Agora Financial’s Rude Awakening

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Baltimore, Maryland

• Our favorite play on the global energy crunch north of the border,
• Gold, energy or dollars…the choice is up to you,
• And a few ways to thwart the efforts of central bank currency
  pirates…

Joel Bowman, from the Arabian Gulf…

If you’re earning and spending U.S. dollars and not earning 6% on them, wrote
Addison Wiggin of the 5-Minute Forecast a short while back, then you’re
losing money. Inflation is eating away your savings while you work, rest and
play.

Every minute of the day the folks at the Fed are undercutting your efforts at
wealth preservation. With every rate cut, every cleverly designed stimulus
package aimed at injecting more liquidity into the economy, your efforts to
save for a rainy day are being thwarted.

No longer is investing an option for those who wish to earn a little cash on
the side. Now, thanks to the crafty jokers in the world’s central banks, you
must invest just to break even.

One way to preserve your hard-earned wealth is to park it in tangible assets
– metals and energy, for example.

If you’re interested in adding some gold to your holdings, but are unsure as
to where to start, you can have a gander at the array of products and
services offered Rude regular, Adrian Ash, over at BullionVault.

If you’re more inclined to load up on an attractive play on energy, the
column below by Chris Mayer should pique your interest.

The choice, of course is up to you: Gold, energy, or dollars.

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A Resourceful Canadian
By Chris Mayer

Cats, the great humorist P.G. Wodehouse once wrote, are snooty because they
cannot get over the fact that the ancient Egyptians once worshipped them as
gods. Americans, like cats, might also struggle to get used to a changed
world. The global economy no longer bows exclusively toward the altar of
American enterprise. China’s robust economic machine also attracts a
genuflection or two. Successful investors will adapt to this new reality.

Fareed Zakaria, editor of the Newsweek international edition, notes that
China added more to global economic growth in 2007 than the U.S. That’s the
first time a country other than the U.S. has contributed more to global GDP
since at least the 1930s. This little history-making milestone seems rather
important. And it typifies a growing list Chinese economic achievements…and
American shortcomings. “On issue after issue,” Zakaria writes, “China has
become the second most important country on the planet.”

China is no longer the scrawny puncher that might grow up to be a contender;
it has arrived. It is a bona fide heavyweight…and it has the potential to
throw even harder punches. Jim Rogers, the celebrated globe-trotting investor
and writer, believes the 21st century will belong to China in the same way
the 20th century belonged to the U.S. In Roger’s new book, “A Bull in China,”
he expands on this thesis. His conclusion is as simple and direct as scotch
on the rocks or a quarterback sneak: “Get out of the dollar, teach your
children Chinese, and buy commodities.”

I can’t help you teach your children Chinese. And getting out of the dollar
is a lot more difficult than it sounds if you live in the U.S. But on the
third score, I have some ideas. As Rogers says, owning a piece of the things
that China’s hot economy simply can’t do without seems like a good idea. “If
you own commodities,” Rogers writes, “the Chinese will always pay you on
time.” One thing they certainly can’t do without is oil. In fact, the thirsty
dragon in the East has caused most of the increased demand for oil during the
past few years.

My favorite oil play is our own Canadian Natural Resources (NYSE: CNQ), a
stock I recommended one year ago to the subscribers of my investment letter,
Capital & Crisis. The stock has tacked on about 30% since then. But I think
its advance is far from over. This year, Canadian Natural’s huge Horizon oil
sands project will start pumping out oil for the first time. Unlike
conventional oil assets, this one could produce steady cash flow for decades.

In addition to one of the largest oil sands projects on the planet, Canadian
owns a vast amount of other energy assets in Canada, West Africa and the
North Sea. Overall, Canadian Natural should gush $2 billion in free cash flow
in 2008. The company could double that number in 2009 as the Horizon project
expands. If Canadian Natural actually achieves these cash-flow totals, its
stock could be worth twice what it trades for today.

The stock is not risk-free, of course. Oil prices could sink. Tax regimes
could get uglier (especially the fickle Canadian tax regime). Currency
fluctuations could undermine investment returns. But overall, if you want to
own an emerging energy behemoth, Canadian Natural is very strong candidate.

In searching for investments for our well-scrubbed Capital & Crisis
portfolio, I look for four things, and Canadian Natural has them all:

1. A rock-solid financial condition, preferably backed by tangible
assets. (Canadian took on debt to acquire Anadarko’s Canadian assets.
But ample cash flow means the new debt presents little danger).
2. An understandable business, including detailed disclosures.
3. Good owner-operators, preferably with a track record of creating
wealth.
4. A healthy discount from what private owners would pay to own the whole
thing.

That’s the nub of what I look for. It is not an easy mission to fulfill. So
when we find good investments, it’s important we ride them for all they are
worth. Canadian Natural is one of those.

[Joel's Note: We consider Chris Mayer’s investment research mandatory reading
here at the Rude Awakening. While we occasional feature some of his picks in
these pages, we cannot – out of respect for his paid up subscribers – publish
all of his actionable ideas. If you are interested in nabbing a place on his
mailing list and availing yourself to his entire portfolio, simply read on
here: Mayer’s Special Situations: Full Portfolio Access + Breakthrough
Resource Research Report.

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[Rude Endnote: A couple of weeks back, an underwater Internet cable was
damaged off the North coast of Egypt. Since then, connectivity in the UAE –
largely dependent on this line – has been spotty at best. For a country
building the world’s tallest building and with hundreds of billions in real
estate project pipelines, this “crack around the edge” is nothing short of an
utter embarrassment.

Surely there’s an investment theme here somewhere…infrastructure
developments anyone?

Until tomorrow…

Cheers,

Joel Bowman
Rude Awakening