Agora Financial’s Rude Awakening

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Baltimore, Maryland

• Crude falls below $57 – what it means for the future of “cheap” energy,
• IEA announces startling oil field decline rates,
• Global markets continue selloff, “Flash Action” market moves and more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

We begin this morning’s musing with a question for our Rude reader: How much is 26.3 trillion dollars?

A figure this large is somewhat difficult to fathom, so let’s put it into perspective. $26.3 trillion is equal to approximately:

• 13.15 trillion times the amount your editor has in his back pocket,
• Two million, six hundred thousand times the total prize pool of the world’s richest golf tournament,
• 2,768 times the amount of money spent annually to fight the AIDS virus,
• 14.6 times the annual GDP of France, the seventh largest economy in the world,
• More than two and a half times what the U.S. National Debt Clock would read…had it not run out of space to post the disastrous figure,
• The estimated amount needed to fund the world’s insatiable energy consumption until the year 2030.

Leaving aside golf, viral epidemics and the financial plight of your editor for just a moment, let’s turn our attention to that last point. According to the International Energy Agency, the world will need to pump well over one trillion dollars into energy development and production each year just to maintain “adequate supply.”

Unfortunately for the car-driving, plane-flying, grocery-eating, plastic using, crop-fertilizing, factory-working population of the world, maintaining adequate supply might be harder than first thought.

As the credit crisis chokes off funds needed to keep the moribund banking system alive and thieving, it also drains liquidity from other sectors. Squeezed by exposure to collapsing financial institutions and facing do-or-die margin calls, mega-funds around the world have been forced to sell off profitable positions en masse. Having delivered investors relatively handsome returns in the first half of the year, commodity positions were among the first items up for grabs as institutional outfits scrambled to raise cash and keep their head above water.

Gold, ags and, perhaps most notably, oil are well off their record highs of earlier in the year. The world’s grease fell to $56 per barrel overnight, a fresh twenty-month low.

With crude more than 60% off its July high, oil-producing nations around the world are watching the profit margin of the primary (and often only significant) export evaporate before their eyes. Consequently, belts are tightening, supplies are taken off the market, and crucial exploration and development projects are being shelved.

Couple markedly decreased investment in the sector with accelerated production declines in many of the world’s premier oil fields and pretty soon you’re looking at a steep price hike in the not-too-distant future; one that could potentially dwarf anything we saw in the run up to $147 per barrel. 

In the column below, our resident small cap expert, Greg Guenthner, examines the frighteningly precarious fundamentals on which future oil supply now hinges. If you are a member of the population we mentioned above (the car-driving type, etc.) this will impact you directly. Details below…

— Energy & Scarcity Investor Insider’s Report —

Urgent Notice For American Energy Users: Introducing…

The Breakthrough That Could Put Oil Refineries Out of Business

This tiny company’s private technology refines crude oil as it’s pulled out of the ground…And you can get in on it today for a potential 250% gain this year. For the rest of this must-read report, click here

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Surviving the Selloff
By Greg Guenthner

The Great American Debt Machine has come to a grinding halt. One only has to look toward the auto industry for a glimpse of how it’s all playing out. Right now, U.S. auto dealers are coping with a triple threat: soaring energy costs, a difficult credit crunch and the industry’s worst sales drop in 15 years.

“Car dealers are like the canaries in the coal mine,” Sheldon Sandler told the Associated Press. Sandler is the founder of Bel Air Partners, a firm that helps car dealers find options when they want out of the business.

Inventory is languishing at car lots all over the country and customers are scarce, with many unable to obtain auto loans as the credit crunch escalates…Doom and gloom seems to surround us…and reasons to buy stocks seem as scarce as altruistic investment bankers. During times like these, it’s all too easy to become caught up in the moment. Fear is a powerful emotion. As the markets continue to crumble, many investors lose sight of their goals. They sell positions indiscriminately; they become irrational.

The sell-off we’re experiencing right now is global. And no stock or commodity has escaped the devastation. That’s why we’re looking at a scarce and valuable resource for steady long-term gains: oil.

One energy guru recently made a big bet on oil. He repurchased shares of Exxon, ConocoPhillips, Pioneer Natural Resources, BP and Statoil — all at rock-bottom prices. We say he RE-purchased these shares because, in a prescient move, this sage sold off every oil stock he owned in May…back when oil was sitting atop $129 per barrel.

Richard Rainwater knew he would be leaving the party a bit early to the party — and probably miss the top — when he sold his oil investments back in spring. But he also knew that the gains from his $300 million invested in oil stocks and futures were in jeopardy.

“I just felt that America was not ready for $4 gas and we would see a pause here,” he told Time magazine in June.

Rainwater cashed in his profits just before oil’s peak in July. Now, he’s ready to do it all over again, spreading his millions across Exxon, ConocoPhillips and other big-name petroleum pushers.

Rainwater’s outlook is simple: Increased worldwide demand will continue to push the oil price up in the long term. Rainwater’s not alone, either. Analysts and industry experts — like oil tycoon T. Boone Pickens and OPEC President Chakib Khelil — have been making it perfectly clear…oil won’t be down too long.
On July 11, 2008, oil made a record ascent to $147.27 — a 123% jump in only 12 months. Since that momentous event, however, it has been all downhill for the energy sector. As the nearby chart illustrates, oil stocks (yellow line) have been closely tracking the downward trajectory of crude oil (blue line).

With oil sitting below $60 right now, oil aficionados like Pickens are bracing for the run-up to come. “The Saudis claim they have more oil; they don’t. The president wasted his time to go to Saudi Arabia, to say, ‘Give us more oil.’ They can’t give any more oil…they’re stacking up the money as fast as they can stack it up,” warned Pickens in an interview with CNBC.

The allure of oil is hard to refute. With finite supplies and unquenchable demand, it’s clear why many investment houses put oil above $200 in the near future. According to Pickens, it’s just a case of an oil-hungry economy overwhelming producers: “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 million. It’s just that simple. It doesn’t have anything to do with the value of the dollar.”

Now is the time to buy oil. The second quarter of 2008 saw the largest drop in oil prices in 17 years. Now with OPEC slashing its production outlook for the rest of 2008 and 2009, it’s unclear just how long prices will be able to stay under $100…much less under $57.

[Joel's Note: Right now Greg’s Bulletin Board Elite investment service is available for a 50% discount…but only until midnight tonight. In it he explains how “Flash Action” market moves can help you turn $500 into a whopping $14 million. Sound too good to be true? Read on here and decide for yourself. You’ll get one final reminder before the half price offer expires tonight, then it’s all over.

—- Bulletin Board Elite “Flash Market ” Strategy —-

One Month and Three “Flash Action” Market Moves Could Be Your Chance to Turn $500 into $14 Million

It’s happened before and it could happen again — starting as early as Thursday, Nov. 13 …

With hundreds of billions of dollars in liquidity sloshing around the marketplace, eagerly seeking a safe place to whether the financial meltdown, these three “Flash Action” market moves could launch your portfolio into the stratosphere.

There has scarcely been a more exiting time to invest…provided you know where to position your cash! Get Onboard While Positions Last Right Here

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[Rude Endnote: Expect another spectacularly tumultuous day in the markets today. Futures point sharply lower for Wall Street after Asian and European markets were dealt another uppercut overnight. Japan’s Nikkei 225 , Hong Kong’s Hang Seng and the Aussie All Ordinaries all fell over 5%.

We don’t have time to go into the catastrophic events unfolding here in the Gulf region right now, but if you Google “Kuwait bourse 40-month lows” you’ll soon get the general gist of things.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com