markets, or risk lower and lower returns on their capital.”

Chris has been writing the Free Market Investor exclusively for our Agora Financial Reserve members since the start of 2007. If you agree your capital will be treated more fairly elsewhere in the world, stay tuned… Free Market Investor will be available for public consumption soon.

In 2007, for the first time in history, the median home sales price in the United States is likely to decline. Greg Grillot of Whiskey & Gunpowder rushed this news to The 5 early this morning. He told us that Lewis Ranieri -- who many regard as the father of the securitized mortgage market -- told a small audience last week that 2007 might be housing’s worst year on record. For the full story, click here.

Striking miners in Peru could prolong copper’s incredible run. Peru is the world's largest producer of silver, third largest in zinc, copper and tin and fifth in gold. News of this labor strike came in just before The 5 went to press, but Manic Trader Kevin Kerr was right on top of the action:

“Copper has been on a tear for the last couple of years, and people have been calling a top in it for a long time… but this is a market that I wouldn't turn my back on. A strike in Peru and continued demand out of China could absolutely cause this market to crush any short interest immediately.”

“It's very important to remember we are not seeing much of a rally in copper right now. Trade from Asia will thin out starting tomorrow and stay thin for a week. China, which is the world's largest copper consumer, celebrates Golden Week, and the Japanese markets are closed today, Thursday and Friday." 

 "The one ‘beneficial’ byproduct of ethanol is actually harmful to cattle,” Kevin also reports. When Kevin visited Midwestern farmers this month, he asked how the highly anticipated DGS feed was working. (These “distillers grains with solubles” are a byproduct of ethanol production that can be fed to cattle). Kevin tells The 5 he was nearly laughed off the farm. DGS feed costs farmers just as much as normal feed and routinely produces underweight cows with low-quality meat. “The bottom line is the crap is expensive,” says Kevin “and it creates a lot of waste and adds transport costs.“

Bottom line? If you like steak and plan to grill this summer, expect to pay much more… more for the meat, more for the propane to cook it and more, more, more for the corn on the side. The Daily Reckoning’s Kate "Short Fuze" Incontrera told us that corn prices this year are creeping toward two ears for a buck -- it was 10 for $1 in 2006! Prices have risen so quickly that the Mexican government has put a price freeze on tortillas.

“Look, we’re not running out of oil, yet. There is just less of it… and it’s getting harder to collect,” Byron King writes, setting the record straight. Our coverage of his and Dr. Ali Samsam Bakhtiari’s claim that Peak Oil occurred sometime in 2006 stirred up plenty of reader feedback.

“Peak Oil doesn’t mean the end of oil. It means the end of cheap oil.” And consequently, the beginning of some great investment opportunities. Most industry analysts believe that oil will become scarcer in the next few decades, but Byron, a Harvard-trained geologist, believes rather vehemently that there is a whole boatload of money to be made between now and then.

Where? The enhanced oil recovery business. An estimated 89% of the world’s oil fields contain oil unreachable by traditional drilling. Oil service businesses that are capable of getting the last drops out of dried-up wells are very well positioned. A huge international pool of well owners will soon be paying these companies top dollar to get the most out of their drilling ventures.

Have you heard the rumor that the nation’s honeybees are disappearing? Well… it’s definitely true. Or may be, anyway.

Our tech investing expert, Jonathan Kolber, reports that a rare phenomenon called Colony Collapse Disorder may have wiped out over 60% of America’s commercial bee populace. And “experts” in the government and the telecom industry believe they know why: cell phones.

Significant bee populations are critical to the pollination of a third of the food grown in Western nations. Without bees, some agricultural industries would simply crumble. So you can expect beaucoup dineros to be spent on finding a solution to this problem. We don't think cell phones are going away anytime soon.

Which company will stand to profit? Jonathan is looking into the alternative pollinization industry... and will let us know as soon as he finds a solution he likes.

When we interviewed Warren Buffett a few weeks ago, we asked him one very critical question. "Warren," we asked, "do you still play the ukulele?"

"Yes, I do. In fact... are you coming to our annual meeting?"

"Well, if you're inviting us..."

"Good. I'm going to open up the meeting by challenging the girl's under-14 table tennis champion from China. Then, Charlie [Munger] and I are going to play the ukulele and sing."

Truth is, although we'd really like to witness the spectacle, we're not going to make it to the meeting. But our own Chris Mayer is. After which, he'll no doubt tell us how adept Buffett is with a Ping-Pong paddle... and a ukulele. Stay tuned...

Regards,

Addison Wiggin,
The 5 Min. Forecast

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