May 21, 2007 by Addison Wiggin & Ian Mathias

• Gas prices at their highest in U.S. history… even after inflation
• Loonie-greenback parity? You gotta be kiddin’ me… Punk age economics revisited…
• China and Kuwait cut loose from the dollar... how will this affect your portfolio?
• Booming world trade:  A rare opportunity to profit from clogged shipping ports
• $500 million in rare coins discovered in U.K. waters… readers of The 5 could be among the first to cash in…

Happy Monday to you… gas prices reached their highest level in American history this weekend. The national average was estimated as high as $3.19 this morning. In 1981, the price of gas reached $1.35, which, adjusted for inflation, would be $3.15 today.

And get this… Over the weekend, the Canadian dollar rose to $0.92 — a 30-year high against the U.S. dollar.

Back at the turn of the century, when the euro was trading at $0.83, we laughed at the prospect of euro-dollar parity. Who would have thunk… just a few short years later… we’d be on the verge of loonie-buck parity? With gold, the dollar, commodities, real estate all going haywire…you’d expect Sid Vicious to be returning from the grave with a new hit album.

What’s next? The return of Paul Volcker? More on this theme tomorrow…

 This weekend, both China and Kuwait announced adjustments to their respective currencies’ dollar pegs.

On Friday, China announced it would widen the yuan’s trading band with the dwindling U.S. dollar. Is this a sign that China is bullish on its economy, bearish on ours and more confident in the yuan’s ability to stand on its own? Or just posturing before trade talks begin Wednesday? You can bet on the latter…

Sunday, the central bank of Kuwait announced it will abolish the dinar’s peg to the dollar in favor of a grab bag of major world currencies. Apparently, OPEC’s fourth largest oil producer thinks that its resource profits are better protected without the dollar.  

“The U.S. dollar has been the world’s ‘reserve currency’ since the end of World War II,” Strategic Investment’s Dan Amoss reminded us this morning. “Most foreign central banks have gladly hoarded U.S. dollar notes and bonds in their vaults, thinking that this will bolster their citizens’ faith in local paper currencies -- paper backed by paper, so to speak.

“It’s not good for the U.S. that these dollar hoarding habits show signs of weakening,” Dan says. “Aside from the clearly bullish implications for gold, major oil producers are waking up to the fact that increasingly valuable oil shouldn’t be traded so easily for rapidly decreasing dollars.”

 “The Europeans can’t keep up with container volume coming into their ports,” our Chris Mayer reports. In the first quarter, an estimated 73% of Euro-bound container ships were delayed, up by nearly half from 2006. “Rotterdam, one of the busiest ports in Europe, sent away or delayed 30 ships and more than 50,000 containers,” Chris told The 5.

“World trade increasingly relies on containers -- 20- or 40-foot steel boxes that are easily loaded on ships, transferred to ports and then loaded onto trucks or rail cars. Container traffic flows have doubled since 2000. But the skeletal structure supporting this trade has not kept up, hence all the delays,” says Chris.

How can you play this trend? “The shipping boom has legs yet,” says Mayer. “Building out that infrastructure should be a good business. Moreover, the demand for basic commodities such as steel should rise.”

“Gee, so capacity utilization is up at America's factories?” a reader gives us the time of day. “But don't we keep hearing about 3 million lost jobs in manufacturing? Seems like those two data points don't match up very well, do they?
 
“Of course, once a manufacturing plant gets shuttered and its productive machinery is taken out and sent to China, the plant is no longer counted in government statistics. You want to see 100% capacity utilization rates? No problemo, just keep closing plants until all the work is shifted to those that remain.
 
“If GM closes a few more plants and shifts the work to those that stay operating, sooner or later, there you go. 100% capacity utilization! Isn't that what's really happening here? So is that data point any more reliable than official estimates on inflation, GDP or unemployment?”

Hey… these are guvment’ numbers.  They’re just trying to help.

"Why all the fuss about property values falling?” asks another.

“If you are an owner of a single-family home and not an investor, falling values of homes, if they fall in tandem all over the country or world, should only make them more affordable, thereby producing more buyers. The way I look at it is when I moved into my brand-new home in 1986, the taxes were $700 per year.

“Now, 20-plus years later, my taxes on the same home, without improvements, are $2,500 and rising. True, the home was valued in 1986 at about $130,000, and now at about $350,000 (market value), but it is, nevertheless, the SAME home that I have been living in for that time period. The only thing different is that I am now paying 3 1/2 times MORE in taxes to live in this SAME home. And if I should sell it and move elsewhere, the same problem exists. A higher-priced home only benefits me if I intend to sell and NOT repurchase a new home.

“Of course, higher prices translate into higher rents also; so I think I would still have the same problem.”

The 5 responds: Higher prices don’t necessarily translate into higher rents. In fact, it has been so easy to get mortgages to buy houses in the past few years, in many areas, the demand for rentals has gone down… driving the price down.

But the real problem with declining house prices is the American penchant for loading up on too much house… and then borrowing against it. In Europe, you cannot borrow against the market price for your house, only the amount you last paid for it. In the U.S. and most commonwealth countries, you can borrow against what it should bring if you sold. If you’ve already borrowed against the market price -- or if you used cheap money to get into a bigger house than you can afford -- and then the price goes down… well, you do the math.

Property taxes, by the way, lag the market price by a number of years. So even if the price you could get for your house goes down, your taxes will likely rise to meet the apogee of the market, only years later.

The problems revealed in the bust, were, as always, begat in the boom.

And this for the "Do as I say, not as I do" file, from the gun-toting Jim Amrhein, a distinguished Whisky & Gunpowder contributor:

“After the political and media fallout following New Jersey Gov. Jon Corzine's multiple-lawbreaking April car wreck (he was hurtling seat belt-less at 91 mph), one might suppose lawmakers would start paying a bit more attention to their comportment behind the wheel...

“Evidently not. According to the Vallejo Times Herald, California State Sen. Carole Migden plowed her taxpayer-bought Toyota Highlander SUV (the hybrid version, of course) into the back of a Honda sedan with enough force to send it slamming into a third vehicle at a Solano County stoplight, hospitalizing the Honda's driver. The cause of the three-car crash: Migden had been in the act of fumbling to answer her cell phone.

“This is noteworthy because…? Migden just voted for a new law which takes effect in 2008 that fines drivers for talking on cell phones without the aid of hands-free technology...”

Over $500 million worth of rare coins were discovered off the British coast late last week. The find doubled the gross net worth of Odyssey Marine, the undersea exploration firm that discovered the treasure.

If you didn’t catch our urgent dispatch over the weekend, we’ve befriended and do business with the gentleman who was called in to assess the booty from that recovery effort. We’re already trying to work out a deal to offer these coins exclusively to Agora Financial readers. With any luck, we’ll pull it off… For details, see the overtime briefing.

Best reguards,
Addison Wiggin,
The 5 Min. Forecast

“Shipwreck yields estimated $500M haul,” reads the headline in today’s Yahoo! News.

It’s an astounding story.

Every news outlet in the nation is brimming with excitement over the announcement today that Odyssey Marine Exploration team hit the mother lode. 

In a secret, heavily protected location, the firm located and has now brought to the surface “17 tons of colonial-era silver and gold coins estimated to be worth $500 million.”  I’m writing to you today to ask…

How’d you like to own a piece of this historic find?

We’re on the phone right now, trying to negotiate, on your behalf, “first refusal” rights to buy some of the very coins that grace the nation’s headlines today.

But let me back up a bit and explain how this unique and rare opportunity is even possible. While in Vancouver last year at our annual Agora Financial Investment Symposium, (coming up again this year July 24th-27th), we had the good fortune of meeting a gentleman who has a very exclusive relationship with Odyssey Marine.

In fact, while swapping stories over coffee and scrambled eggs at the hotel cafe, Nick Bruyer told me Odyssey was on the verge of a very important discovery. When we heard the news today, we immediately thought: this has to be the very same “top secret” reclamation effort Nick was referring to.

As the CEO of First Federal Coin Corp, Mr. Bruyer often negotiates first rights on many a rare find: Gold coins that were lost after a trading ship sank off the coast of Holland in 1724; another stash of U.S. silver dollars from the 19th century hoarded by an eccentric potato farmer during the Great Depression.

The coins brought to the surface today are believed to have gone down with a 400 year-old ship registered in England. "For this colonial era, I think (the find) is unprecedented," Nick told the Associated Press after he had a chance to examine a batch of coins from the wreck. "I don't know of anything equal or comparable to it."

If anyone can secure you the right to buy these coins, Nick can. So we called him up. We’re already trying to work out a deal to offer these coins exclusively to Agora Financial readers. With any luck, we’ll pull it off…

You might recall that Nick has already brought rare coin finds to your attention. For example, have you ever seen an 1859 New Orleans “O” Mint Seated Liberty silver half dollar? The one with the number “9” in the date double struck next to the rim of the coin?

Neither have we.

But it’s a rare and important coin. So rare, so important National Geographic did a television series documenting the discovery and reclamation of this national treasure. Nick, by virtue of his reputation and connections with the recovery team, can get his hands on a limited stash of these very special coins.

The “error” in the Seated Liberty half dollars, Nick told me, happens only when the die maker strikes the date into the die improperly, then has to reposition them. New Orleans Mint Liberty half-dollars with the number “9” double struck are rare and valuable indeed.

These Seated Liberty half dollars were minted before the Civil War. And they were lost at sea while on their way to help pay for the rebuilding of the South’s war ravaged economy. The story is almost as amazing as the coins themselves.

But that’s not my business… it’s Mr. Bruyer’s. That’s why I’m sure you’ll be happy that I made the gentleman’s acquaintance in Vancouver.

You’ll find Nicholas’ account of the SS Republic below… the story of the coins alone is worth the read. But you’ll also be interested to know that the ship and team that made the astonishing $500 million discovery are the same who reclaimed the treasure of the SS Republic.

Click here to read more ... and enjoy.

P.S. You can be sure we’ll keep you updated on the amazing coins Odyssey Marine Exploration recovered. It’s my personal goal to make as many of them as possible for you to purchase, by exclusive arrangement. Stay tuned…

P.P.S. Save for the America Revolution, the Civil War was one of the more defining moments in the birth of the United States as a Nation. New Orleans played a significant role in the financial history of the South and those turbulent years following the war. These coins — especially the rare examples with the “9” double struck — are an important detail in the plot line of that story.

Not to mention the recovery of the sunken SS Republic and the recovery of its precious treasure.  Click here for all the fascinating details… and happy treasure hunting.