Stock Market News & Stocks to Watch from StraightStocks » oil reserves

On the Ground in Brazil

Frank Holmes — Mon, 23 Nov 2009 06:00:00 +0000

If seeing is believing, natural resources and infrastructure opportunities abound in Brazil. The above photo was snapped by our global strategist Jack Dzierwa at Satilde;o Paulorsquo;s Guarulhos International Airport as he spent hours trying to board a domestic flight to Rio de Janeiro. Not surprisingly, he didnrsquo;t make the flight. Jack has traveled extensively around the world, and he says hersquo;s never seen anything like the hectic scene at Guarulhos, which just canrsquo;t service the rapidly growing number of Brazilians who can now afford to travel by air. Scenes like this are important for investment managers to experience in order to grasp the significance of whatrsquo;s taking place in emerging countries like Brazil. You just canrsquo;t get the full flavor of the chaos at Guarulhos from an economic data spreadsheet or a research report. Jack traveled to Brazil to collect some insight on the countryrsquo;s infrastructure development and the best prospects for investment. His experience at the airport gives him tacit knowledge and a clear understanding that Brazil will have to expand on its domestic infrastructure. Brian Hicks, who co-manages our Global Resources Fund (PSPFX), has also spent the week in Brazil ndash; he has been doing research and meeting with natural resources companies. Brazil is a key driver for natural resources and infrastructure markets. It is home to 190 million people, many of them moving into the middle class, and itrsquo;s also one of the worldrsquo;s fastest-growing economies. Similar to China, this rise of the middle class will increase demand for oil and other commodities, and its expansion will put growing pressure on the countryrsquo;s inadequate infrastructure. Just a couple of weeks ago, a blackout left nearly 60 million people without electricity and another 7 million without water. Traffic in downtown Satilde;o Paulo is so bad that many businessmen use helicopters as taxis to get around the city. Brazil only has three main international airports, despite that it has 14 cities with at least 1 million residents. The U.S. Energy Information Administration estimates that Brazil has more than 12 billion barrels of proven oil reserves. That number is certain to grow as we learn more about the large discoveries recently made off its southeastern coast. In addition to vast reserves of oil, it is also a leading producer of iron ore, aluminum, platinum and other industrial metals. This natural wealth puts Brazil in an enviable position compared to some other large emerging economies. As the domestic demand for resources increases with infrastructure expansion, much of that demand can be met from internal sources. This benefits the economy on both ends and sets the stage for further economic growth. Please consider carefully a fundrsquo;s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. #09-818

This Small Oil Producer is Ripe for a Takeover… Here’s How to Profit

Investment U — Fri, 20 Nov 2009 18:18:58 +0000

This Small Oil Producer is Ripe for a Takeover… Here’s How to Profit by Sheena Martin, Contributing Editor Friday, November 20, 2009 Takeovers are big news in the market at the moment. In fact, did you know that takeovers have the biggest one-day gain in stocks for any asset? As my colleague – and takeover expert [...]

Defense Solutions Holding Inc. (DFSH.OB) Growing into Global Power

QualityStocks — Fri, 23 Oct 2009 14:18:03 +0000

Defense Solutions Holding Incorporated is a company that is on the rise. Founded in 2001 in Exton, Pennsylvania, Defense Solutions is known as being one of the few American companies that does business in the U.S. and Iraq. Today, the company announced that one American refinery and two Asian refinery groups have asked [...]

Who’s Buying Oil?

Contrarian Profits — Wed, 30 Sep 2009 19:35:14 +0000

pAs the US strategic petroleum reserve (SPR) approaches capacity (721.5 million barrels filled out of a total possible 727 million, and will be filled by January 2010), the federal government will fade out of the oil-buying business. Some bearish traders believe that this factor can weigh in on prices, since most petroleum stocks in the United States are government-held rather than private. Bullish traders have also used the filling of the Chinese SPR as a reason that oil should go much higher./p pThe team at Casey’s Energy Opportunities believe that strongplanned government buying or selling of crude oil for SPRs actually have very little impact in the overall market./strong However, an overall drawdown of worldwide inventory could put downward pressure on the#8230;/p

One Natural Gas Company Worth Looking Into… Now And Later

Investment U — Fri, 25 Sep 2009 15:52:44 +0000

One Natural Gas Company Worth Looking Into… Now And Later Tony Daltorio, Investment U Research These days, the US natural gas market finds itself weighted down by doom and gloom. With North America choking on the stuff and underground storage of natural gas potentially approaching 4 trillion cubic feet, pundits keep saying that the market [...]

It’s the Best Investment in North America and It Isn’t the United States

Contrarian Profits — Thu, 24 Sep 2009 13:08:34 +0000

pThe U.S. stock market has run up magnificently in the last six months. The U.S. economy has begun to recover, but its performance has fallen short of expectations./p pAnd with good reason. The United States has a bigger and more-troubled financial sector than most countries. It also has a bigger overhang from the housing bubble, has a bigger balance-of-payments deficit and has a budget deficit that’s fat enough to stall the recovery./p pIt would be nice to have an economic recovery to invest in that didn’t have all of these problems./p pTruth be told, such an investment play does exist. What’s more, the market I have in mind is advanced enough for us to invest in it without having to go through all#8230;/p

Oil Investors: Keep Your Eye on That Dollar

Andrew Snyder — Mon, 21 Sep 2009 20:03:47 +0000

pThe risk factors surrounding the nation’s oil industry are through the roof. The action is costing unprepared investors a lot of money. For proof, ask Delta Petroleum (NYSE:a href="http://www.google.com/finance?q=DPTR"DPTR/a) shareholders. /p pEven a first grader can look at this market and know anything but fundamentals are driving the action. Fortunately for guys like me, few grade-school can figure out why./p pThese days, it is all about the macro-economy. More specifically, the only thing anybody cares about is the value of the dollar. When the greenback is up, the market is down (like today). When the dollar is weak, the market rallies – like last week./p pThere are several reasons for the trend: flight to safety, inflation, political risk… you name it./p pWhat matters for us#8230;/p

Axial Vector Energy Corp. (AXVC.PK) JV Partner Awarded Key Patent in Indonesia

QualityStocks — Wed, 09 Sep 2009 13:35:17 +0000

Axial Vector Energy Corp. announced that its PETRO AVEC JV partner, Petrosonics LLC, has been awarded a patent in Indonesia that protects the process of removing sulfur from all types of crude oil fractions through sonic energy, oxidation and the removal of all of the oxidized sulfur through hydrotreatment. The patent will remain effective for [...]

Peak Oil: Supply Data Doesn’t Lie

Contrarian Profits — Wed, 26 Aug 2009 23:30:28 +0000

pDespite the ‘demand destruction’ hype, it is interesting to note that during this severe global recession, worldwide oil usage has dropped by a minuscule 2.7%. So, what will happen when the world comes out of this recession? Who will rise up to the challenge and meet our insatiable thirst for energy? These are critical questions not many are willing to ask./p pAccording to the US Department of Energy, liquid fuel demand in the developed nations peaked in August 2005 at 41.89 million barrels per day. Since then, it has plunged by 3.6 million barrels per day to 38.27 million barrels per day. However, you may want to note that despite these tough economic conditions, consumption has been extremely resilient in the#8230;/p

Forget BRIC… These Emerging Economies Hold the New Keys to Growth

Chris Mayer — Wed, 26 Aug 2009 20:32:43 +0000

pIt’s become widely accepted when talking about emerging economies to focus on the so-called BRIC countries - Brazil, Russia, India and China. But there is a very important region that gets lost in that discussion./p pAnd it’s a region that holds the key to growth opportunities that could eclipse the growth in the BRIC countries./p pIn fact, this region collectively has a bigger economy than Brazil, Russia or India already. And in terms of growth, it is growing faster than any of these countries. In terms of population, it’s bigger than the U.S. and nearly as populous the EU. It holds 60% of the world’s proven oil reserves and nearly half of its natural gas./p pThat last clue probably gives it away. I’m#8230;/p

Update on Canada Oil Sands, Part I

Byron King — Mon, 24 Aug 2009 19:26:17 +0000

pRecently, I had the unique opportunity to tour two different oil sands operations near Fort McMurray, in northern Alberta. I saw a massive open-pit oil sands mine, and the associated reclamation effort, operated by Syncrude Canada Ltd. I also visited an in situ oil sands recovery project called Surmont, operated by ConocoPhillips (NYSE:a href="http://www.google.com/finance?q=ConocoPhillips"COP/a)./p pThe trip was sponsored by the American Petroleum Institute (API), which paid for the airfare and accommodations. Managers at both Syncrude and ConocoPhillips granted me access to any parts of their operations I wanted to see (within allowances for safety). And everyone answered any and all questions I asked./p pPost-trip, I have complete editorial freedom to write about what I saw and learned. And I learned a lot. So#8230;/p

The Oil Sands in Alberta, Canada

Byron King — Thu, 20 Aug 2009 17:30:01 +0000

pA couple of weeks ago I was in Fort McMurray, Alberta. I was visiting two large oil sands operations, courtesy of Conoco Phillips (NYSE:a href="http://www.google.com/finance?q=Conoco+Phillips"COP/a), Syncrude Canada and the American Petroleum Institute, which sponsored the trip. I’ve been all over the place, but never to a working oil sands operation. This was a first for me, and quite an eye-opener./p p style="text-align: center;"strongWhat Are These Oil Sands?/strong/p pBack in Pleistocene time, the glaciers covered much of northern Alberta. In places, there was a mile of ice. During some of the warmer periods, there was a lot of melting. On occasion, and in some places, there were giant, glacial-dammed lakes./p pEvery now and again, these glacial dams would break, sending massive volumes of water downstream, wiping away#8230;/p

Axial Vector Energy Corp. (AXVC.PK) Joint Venture Partner Awarded International Patents

QualityStocks — Fri, 14 Aug 2009 19:15:34 +0000

Axial Vector Energy Corp. is a global solutions provider that owns, develops, invests in and licenses revolutionary technologies in areas such as energy. In the energy area, the company has entered into a joint venture with Petrosonics LLC called PETRO-AVEC. The joint venture is owned 60% by Petrosonics and 40% by Axial Vector Energy. The company’s [...]

The Saudi Arabia Next Door

Byron King — Fri, 14 Aug 2009 17:30:55 +0000

pI had the unique opportunity to tour two different oil sands operations near Fort McMurray, in northern Alberta. I saw a massive open-pit oil sands mine, and the associated reclamation effort, operated by Syncrude Canada Ltd. I also visited an in situ oil sands recovery project called Surmont, operated by ConocoPhillips (NYSE:a href="http://www.google.com/finance?q=ConocoPhillips"COP/a)./p pWhen we think about the concept of ’Peak Oil’ today, we need to keep in mind what we’re talking about. The curves show oil output peaking in so many parts of the world. This phenomenon is quite real, as long as you understand that it’s the light, sweet, easy-flowing oil that is getting harder and harder to find, certainly in significant quantity./p pBut there are a lot of other hydrocarbon#8230;/p

Budget Insanity, FOMC Down-Low, Oil Sands Investing and More!

Contrarian Profits — Thu, 13 Aug 2009 16:00:10 +0000

pGovernment budget hits all-time insanity… record monthly, year-to-date deficits#8230; “Cash for clunkers” helps GM, but not economy… July retail sales stage surprise fall#8230; Fed plans exit strategy, ends bond buys… why the FOMC is still not helping you#8230; Byron King’s crude reality: How Canada could be the next Saudi Arabia#8230;/p p It’s official: strongOur government ran a record $180.7 billion over budget in July,/strong the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported a href="http://www.agorafinancial.com/5min/the-debt-ceiling-dividend-plays-a-currency-sea-change-and-more/"Monday/a. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief./p pA few more scary details:/p ul liThe budget deficit is still on track to#8230;/li/ul

Energy Blast – August 12, 2009

Robert Amsterdam — Wed, 12 Aug 2009 09:11:35 +0000

The International Energy Agency's chief economist Fatih Birol has said that if oil prices rise higher than $70, the global economic recovery will be rendered more difficult. Birol has also predicted there may not be sufficient demand for natural gas...

Axial Vector Energy Corp. (AXVC.PK) JV Partner Awarded Patent in Mexico

QualityStocks — Thu, 06 Aug 2009 13:21:11 +0000

Axial Vector Energy Corp. announced this morning that its PETRO AVEC JV partner, Petrosonics LLC, was awarded a patent in Mexico. This patent protects the process of removing sulfur from all types of crude oil fractions through sonic energy, oxidation as well as the removal of all of the oxidized sulfur through hydrotreatment. The patent [...]

Axial Vector Energy Corp. (AXVC.PK) JV Partner Awarded Patent in Egypt

QualityStocks — Wed, 05 Aug 2009 14:06:02 +0000

Axial Vector Energy Corp. announced this morning that its PETRO AVEC JV partner, Petrosonics LLC, was recently awarded a patent in Egypt (Egyptian Patent Application No. PCT/NA/122/2006). This patent protects the process of removing sulfur from all types of crude oil fractions through sonic energy, oxidation as well as the removal of all of the [...]

Savoy Energy Corp. (SNVP.OB) to Upgrade Rozella Kifer Well’s Technology for Increase in Efficiency and Decrease in Costs

QualityStocks — Fri, 31 Jul 2009 13:28:32 +0000

Yesterday after the closing bell, Savoy Energy Corp. announced that in the near future the company intends to upgrade the technology at its Rozella Kifer Well. The company has ordered a Jack Shaft Reducer that will be installed on the well. The installation is anticipated to increase efficiency by 25% while decreasing maintenance by 23-35%. [...]

What Would Borat Do?

Chris Mayer — Wed, 22 Jul 2009 16:13:46 +0000

p class="MsoNormal"Kazakhstan was once a nation of nomads wandering vast steppes. They herded cattle, goats and camels. On the country’s western edge lies the Caspian Sea. Towns grew up along the shore there, hauling in catches of sturgeon and black caviar./p p class="MsoNormal"But otherwise, Kazakhstan was an empty desert. Even in the days of the old Silk Road, traders would skirt Kazakhstan’s southern border rather than try to cross that hell of a desert. It was remote. Desolate. The Soviets used parts of the northeast to test nuclear weapons./p p class="MsoNormal"The Aral Sea, site of one of the greatest environmental disasters ever, is in Kazakhstan. A century ago, carp, perch, caviar-bloated sturgeon and much more filled the Aral Sea. Fisherman hauled hundreds of tons of#8230;/p

World Fuel Services Corporation – Value – Zacks Rank Buy

Tracey Ryniec — Mon, 13 Jul 2009 05:00:00 +0000

Highlighted stocks include World Fuel Services Corporation (INT), SYNNEX Corporation (SNX), Casey's General Stores, Inc. (CASY), The Gymboree Corporation (GYMB) and TOTAL S.A. (TOT).

World Fuel Services Corporation (INT), which sells marine, aviation and land fuel products and services to more than 6,000 locations, including airports, seaports and tanker truck loading terminals, in over 190 countries, continues to surprise on estimates.

On May 7, the company surprised for the fourth consecutive time reporting first-quarter 2009 earnings per share of 92 cents compared to analysts' estimates of 79 cents for a beat of 16.46%.

Two out of three business segments saw a year over year increase in gross profit. The marine segment's profit rose 28% compared to last year while the land segment gained 355% mainly due to the acquisition of the Texor business.

Only the aviation segment saw a decline, decreasing 9% year over year as economic conditions remained challenging in the aviation sector.

Covering analysts are bullish on 2009 as full year consensus estimates are up 7 cents to $3.17 per share in the last 60 days. The company is scheduled to report second quarter results on Aug 6.

Value Fundamentals

World Fuel Services is more expensive than when I last updated it on Mar 2. It is now trading at 12x forward earnings, but still a value stock, compared to 7x forward earnings in March. Its PEG ratio is still attractive at 0.89.

The company was a Zacks #1 Rank (strong buy) stock in March and is now a Zacks #2 Rank (buy) stock. World Fuel Services has an excellent 1-year return on equity (ROE) of 19.86%. The company also pays a dividend with a current yield of 0.80%.

Read the Mar 2 analysis.

Update to Previous Value Zacks Rank Buy Stocks

SYNNEX Corporation (SNX) sees market stabilization as the distributor of IT systems recently surprised on estimates for the fourth consecutive quarter. The company also offered up a higher than expected fiscal third quarter forecast. SNY trades with a PEG ratio of just 0.80. Read the full article.

Casey's General Stores, Inc. (CASY), the operator of convenience stores, had record earnings in fiscal 2009 and is optimistic about 2010 despite the struggling economy. CASY has surprised on estimates 2 out of the last 4 quarters by an average of 10.67%. The company has a PEG ratio of 0.96. Read the full article.

The Gymboree Corporation (GYMB), the children's retailer, has a streak of 4 consecutive earnings surprises and has averaged a beat of 6.64%. Will it keep the streak alive when it reports its second quarter results in August? Read the full article.

TOTAL S.A. (TOT), the large French oil company, is exploring in areas of the world where oil reserves are growing. Full year estimates are jumping as crude prices rise. TOT trades at only 9x forward earnings. Read the full article.

Zacks Investment Research

Zacks Releases Four Powerful ”Buy” Stocks: RightNow Technologies, Inc., China Life Insurance, Kongzhong Corp and TOTAL S.A. – Press Releases

Zacks Market Commentaries — Fri, 10 Jul 2009 14:38:20 +0000

For Immediate Release

Chicago, IL – July 10, 2009 – Four free stock picks are being made available today on Zacks.com. The industry’s leading independent research firm highlights one Zacks #1 Rank Strong Buy or a Zacks #2 Rank Buy stock for each of the four main styles of investing: Aggressive Growth, Growth & Income, Momentum, and Value.

The four highlighted picks are: RightNow Technologies, Inc. (RNOW), China Life Insurance (LFC), Kongzhong Corp (KONG) and TOTAL S.A. (TOT).

Today, Zacks is promoting its ''Buy'' stock recommendations. Four daily picks are offered free at http://at.zacks.com/?id=5607

Zacks #1 Rank Stocks have nearly tripled the S&P 500 since 1988, producing an average annual return of +28%. Performance has been notable even during volatile and down times. For example, during the last bear market, 2000-2002, the market tumbled -37.6% – but Zacks #1 Rank stocks gained +43.8%.

Here is a summary of today's selected stocks that are now highly rated by Zacks:

Aggressive Growth – RightNow Technologies, Inc. (RNOW)
RightNow Technologies, Inc. continues to push its way into the black and shares have created a favorable entry point.

Zacks Guide to Aggressive Growth Investing (free!): http://at.zacks.com/?id=4309

Growth & Income – China Life Insurance (LFC)
China Life Insurance saw first quarter income rise 55% and is expected to grow earnings by 39.19% in 2009.

Zacks Guide to Growth & Income Investing (free!): http://at.zacks.com/?id=4310

Momentum – Kongzhong Corp (KONG)
Kongzhong Corp's share price is up more than 200% this year on strong quarterly results and bullish earnings projections.

Zacks Guide to Momentum Investing (free!): http://at.zacks.com/?id=4311

Value – TOTAL S.A. (TOT)
TOTAL S.A., the large French oil company, is exploring in areas of the world where oil reserves are growing. Full year estimates are jumping as crude prices rise. TOT trades at only 9x forward earnings.

Zacks Guide to Value Investing (free!): http://at.zacks.com/?id=4312

How to Regularly Access Picks from the Zacks Rank Discovery for Free: http://at.zacks.com/?id=5607

Underlying the four free stock picks is a simple truth that first appeared in a Financial Analysts Journal article published in 1979. Leonard Zacks, a Ph.D. in Mathematics from M.I.T. found that "earnings estimate revisions are the most powerful force impacting stock prices." Zacks #1 Rank is awarded to a stock when analysts sharply upgrade their estimates of what the company will earn.

Today, Zacks is promoting its stock recommendations by offering four daily picks free to those who register at http://at.zacks.com/?id=5607

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.

Then, when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock-picking system continues to outperform the market by a nearly 3-to-1 margin.

More Free Stock Picks

Each weekday, new Zacks #1 Rank or Zacks #2 Rank stock picks are released on the free email newsletter, Profit from the Pros. Investors are invited to register for their free subscription at http://at.zacks.com/?id=5642

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Zacks.com

Aggressive Growth Stocks:
Contact: Bill Wilton
Phone: 312-265-9277

Growth & Income Stocks:
Contact: Alex Kolb
Phone: 312-265-9149

Momentum Stocks:
Contact: Michael Vodicka
Phone: 312-265-9226

Value Stocks:
Contact: Tracey Ryniec
Phone: 312-265-9232

Email: pr@zacks.com
Visit: www.zacks.com

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

Cashing in South of the Border – Investment Ideas

Tracey Ryniec — Thu, 02 Jul 2009 05:00:00 +0000

With growth rates nonexistent in the United States and expectations for future growth muted due to ongoing debt levels and credit problems, investors have turned to other regions of the world to boost their portfolios.

China and the Asian Tiger countries have long been popular destinations to diversify portfolios.

But countries south of the border have also seen an emerging middle class and sometimes are overlooked on the world stage.

Buy Individual Companies or Buy a Basket

There are two ways to invest in Latin America: through individual companies that trade on the American exchanges or through a basket of companies in an exchange traded fund (ETF).

If you want to take the no hassle approach there are several ETFs available to capture the Latin American market.

You can buy a basket of companies from many countries in the iShares Latin America 40 ETF (ILF). Or you can buy individual countries such as with the popular iShares Brazil (EWZ), iShares Mexico (EWW), or iShares Chile (ECH).

But a more interesting investment opportunity, with the possibility of bigger returns, lies in buying the individual companies.

Finding Latin America Companies

You might be confused as to where to even begin in finding individual companies. But one shortcut is to look at the holdings in the ETFs. Financial sites such as Yahoo Finance list the top 10 holdings in ETFs.

These will be the largest holdings and usually are large cap companies with a long earnings history. But this is a good place to start.

Using this method, I easily discovered several companies with well-known name brands.

Companhia de Bebidas Das Americas (otherwise known as AmBev) (ABV) is the world's 5th largest brewer and one of the largest in Latin America. Based in Brazil, it distributes beer, soft drinks and other non-alcoholic beverages in the Americas. It also is PepsiCo's largest bottler outside of the United States.

AmBev trades with a forward P/E of 14.8 and has an outstanding 1-year return on equity (ROE) of 29.73%.

Read the Zacks Analyst Research Report from May 8, 2009.

Petrobras (PBR) is a large Brazilian-based integrated oil company. It has more than 100 production platforms, 16 refineries and 6,000 gas stations.

Recently, the company announced a huge find in the giant Tupi oil field off the coast of Brazil which would rank the country ninth in oil reserves in the world.

The company is trading with a forward P/E of 17 and has a 1-year return on equity (ROE) of 24.01%.

Read the Zacks Analyst Research Report from June 10, 2009.

Coca-Cola FEMSA S.A. de C.V. (KOF) produces and distributes Coca-Cola products in nine Latin American countries. Headquartered in Mexico, the company is the second largest Coca-Cola bottler in the world by volume.

It accounts for 10% of Coca-Cola sales in the world and 40% in Latin America. Despite challenges including the global recession and the swine flu outbreak in Mexico, Coca-Cola FEMSA is benefiting from its strong brand.

The company is trading at just 13.6x forward estimates. It also pays a dividend, with a current yield of 1.24%.

Read the Zacks Analyst Research Report from May 5, 2009.

Expand Your Horizons South of the Border

These are just a few of the options investors have in expanding their portfolios to include Latin American exposure. In today's global economy, investors will find there can be faster growth and opportunities outside of the United States.

It pays to look.

Ways to Search for ADRs

Research Wizard - This sophisticated tool will allow you to search for a detailed list of companies that trade as ADRs.

Zacks Investment Research

Savoy Energy Corp. (SNVP.OB) Brings New Life to Abandoned Wells

QualityStocks — Wed, 01 Jul 2009 16:57:01 +0000

Savoy Energy Corp., an independent oil and gas company, is building a diversified portfolio of oil and gas assets with the goal of turning around previously abandoned sites. The step-by-step process involves the aggressive application of modern well technology and stringent management controls, but only on sites that have passed a meticulous evaluation process. This [...]

Savoy Energy Corp. (SNVP.OB) Inks LOI to Create JV for Oil Exploration

QualityStocks — Wed, 24 Jun 2009 18:15:39 +0000

Savoy Energy Corporation announced earlier today that it has signed a Letter of Intent (LOI) with Masi Corp Holdings Limited to create a Joint Venture (JV) in Fiji. The joint venture/partnership would be designed to license properties in Fiji for Oil Exploration and drilling rights. According to the press release, the Pacific Islands Applied Geoscience Commission’s [...]

Natural Resources, Energy and Precious Metals Update

Bullish Bankers — Wed, 24 Jun 2009 16:00:56 +0000

Many investors are somewhat dazed and befuddled as they watch what used to be called “The Natural Resources Sector” bounce up and down as the summer season commences. With the dollar up again, commodities including the precious metals and oil were off sharply yesterday. All in all, it was just a broadly negative day. Little [...]

China Leads the Way, The Trade of the Next Decade, CEO Pay and More!

Contrarian Profits — Thu, 11 Jun 2009 16:22:02 +0000

pAmerican markets at a standstill… can the Far East drive stocks forward? #8230; a href="http://www.contrarianprofits.com/articles/author/chris-mayer/" class="alinks_links"Chris Mayer/a on buying “what China needs, but can’t make for itself” #8230; a href="http://www.contrarianprofits.com/articles/author/dan-denning/" class="alinks_links"Dan Denning/a’s pair trade for the next decade #8230; a href="http://www.contrarianprofits.com/articles/author/bill-bonner/" class="alinks_links"Bill Bonner/a and Goldman Sach’s CEO on the current “bull market” #8230; Plus, a CEO pay debate fills our inbox… your letters and our response, below#8230;/p p The Dow crashed 1.4 points yesterday, wiping out Monday’s 1.3 point moonshot. Desperate for something beyond these 0.014% “swings,” strongthe market’s putting China in the driver’s seat today… and these guys still have quite a lead foot:/strong/p p strongChinese auto sales soared 34% in May/strong, year over year. According to the China Association of Automobile Manufacturers, the Red Nation scooped up 1.12 million vehicles last month, outpacing any nation#8230;/p

Energy Blast – June 4, 2009

Robert Amsterdam — Thu, 04 Jun 2009 09:27:39 +0000

According to President Medvedev, the current value of Urals at $60-70 a barrel is 'a fairly just price'. Finnish Prime Minister Matti Vanhanen has said the government will need more time to decide upon whether or not to approve...

Energy Blast – May 14, 2009

Robert Amsterdam — Thu, 14 May 2009 08:48:44 +0000

'Everything is murky in this part of Europe where Russia continues to expand its grip over the energy sector': the New York Times looks at the shady dealings surrounding Emfesz. After refusing to sign the EU-led Nabucco deal, the president...

Defense Solutions Holding, Inc. Expands Commercial Scope to Include Energy Sector

Stuart T. Smith — Wed, 13 May 2009 16:43:53 +0000

Defense Solutions, Inc., an international project management firm and executive consulting firm, a wholly owned subsidiary of Defense Solutions Holding, Inc. (OTC Bulletin Board: DFSH), announces that the Company has expanded its commercial scope opportunities to include the facilitation of contracts within the energy sector. Through the Company’s continued ongoing relationship with the Iraqi Government [...]

Energy Blast – May 7, 2009

Robert Amsterdam — Thu, 07 May 2009 09:22:39 +0000

In exchange for their support on pipelines to bypass Russia, the EU will propose better trade ties to six former soviet states in the Eastern Partnership meeting. An agreement on the South Stream pipeline may be delayed as the countries...

Energtek, Inc. (EGTK.PK) Taps One of the Biggest New Energy Sources

QualityStocks — Tue, 05 May 2009 16:34:16 +0000

Energtek, Inc., a world leader in the development of ANG (Adsorbed Natural Gas) and other natural gas transportation and storage technologies, may have the key to tapping into an energy resource as big as all the oil reserves of Saudi Arabia. This energy source has already been discovered, just in time to serve the needs [...]

CityView Corporation Limited (CTVWF.OB) Forms Joint Venture with Deanshanger Project Ltd. to Acquire Nigerian-based Refinery

QualityStocks — Wed, 25 Mar 2009 21:19:57 +0000

CityView Corporation Limited (CTVWF.OB) is an Australian-based natural resource company with a diverse portfolio of copper, gold, diamonds, coal, iron ore, rare earths and oil refinery interests. The company today announced a joint venture with Deanshanger Project Ltd. for the acquisition of a crude oil refinery with a daily capacity of 55,000 barrels. The acquired [...]

Is Brazil the New Saudi Arabia?

Contrarian Profits — Wed, 18 Mar 2009 12:19:49 +0000

pWith Exxon Mobil Corp.’s (a href="http://www.google.com/finance?q=xom"XOM/a) new oil discovery off the coast of Brazil - the latest in a series of such offshore finds and potentially the largest Western Hemisphere discovery in three - the South American nation has taken another giant step in its quest to become a global energy superpower./p pExxon’s Azulao-1 well tapped a reservoir that reportedly contains as much as 8 billion barrels of recoverable oil, says Luiz Lemos, a partner at TozziniFreire Advogados, a Brazilian law firm that represents foreign energy companies./p p#8220;This is very huge,” Lemos told strongemBloomberg News/em/strong./p pSo is the potential benefit for Brazil. If Lemos’ estimate is accurate, this new Azulao find will rival the nearby a href="http://en.wikipedia.org/wiki/Tupi_oil_field"Tupi oil field/a as the largest discovery on this side#8230;/p

China to Buy Oil Reserves – Analyst Blog

Zacks Market Commentaries — Wed, 04 Mar 2009 15:13:29 +0000

Highlights include Petroleo Brasileiro SA (PBR), China Petroleum & Chemical Corp. (SNP), Vale (RIO), Cosan Limited (CZZ) and Gerdau SA (GGB).

China Continues to Pursue Long-Term Investments in Commodities

Yesterday, leading Japanese business newspaper Nikkei informed that China is considering a plan to use part of its US$2 trillion reserves to buy oil reserves and diversify its international investments, reducing the exposure to U.S. bonds. Currently 2/3 of the Chinese reserves are denominated in U.S. dollars.

If this plan is approved, we foresee two direct consequences: (i) Oil prices should recover, leading the way to other commodity price increases, and (ii) the U.S. dollar should fall against international currencies like the Yen and the Euro, a development that would also be positive for commodities prices in general, since they are all negotiated in U.S. dollars -- thus a lower dollar would mean higher nominal prices for commodities.

However, it is not reasonable to expect a great movement in the short-term for the U.S. dollar based on this information. Just to put it into perspective, even if China decided to buy 100 million barrels of oil, it would mean around US$4 billion, or just 0.2% of the countries' reserves. Nevertheless, Prime Minister Wen Jiabao already said that Chinese purchases of U.S. bonds should be revised in the near future.

Actually, it makes a lot of sense for China to make such a move, mainly considering it has already announced its decisions. Some weeks ago, Chinese steel companies announced they would buy stakes in smaller Australian mining companies in order to guarantee future flow of raw material.

Also, some days ago Petrobras (PBR) announced it has signed two Memorandums of Understanding with Chinese institutions and an export oil contract with UNIPEC Asia Co. Ltd., a subsidiary of China Petrochemical Corporation, or SINOPEC (SNP), to export around 100 thousand barrels of oil per day. The amount of the deal is estimated as US$10 billion in loans for Petrobras in exchange of future oil exports.

We have been skeptical on commodities producers, since these are highly cyclical companies. However we prefer raw material producers like oil companies such as Petrobras and mining companies like CVRD (RIO) and agricultural companies like Cosan (CZZ) if compared to steel producers like Gerdau (GGB).

For the moment, we are keeping our Hold recommendation on both Petrobras and CVRD, our Buy recommendation on Cosan and our Sell recommendation on Gerdau, however we are following the particular case of Petrobras with great attention before the company's earnings release next week.

Read the full analyst report on "PBR"
Read the full analyst report on "RIO"
Read the full analyst report on "SNP"
Read the full analyst report on "CZZ"
Read the full analyst report on "GGB"
Zacks Investment Research

Continued, Sustainable Demand for Enterprise Oilfield Group Inc.’s (TSX: E) Services

QualityStocks — Tue, 17 Feb 2009 14:08:37 +0000

The EIA, a section of the U.S. Department of Energy, predicts world oil production will grow at 1.16% per annum, during the period 2005 –2030, compared to consumption growth of 1.19% during the same period. For natural gas, the supply is forecasted to be in deficit through 2030, which is a positive for the Canadian [...]

Scrap Metal Prices Bounce as China Stockpiles…

Sean Maher — Fri, 30 Jan 2009 11:35:00 +0000

div align="justify"We're familiar with the concept of strategic oil reserves but a strategic reserve of rubbish? Actually, the huge pile of unwanted recyclable materials like glass and cardboard now piling up in warehouses around the world will only get bigger, but the Chinese government is aggressively stimulating the global scrap metal industry with a focused bailout plan of its own. A few weeks ago, China’s State Reserve Bureau announced that, in an effort to stimulate the collapsing non-ferrous metals sector (ie aluminium, copper, lead, zinc and tin) it would emstrongfund the acquisition of a large non-ferrous metal stockpile/strong/em. Soon after, Yunnan Province (home to a large non-ferrous industry) announced its own strategic reserve to include 300,000 tons of aluminum, 100,000 tons of tin, 300,000 tons of zinc, 150,000 tons of lead, and 150,000 tons of copper. In the wake of the economic crisis, and the collapse in China’s export manufacturing sector, the non-ferrous metals industry nearly collapsed due to a lack of demand and excess inventories purchased at record prices. As a result, raw material suppliers, including US scrap metal dealers and Australian miners, found that, in the space of a few months, their biggest customer simply stopped buying. Now that's all changing fast. strongemspan style="font-family:trebuchet ms;"This article continues at /span/em/stronga href="http://www.deadcatsbouncing.com/"strongemspan style="font-family:trebuchet ms;color:#cc0000;"www.deadcatsbouncing.com/span/em/strong/astrongemspan style="font-family:trebuchet ms;" /span/em/strong/divdiv align="justify"strongemspan style="font-family:Trebuchet MS;"/span/em/strong/divdiv class="feedflare" a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=F4mNRw.P"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=F4mNRw.P" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=BJyfH4.P"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=BJyfH4.P" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=puKPYJ.P"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=puKPYJ.P" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=NOFR6w.P"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=NOFR6w.P" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=O53wCn.p"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=O53wCn.p" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=xqEOaW.p"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=xqEOaW.p" border="0"/img/a a href="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?a=DBqs9m.P"img src="http://feeds.feedburner.com/~f/DeadCatsBouncingMusingsOnTheMarkets?i=DBqs9m.P" border="0"/img/a /divimg src="http://feeds.feedburner.com/~r/DeadCatsBouncingMusingsOnTheMarkets/~4/527199875" height="1" width="1"/

China Accelerates Filling Up Its Oil Reserves

Larry Edelson — Wed, 07 Jan 2009 17:50:04 +0000

pJan 5, 2009 (WALL STREET JOURNAL) -- As the U.S. seeks to stockpile oil, China has been doing the same, observers say, and is expected to quicken the pace -- a development that already may be helping to boost oil prices./ppOn Friday, the U.S. Department of Energy said that amid low oil prices, it aims to fill the country's Strategic Petroleum Reserve to capacity this year./ppThat news followed a rare public statement last week from China's top energy official, Zhang Guobao, head of the National Energy Administration, in the People's Daily newspaper that China should take advantage of the falling global energy demand to increase its oil reserves. Mr Zhang said China will quot;encourage companies to utilize idle storage capacity to increase inventories.quot;/ppOil prices have been rising lately. On Friday, oil closed up 3.9% to $46.34 a barrel on the New York Mercantile Exchange./ppThough China doesn't disclose its oil inventories on a regular basis, some energy watchers think the country has been building its stockpiles for some time. China has increased crude oil imports in recent months, and quot;the increase of imports is certainly caused by them fillingquot; the strategic reserve, said John Kingston, global director of oil at Platts, an energy-reporting service./ppbr /Paul Ting, a U.S.-based energy analyst, estimates that about 25 million barrels of crude oil have been injected into China's strategic tanks since August./ppThe U.S. buying isn't expected to significantly affect oil prices over the long term. The U.S. Energy Information Administration expects global oil consumption to fall to 85.3 million barrels a day./ppBut the Chinese government's hunger for oil has more potential to influence prices. quot;In our opinion, China's inventory policy will be a critically important factor in determining global oil price,quot; said Mr. Ting./ppThe U.S. suspended adding oil to the emergency reserve in May 2008 after oil prices soared to over $100 a barrel. It is widely believed that China stopped its filling efforts after oil prices reached $70 a barrel around August 2007, according to industry observers./ppChina recently completed construction of four oil-reserve bases -- together representing the first phase of its strategic oil-reserve plan. Those bases can hold 102 million barrels of crude oil, and China is now pushing ahead with the construction of the second phase, which could store an additional 170 million barrels, Mr. Zhang said in the article./ppIn the next few months, China is likely to fill the fourth base -- in Dalian -- from the first phase, for 19 million barrels, says Kang Wu, a senior fellow who follows China's energy policies at East-West Center, a Honolulu-based think tank./ppMeanwhile, hundreds of nonstate oil distributors and refiners in China are currently sitting on what could amount to more than one billion barrels of idle storage capacity, according to the petroleum distribution committee of the China General Chamber of Commerce, an industry group. Massive storage facilities have been built up by oil companies since the mid-1990s after China opened up its oil markets to nonstate and foreign players. However, oil-importing licenses are basically controlled by state-owned companies, and private companies ended up sitting on empty tanks./ppAnalysts now expect the government might facilitate consolidation between state-run companies and private ones to use the idle capacity. Still, changes aren't expected immediately, given that policy modifications can take time and that storage is often scattered and small scale./ppIn mid-December, the petroleum-distribution committee submitted a proposal to various government agencies, asking to contribute to the state petroleum reserve, according to Zhao Youshan, the committee director. He said in an interview the agencies have yet to respond.br /nbsp;/p

Investing In Oil Now Could Be The Trade Of The Year

Contrarian Profits — Wed, 07 Jan 2009 16:49:52 +0000

pGeo-political tensions are mounting in the global energy game. And that could make investing in oil right now the trade of the year, says Manraaj Singh. Buying shares of oil majors is a good move now. But Manraaj says quality mid-sized oil companies are best placed to return big profits in the next oil bull run./p pThis from Fleet Street Invest:/p blockquote pIsraeli tanks have just rolled into Gaza…Almost three thousand miles away, Nigerian separatist blew-up an oil pipeline over the weekend…Meanwhile, Russia is locked in a dispute over the price of gas with Ukraine. Today they stopped deliveries of natural gas to Ukraine, Turkey and Europe to force the Ukrainians to pay up#8230;/p pWhile fears about political instability drive the price of oil#8230;/p/blockquote

Oil Prices Retreat after Oil Reserve Report

QualityStocks — Wed, 07 Jan 2009 16:42:24 +0000

Oil prices had climbed 43 percent from a five-year low of $33.87 a barrel on fears that the conflict between Israel and Hamas in Gaza could spread to the rest of oil-rich Middle East and affect supplies. Today, however, energy prices tumbled across the board after a government report showed U.S. oil reserves were much [...]

Oil Rises Above $40 on Israeli Attacks

Contrarian Profits — Mon, 29 Dec 2008 14:18:45 +0000

pOil above $40 a barrel; geopolitical risk returns#8230; Israeli air strikes go into third day#8230; China to build up oil reserves while price is low /p pOil prices rose above $40 a barrel on Monday, boosted by the weak dollar and Israeli attacks on Hamas that served as a reminder of tensions that could threaten Middle East crude oil supplies. /p p U.S. light, sweet crude was up $2.75 at $40.45 a barrel by 1335 GMT, below a session high of $42.20. /p p Oil is on track for a nearly 60 percent loss this year, the biggest annual fall since futures began trading 25 years ago. /p p London Brent crude rose $2.88 to $41.25 a barrel, after touching a session high of $43.18. /p p #8220;Geopolitics had#8230;/p

Fox Business — Talkin’ ‘Bout Oil

Sean Brodrick — Mon, 15 Dec 2008 15:29:14 +0000

I'm appearing on Fox Business TV at 1:00 to 1:06 today on the Stuart Varney Show. Stuart's a good guy, so probably no chairs will be flung (ha-ha). Anyway, I'm going on to talk about oil prices.brbrIf you don't get Fox Business -- I don't get it on my darned cable -- here are the talking points I'm bringing for my interview ...brbrGoldman Sachs predicts oil prices will fall to $30 a barrel.brbrOPEC President Chakib Khelil said all the group’s members support an oil output cut at this week’s meeting, including the largest producer Saudi Arabia.brbrOPEC is about 75% compliant with the last round of production cuts (cutting production by 1.5 million barrels a day from Nov. 1) – that’s pretty good by their standards.brbrRussia, a non-OPEC producer, will likely cut production as well. OPEC is asking Russia to reduce oil output by 200,000 to 300,000 barrels a daybrbrWe are already seeing oil production fall with prices. Unconventional oil reserves account for 18% of all liquids used, according to the International Energy Agency. And that represents 15.6 million barrels per day.brbrNext we’ll see marginal production from major producers cut. brbrResult: World oil supply is likely to drop by three million to five million barrels a day in 2009, due to OPEC cuts and smaller companies slashing production, compared with a decline of just one million to two million barrels a day in global oil demand.brbrBottom line: Unless prices go higher, marginal production will come offline. That, in turn, will push prices higher. Oil has technical and fundamental support at current levels. We may see Goldman’s price target of $30, but not for long, and there are already forces in play that could send oil higher from here.brbrWhat could stop oil prices going higher? A severe global recession. And do you really want to root for that?

“We’re going to see $200 oil at some point” Jim Rogers

Alex Stanczyk — Sun, 14 Dec 2008 14:16:41 +0000

“We’re going to see $200 oil at some point” Jim Rogers Rogers buys oil last week as price drops Thu Dec 11, 2008 12:49pm EST By Herbert Lash http://www.reuters.com/articlePrint?articleId=USTRE4BA4HD20081211 NEW YORK (Reuters) - Renowned commodities investor Jim Rogers said on Thursday that he bought oil last week as crude prices collapsed to near four-year lows and that the world [...]

Real values … real opportunities … and real money …

Larry Edelson — Fri, 12 Dec 2008 14:16:45 +0000

PIf you think there’s no money to be made in the markets think again!brbrTake oil companies. They're trading as if their oil reserves are worth as little as 15 cents on the dollar. Gold miners? They're an outright steal. One of my favorites with over 93 million ounces of gold, is valued at just 21 cents on the dollar!brbrIn fact, almost all natural resource companies are grossly undervalued -- including some of the largest in the world.brbrBut it's not just natural resource companies. Companies of all kinds all over the globe are trading as if their profits today and earnings tomorrow don’t even exist. Is that amazing, or what?brbrBottom line: There are bargains and profits galore in these markets.brbrTo read about some of the companies on my radar screen and how you can be sure you're positioned for the profit opportunities of a lifetime, go to my A title=Larry Edelson MoneyandMarkets 121108 href=http://www.moneyandmarkets.com/bargains-and-profits-galore-28666 target=_blankMoney and Markets column/A just published.nbsp; br/P

How Shale Could Dent Clean Energy Hopes

Irwin Greenstein — Fri, 21 Nov 2008 16:34:22 +0000

pWhile no one was looking the Bush Administration quietly changed regulations that would allow oil companies to extract shale from public lands. The U.S. Department of the Interior made both a land grab and a regulatory grab for enormous swaths of shale that have previously been off limits./p pWe believe this is another body blow to the ailing green industry, as Washington taps a source of energy with huge potential returns. Moreover, president-elect Obama has hedged his bets on oil shale - perhaps surprising many green advocates./p pOn October 27, 2008, Obama told supporters in Denver…/p p#8220;When it comes to oil shale right now, I think we have to do more research and more science to discover whether or not the amount of#8230;/p

Mississippi Stocks

Fred Fuld — Tue, 18 Nov 2008 23:26:00 +0000

Until 1990, gambling in Mississippi was not permitted. Now it is a major source of revenue for the state and an attractive tourist attraction. Following are some interesting facts about Mississippi:
1. 25% of total employment is generated by the agriculture industry.
2. Mississippi most important agricultural products are poultry and eggs, forestry, soybeans and corn.
3. The state offers different business incentives to new businesses and businesses relocating to Mississippi. They include tax credits, and tax exemptions.
4. The top manufactured products are processed foods, beverages, dairy and grain products.
5. Between 2004 and 2005 Mississippi’s export increased by 26% to achieve a record $4 billion.
6. Mississippi’s top export are chemical products.
7. Manufacturing firms employ 172,000 workers in the state.
8. Mississippi’s oil reserves rank it number 13 out of 50 states, with 167 million barrels of oil.
9. Mississippi has the lowest cost of living of all states.
10. In 2006 the total state product was $84 billion.

The following companies are headquartered in Mississippi:

BacorpSouth, Inc. (BX) is a financial institution, providing services to individuals and businesses in several states. The stock has a market cap of $2.11 billion, a PE of 15, a PEG of 1.93, and it pays a yield of 3.6%.

Hancock Holding Company (HBHC) is a financial institution. It services include banking, and lending. The stock has a market cap of $1.49 billion, a PE of 20, a PEG of 1.78, and it pays a yield of 2.1%.

Trustmark Corporation (TRMK) is a financial company. Its services include banking and financial services for individuals, institutions and corporations. The stock has a market cap of $1.19 billion, a PE of 12, a PEG of 1.33, and it pays a yield of 4.4%.

EastGroup Properties, Inc. (EGP) is a real estate company. It purchases and develops properties throughout the United States. The stock has a market cap of $905.92 million, a PE of 27, a PEG of 1.17 and it pays a yield of 5.9%.

Sanderson Farms, Inc. (SAFM) is a poultry processing company. The stock has a market cap of $672.82 million, a PE of 21, a PEG of 9.13, and it pays a yield of 1.6%.

Cal-Maine Foods, Inc. (CALM) is in the business of producing and packaging shell eggs. The stock has a market cap of $668.23 million, a PE of 5, and it pays a yield of 2.5%.

Renasant Corporation (RNST) is a financial and insurance company. Its clients are retail and commercial businesses. The stock has a market cap of $416.98 million, a PE of 13, a PEG of 1.56, and it pays a yield of 3.4%.

Parkway Properties, Inc. (PKY) is a real estate company, it purchases, manages and rents office space. The stock has a market cap of $312.90 million, a PEG of 1.25, and it pays a yield of 12.4%.

Callon Petroleum Company (CPE) is an oil and gas exploration company. The stock has a market cap of $237.19 million, a PE of 12, and a PEG of 0.77.

Peoples Financial Corporation (PFBX) is a financial institution providing banking services in the United States. The stock has a market cap of $103.78 million, a PE of 17, and it pays a yield of 2.8%.

Don't forget to check out the stocks from the states of Wisconsin, Louisiana, Michigan, and Kentucky.

Author does not own any of the above.

By Stockerblog.com

American Optimism, Russia’s In Trouble, But Good News For Oil, Breakthrough Med Tech, And More!

Contrarian Profits — Wed, 12 Nov 2008 21:43:33 +0000

American optimism at all-time low, 2009 recession imminent… Fannie and Freddie to the rescue? Chris Mayer with good news for oil investors. Another day, another double-digit decline… Russian market, currency plummeting. Pat Cox with a “huge” breakthrough medical tech about to become reality. Have we hit a nerve? The automaker debate rages on in The 5’s inbox

Oy. “The $700 billion financial bailout program,” the New York Times sums up Treasury Secretary Paulson’s speech this morning, “will not be used to buy troubled mortgage-backed assets, as originally intended. Instead, capital would be provided directly to nonbank companies, as well as banks and financial institutions, and that more would be done to prevent home foreclosures.”

Is it any wonder 83% of Americans think the U.S.…

American Optimism, Russia’s In Trouble, But Good News For Oil, Breakthrough Med Tech, And More!

Contrarian Profits — Wed, 12 Nov 2008 21:43:33 +0000

Is it any wonder 83% of Americans think the U.S.…

Platinum Energy Resources Inc. (PGRI.OB): Producing and Planning in Texas

QualityStocks — Mon, 03 Nov 2008 16:18:21 +0000

There is quite a bit to be said for planning and execution. Laying ground work for a program to succeed, with each piece of the puzzle being placed for later exploitation, is one of the better ways to profit when the time is right. Not only does planning allow for maximum opportunity for profit, but [...]

Platinum Energy Resources Inc. (PGRI.OB): Producing and Planning in Texas

QualityStocks — Mon, 03 Nov 2008 16:18:21 +0000

Cash in on the ‘New Silk Road’

Contrarian Profits — Tue, 28 Oct 2008 12:35:09 +0000

Like a boxer who has a habit of dropping his hands, America finally caught one on the chin. The U.S. economy is flat on its back, and the financial markets are leaning down into its face yelling out a 10-count. But the U.S. economy isn’t “out for the count” yet. It will struggle back to its feet. But if the economy hopes to stay on its feet, it will have to devise new tactics. The old, sloppy tactics of credit-financed consumption won’t work anymore.

The biggest change in the American economy over the last few decades has been the transition from making things to making loans. We Americans abandoned the manufacturing industries that once powered our economy and devoted ourselves to…

Despite The “Sudden Stop” Kazakhstan Won’t Be Calling On The IMF For Help

Edward Hugh — Tue, 21 Oct 2008 10:17:00 +0000

by Edward Hugh: Barcelona

"The Kazakh government is ready to step in,'' Kazakhstan's Prime Minister Karim Masimov said this morning in a telephone interview with Bloomberg "The Kazakh banking system with the support of the government and central bank will fulfill all obligations to international investors.....We have our own specific plan to survive without any external support....I don't think we need support from the International Monetary Fund or overseas.''

Well that is good news, so at least we know that one of the CIS and CEE economies won't be looking to the IMF for bail-out support in this crisis which is presently growing by the day. So Kazakstan, that country which is reputedly host to reserves of approximately 95% of the elements in the periodic table, with a population of around 15 million housed on a surface area greater than the whole of Western Europe, is going to be able to look after itself. But hang on a minute, just where is Kazakhstan, and just what have they been getting up to over there, and why the hell should I take Karim Masimov's word for it, when just about all the other Iceland Look-alike show contestants seem to be saying the same? After all, didn't those extermely bright and able young people over at RBC Capital Markets in Toronto say in a report only last week that, along with Latvia, the country's $100 billion oil-led economy is among the most vulnerable to the present global credit crisis and the skid-row economic trajectories that go with it simply because of its excessive reliance on short-term foreign borrowing. And isn't it the case that the cost of protecting Kazakhstan government debt against default has more than doubled this month - to over 1,000 basis points (or 10%), the level for borrowers that investors term ``distressed,'' according to CMA Datavision credit-default swap prices. Only Ukraine, which as we know is already seeking IMF support, is classified as being a bigger risk among European emerging-market governments. Surely all those highly dedicated, bright, and extremely able young people who are doing all that trading know what they are about, don't they?

Kazakhstan The Country

Kazakhstan, officially known as the Republic of Kazakhstan, could with some accuracy be described as "no mans land" since it actually lies between two worlds, straddling as it does both Central Asia and Europe. It could also be described as a form of no-mans land in another sense, since a large part of its historic population has been nomadic, and rural, and up to very recently the majority of the countries urban population have been migrants who have arrived from "elsewhere".

Ranked as the ninth largest country in the world by size, it is also the world's largest landlocked country, with a territory of some 2,727,300 km² (which is greater than the whole of Western Europe). It is bordered by Russia, Kyrgyzstan, Turkmenistan, Uzbekistan and China. On the other hand, and despite its enormous size, Kazakhstan has a comparatively small population. No one actually has an exact idea of the actual size of the Kazakhstan population (not to mention the thorny issue of just how many foreign migrants live and work there), but the US Census Bureau International Database list the current population of Kazakhstan as 16.763 million, while sources drawing their data from the United Nations (like the IMF which I have relied on for the chart below) give a 2008 estimate of 15.135 million. In any event the current population level, after falling in the early 1990s as ethnic Russians left, has now stabilised, and is virtually stationary. This virtually stagnant population constitutes, as we will see, a significant problem for a country with such a massive resource base, and such enormous economic and development potential as Kazakhstan would seem to have.

Record Oil Revenue Boom

Kazakhstan is the biggest energy producer in Central Asia and the country's $100 billion economy has in fact grown at an average of 10 percent a year rate since 2000 (see chart below), in particular as the price of oil has surged. This rapid GDP growth produced a rapid increase in per capita income as well as national creditworthiness, and these in turn sparked in their wake a substantial construction boom. Indeed it has precisely been the bursting of this boom in the autumn of 2007 - on the back of the seize-up in global wholesale money markets which followed August's financial turmoil in the USA - which lies at the heart of Kazakhstan's current growth slowdown. Kazakhstan's economy expanded at a 'mere' 5.3 percent rate in the first quarter of 2008, half the pace achieved in the same period a year earlier, following a dramatic curtailment in bank lending, and if Kazakhstan is still able, despite all the problems we will see below, to maintain some sort of growth momentum at this point it is undoubtedly the result of the oil and other commodity resources which the country has at its disposal, and indeed as part of its initial response to the present crisis the country increased crude production by an annual 6.3 percent in the first four months of the year, according to official government data.

Now one of the most curious details about the present slowdown in Kazakhstan, has been the fact that at the very same time as the economy started to lose velocity the central bank found itself busy struggling to curb an inflation rate which was steadily shooting onwards and upwards towards the outer stratosphere, as revenue from record oil prices pushed up domestic demand, and the resulting construction and consumption boom drove up wages far beyond normal "productivity-gain" rates of increase (remember, there are not THAT many people in the country, and much of the population is rural and unskilled in relation to the needs of a modern technological and services economy). In fact inflation hit year-on-year rates of increase approaching 20% in the autumn of last year (see chart below), although it had dropped by to an annual 18.2% by September.

So, as well as containing the property bust, the Kazakh authorities have also had to conduct an inflation fight (more details below). So far from lowering rates like the US Federal Reserve has been able to do, Karakhstan's central bank was forced to raise the key interest rate to 11 percent in December 2007, at a time when annual inflation was riding at almost 19 percent, the highest for the country in over eight years. The refinancing rate was then maintained at the 11% level until it was finally lowered to 10.5% at the last central bank meeting in July.

Not Just Energy - Vast Resource Potential

The fact that Kazakhstan's industrial output growth has lost a lot of momentum in 2008 as the slowdown in the building industry provoked a slump in cement and other materials production should not take our minds too far away from the fact that the underlying potential in Kazakhstan is enormous. In fact while industrial output growth was reduced to an annual 3.8 percent growth rate in the January-June period, it was at least still growing.

The low point seems to have been hit back in January, when cement production which, not surprisingly, was among the hardest hit sectors, was down 26 percent year on year, the sharpest January fall in five years, as growth in the construction industry stalled, brought to a halt by the fact that the Kazakh banks, who had been struggling to borrow from abroad following the collapse of the U.S. subprime mortgage market, virtually stopped lending to homebuyers and builders.

Copper and rolled-iron output also declined an annual 13 percent in January while output from oil refineries and manufacturing industry decreased an annual 2.9 percent as the problems rolled in. Thus there is evidence of a very sharp shock initially hitting the local economy. On the other hand, since the country is resource rich and the given that first half of 2008 saw a very significant global commodities boom, there were other economic sectors to fall back on, and mining production was up 6 percent from a year earlier in the first quarter, bolstered by an increase in natural gas and coal output, which climbed 15 percent and 11 percent respectively. At the same time crude oil production went up by an annual 5.4 percent.

Apart from oil and gas Kazakhstan has a huge array of potential resource reserves just waiting to be tapped. Among these there is copper. London-listed Kazakhmys accounts for the bulk of Kazakh copper output - and this was down 17.5 percent year-on-year in January-April. Industrial output in Karaganda region, home to Kazakhmys and Arcelor Mittal mines and smelters, declined 5.5 percent year-on-year in January-April.

Kazakhmys reported that their first-quarter output fell 9.9 percent on "severe winter weather'' and repairs at its Balkhash smelter. Production of finished copper plates, or cathodes, from the company's ore fell to 75,500 metric tons, from 83,800 tons a year earlier. These drops in output are, of course not entirely associated with the credit crunch, but they do give an idea of the challenging and volatile environment in which the mining and extraction industries work in Kazakhstan. Realistically speaking it seems quite likely that output in these sectors will return to more normal levels during the second-half of 2008, having alreadt rebounding significantly from the low point reached in the first-quarter.

On the other hand industrial output in capital Astana and commercial hub Almaty, where most construction activities are based, was down 13.2 percent and 8.6 percent, respectively, in January-April, and this activity may well take much longer to recover.

Kazakhstan has also had to cut its 2008 oil production forecast to 67.6 million tonnes (1.35 million barrels per day) from a previous estimate of 70 million tonnes citing maintenance works and transport bottlenecks. The country is able to produce a lot of oil, but it does have a large problem getting that oil to the places where people want it. Three major pipeline routes - the Atyrau-Samara and Caspian Pipeline Consortium (CPC) links to Russia, and the Atasu-Alashankou pipeline to China - carry Kazakh crude off towards its end destinations, but none of these are proving sufficient to the demands on them.

"It is impossible to transport crude out of Kazakhstan without some difficulties," Senior Associate Klara Nurgaziyeva from law firm Dewey & LeBoeuf told an oil and gas conference last week in the Kazakh financial capital Almaty.

This means output is likely to remain roughly stationary since the country produced 67.5 million metric tons of oil and gas condensate in 2007. Kazakhstan has 3.3 percent of the world's proven oil reserves and 1.7 percent of its gas, according to BP's Statistical Review of World Energy.

Kazakhstan also has around 15 percent of world's uranium, most of which is processed at the Ulba Metallurgical Plant in Oskemen, a formerly secret city south of Siberia known in Russian as Ust Kamenogorsk. Management at the Ulba plant are currently planning to invest $850 million, 6.5 times the plant's projected annual cash flow - and offering to trade domestic mineral rights to joint-venture partners in China, Japan and Russia in return for the technology they need in a bid to make Kazakhstan the world's biggest supplier of atomic fuel for civilian nuclear reactors. If successful, Kazatomprom would consolidate the market for its 983 million pounds of recoverable uranium deposits, second in importance only to Australia's, and become less reliant on the raw ore's spot-market price by supplying higher-value products needed to fuel the next generation of reactors.

However one more time let us not forget the natural environment in which all this is situated, since Kazatomprom's East Mynkuduk mines, which are 1,180 kilometers (733 miles) west of Almaty, lie beneath a semi-desert, where camels idly graze is surface temperatures which range from minus 30 degrees Celsius (minus 22 Fahrenheit) in winter to 60 degrees Celsius (140 degrees Fahrenheit) in summer. Kazakhstan is currently uranium ore's third-largest producer, behind Canada and Australia, both of which it plans to surpass by 2010.

On top of oil and uranium Kazakhstan also has 38 percent of the global supply of chromites, used to produce corrosion-resistant steel; 22 percent of all lead; and 16 percent of known silver reserves, according to Renaissance Capital, a Moscow-based investment bank. And on top of all that there is its bauxite, copper, iron and gold. Indeed, while it is not entirely true that Kazakhstan is home to 95% of the elements in the periodic table, the statement isn't that much of an exaggeration.

But what is obvious if we look at the large swings in output which followed the financial shock of last autumn is that the institutional environment is all important. A simple gung-ho "you've got the reources, we've got the money" investment plan won't work without both serious structural reform and systematic inward migration, as we have been seeing. Kazakhstan looks in many ways like the United States did in the middle of the nineteenth century, with lots of spare land and huge resources to be developed, but where the "carrying capacity" of the country in a modern globalised economic environment far exceeds the resources of the native and nomadic peoples who constitute the historic population. Above all Kazakhstan needs the skilled labour force to leverage these resources and it needs to management and infrastructural support to make things work.

In a smoke-filled bar in the Kazakh financial capital Almaty, the laughter of Scottish ex-pats is loud and boisterous. More than three thousand miles (5,491 km) separate the Scottish Highlands and the Central Asian steppe, but a mutual interest in oil and gas has created a surprising alliance. Residents estimate that around 400 Scots live in ex-Soviet Kazakhstan, a resource-rich country roughly the size of western Europe.

Most come from Aberdeen, Britain's northeastern oil hub, and they bring with them their technical expertise."We're going to try attract Kazakhs to Aberdeen over the next few years and look at initiatives, and create further investment in Scotland from Kazakhstan," Lord Provost Peter Stephen of the Aberdeen City Council told an energy conference last week in Almaty. He said over 100 companies from in and around Aberdeen are active in Kazakhstan, and the Scottish oil town even has a Kazakh consulate to serve the hundreds of Kazakhs who go to Scotland to train up for the oil business. The Kazakh-British technical university, set up by a group of Scottish universities seven years ago, occupies a grandiose columned building in the centre of leafy Almaty, which housed parliament before the capital was moved to Astana.

Despite these evident problems there was, however, no shortage of "ready, willing and able" funding available during the boom, and foreign investment flooded the country after the discovery of the Kashagan oil field in 2000. At the time of discovery it was the largest new field unearthed in 30 years, containing 13 billion barrels of recoverable crude, according to Rome-based Eni, Italy's largest oil company, which is currently contracted to develop the Kashagan field along with Exxon Mobil and Royal Dutch Shell .

However, the local authorities have not been totally irresponsible with the new found wealth from the commodities boom, and buoyed by the surging prices, Kazakhstan's National Oil Fund has been busily soaking up the government's share of the new petroleum revenue. As of November 2007, it had amassed $20.1 billion, according to central bank data.

Kazakhstan is also the world's fifth-largest wheat exporter, and even though on April 15 the government placed a temporary ban on wheat exports in an attempt to control inflation, it made it clear that it would once more allow unlimited grain exports after the ban expired in September (a promise which was subsequently kept).

Apart from manpower all these resources also need, as I have been saying, infrastructure, and Kazakhstan is keeping itself busy building roads as well as pipelines. The Kazakh government is currently out looking for investors to build or maintain 1,000 kilometers (620 miles) of roads at a projected cost of 541 billion tenge ($4.5 billion), and doing it in the extremely practical way of accepting financed construction in exchange for operating concessions. One of the planned roads will connect the capital Astana with the regional mining center Karaganda to the southeast, while two more will run from the financial capital Almaty to Kapchagai Lake and Khorgos on the Chinese border. The government also plans to build a ring road around Almaty. The state may build a fifth road from Astana to the Borovoye forest in the north and again seems likely to seek an investor to maintain the road in exchange for operation concessions.

The government also plans to upgrade 2,552 kilometers of roads at a cost of 900 billion tenge to create a highway that would allow freight from Chinese manufacturers to be delivered directly to European markets. The first phase of the upgrade will cost 789.3 billion tenge and is scheduled for completion by 2013. A second phase will be finished in 2016. Kazakhstan has announced it already has agreed finance of 472 billion tenge ($3.93 billion) from banks to start the works.

The Financial Sector

Banks dominate the financial system in Kazakhstan, accounting for 80 percent of total assets. They are mostly locally and privately owned, although foreign participation has increased recently. The system is highly concentrated, with the largest five banks accounting for 78 percent of market share. Banks are very reliant on external financing, with external liabilities making up about 45 percent of the aggregate balance sheet. Easy access to external funding fueled very rapid domestic credit growth, which expanded at an annual average rate of 70 percent from end-2004 to August 2007, bringing bank credit to around 75 percent of GDP by end-2007. Lending was mainly to the household, trade, and construction sectors (the oil sector is not reliant on domestic banks for its financing).

But then, just as the good times were really letting themselves roll, and as does tend to happen with all fairy-tale, too-good-to-be-true-type, stories reality pocked its ugly nose yet one more time into other people's business, and all that lending came to a "sudden stop", almost as quickly as it had started, and confidence in Kazakhstan's banks suddenly plumetted, as investors got nervous that something similar to what had been going on in the US sub-prime case might have been happening.

Or perhaps it was just the speed with which the debt had risen, the speculative nature of a lot of the activity that followed from it, and the front loading of much of the debt towards short term maturities that frightened people. Anyway the consequence was that household deposits contracted sharply during the August–October period while nonresidents sold about $4 billion worth of tenge assets — mostly held in central bank notes — putting in the process significant downward pressure on the value of the tenge.

Credit Downgrades

However, at the heart of the present economc slowdown in Kasakhstan, and just behind the sudden drop in confidence about Kazakhstan's ability to meet its obligations, we should not be surprised to find the construction slump which the imposition of last autumn's credit crunch last gave rise to. Concern about the rate of Kazakhstan's domestic credit expansion does, in fact, go all the way back to an IMF report of October 2006 which argued that the rapid pace of "credit growth and external borrowing in Kazakhstan was making lenders more vulnerable to external shocks such as a reduction in the availability of financing".

As is so often the case, such early warnings were not heeded, indeed quite the contrary, and when the credit crunch finally did arrive the consequences were always going to be pretty severe. Basically the European wholesale money markets, which had during the boom times been looking so favourably on each and every project which the wonders of the mind made it possible to dream up in Kazakhstan suddenly slammed their doors closed, and a number of local banks, who were in the uncomfortable situation of struggling night and day to try to borrow from overseas financial institutions (just like the Hungarian and Ukrainian banks in the last two weeks), had little alternative but to effectively cease lending to homebuyers and builders in September 2007.

Obviously the blame here can be shared out around a number of parties. Domestic authorities who did little to restrain the property and lending boom, and the international investor community who, it seemed, only needed to hear the long list of Kazakhstan's undoubted natural resources to drool and march up to put their money on the table without any kind of serious due reflection as to the serious infrastructural and instititional problems the country was almost bound to have.

And when the stop came, it came abruptly. Kazakhstan bank sales of Eurobonds and syndicated loans, which had totaled $8.63 billion during the first eight months of 2007, suddenly plummeted to an estimated $300 million in the three months from October to December. Hence my references throughout this post to Kazakhstan's "sudden stop".

And the list of those who had previously been busying themselves arranging the deals for Kazakhstan's banks looks just like a who's who of international finance: New York-based Citigroup Inc., the largest U.S. bank by assets, edged out Amsterdam-based ING Groep NV (you know, the ones who have just been bailed out by the Dutch government), as the top underwriter. New York-based JPMorgan Chase & Co., the third-largest U.S. bank; Frankfurt-based Deutsche Bank AG, Germany's largest lender; and Zurich-based Credit Suisse Group, Switzerland's second-biggest, were all at the front of the queue.

Kazakhstan banks also attracted international equity investors. In November 2006, JSC Kazkommertsbank, Kazakhstan's biggest bank by assets, sold $846 million of global depositary receipts in London. JSC Halyk Savings Bank, majority owned by President Nazarbayev's daughter Dinara and her husband, followed in December with a $748 million sale. JSC Alliance Bank, the country's largest consumer lender, sold $704 million of global depositary receipts in July 2007. All three are based in Almaty, the country's financial center.

The outside money helped the country's banks grow their assets 10-fold between 2002 and 2007, to $94.7 billion as of Nov. 1 2007. It also left the banks vulnerable when investors began retrenching.

From August through October 2007, $6.8 billion in foreign currency flowed out of the country - 28 percent of the central bank's total reserves. With the country's banks largely shut off from international borrowing, the ratings agencies started to get nervous. Standard and Poor's started the ball rolling by lowering Kazakhstan' foreign currency rating in October. By November the cracks were becoming visible, with the construction industry slowing rapidly.

The evolving situation lead to an ongoing series of "reappraisals" of Kazakh bank creditworthiness on the part of the ratings agencies, with Standard and Poor's following its initial October downgrade of the country's foreign currency-denominated debt rating (by one level to BBB-) by a revision on the outlook on Kazakh banks to negative in December. Fitch Ratings also changed its outlook on Kazakhstan's long-term issuer default ratings to negative in December, and even the Kazahstan sovereign rating outlook was revised to negative by S&P in late April 2008.

Moody's Investors Service joined the act, and reduced the credit ratings of six Kazakh banks, including TuranAlem, in November because of concerns they wouldn't be able to refinance about $40 billion of international debt. Kazkommertsbank and Bank TuranAlem were cut to Ba1, one step below investment grade. Halyk was lowered to Baa3, the lowest investment grade, while TemirBank dropped to Ba2 from Ba1.

In an attempt to stop the haemorrage the government stepped in and provided lenders with almost $11 billion of emergency cash, reducing in the process central bank reserves by almost a quarter. The government also moved to place new limits on local banks' foreign debt (according to the new regulation they will now be able to accumulate only up to a maximum of four times their capital base - beginning July 1, 2009). This move is expected to cut dependence on borrowing from abroad, although as a result commercial lending growth may slow to 13 percent this year according to central bank estimates, possibly reaching as much as 8.22 trillion tenge ($68.4 billion), compared with 7.26 trillion tenge in 2007. However - in a "worst-case-scenario" - the central bank warned that banks may post a 9.5 percent drop in commercial lending in the country this year, should access to foreign capital markets not be made available again.

At the same time the Kazakhstan government indicated during the summer that it was prepared to lend $4 billion to banks to ensure liquidity. The banks also were expected to get "about 300 billion tenge ($2.48 billion) of free money" due to a decision to reduce the size of bank reserve holdings with the central bank. The government has also said it will continue to purchase shares of Kazakh companies listed on foreign exchanges until they reach pre-August 2007 levels. Looking at the MCSI Kazakhstan core index, it would seem to me that they still have some distance to travel if this objective is to be achieved.

Kazakhstan banks' foreign liabilities rose 490 percent in dollar terms between 2004 and the start of 2008 - to $13.5 billion - as they used their investment-grade ratings to borrow abroad and lend to consumers and real-estate developers, according to CreditSights. This debt has now become impossibly difficult to refinance because of investor wariness about all but the highest-rated debt. Kazakhstan's central bank holds about $20 billion of reserves and the country's oil fund has about $15 billion, so if push comes to shove they should be able to ensure Kazakh banks have sufficient funds to meet their obligations.

By June, credit-default swaps on Kazkommertsbank had surged to 694 basis points from an earlier 225 basis points, according to CMA DataVision. CDS contracts, which are used to speculate on a company or country's ability to repay debt, increase when perceptions of credit quality worsen. But this was very small beer, and the position has recently deteriorated quite alarmingly, with the cost of protecting bonds issued by BTA Bank, Kazakhstan's biggest lender, have more than doubled in the past month to 3,685 basis points (or 36.85%), while credit-default swaps on AO Kazkommertsbank cost 2,800 basis points (or 28%), according to prices at the time of writing from CMA Datavision.

All kinds of assets and revenue flows have been used as collateral in a desparate attempt to secure refinance for the debt, and one of the most innovative examples of this is the package that Bank TuranAlem JSC, Kazakhstan's second-largest lender, put together last October - via ABM Amro and Standard Chartered - to sell $750 million of bonds in a DPR (diversified payment rights) securitisation scheme backed by foreign currency remittances from migrants. The deal is the largest bond sale of its kind ever by a Kazakh bank. The bonds were sold in four portions. Three were guaranteed by bond insurers and carried top ratings from Moody's Investors Service and Standard & Poor's. The other bond, which isn't guaranteed, is rated Baa3 by Moody's, the lowest level of investment grade, and an equivalent BBB- by S&P.

Construction Slump

After several years of rapid rises, Kazakhstan property prices are now declining, most notably in Almaty where the prices of existing homes are reportedly down (on IMF estimates) by anything up to 40 percent from their peak. This decline has partly corrected previous overvaluation, although the price adjustment may have further to go, particularly if credit availability and household incomes continue to weaken.

As well as the banks, Kazakh homebuyers also found themselves suddenly left out in the cold by the global credit shortage. In Almaty, the Kazakhstan's biggest city, about 30 people were to be seen on March 18 in protest at the hole in the ground which was to be found where their new apartments were supposed to have been. Work stopped on the project after builder AO Corporation Kuat declared it was unable to get further funding.

About 29,000 people had prepaid for apartments which were uncompleted when the September squeeze arrived, and credit for Kazakh builders suddenly dried up. More than 140 housing projects were halted in Almaty alone, forcing the government to say it was going to provide $4 billion of emergency funding to get contractors working again. Kazakh construction companies had sold 280 billion tenge ($2.32 billion) of unfinished apartments by September, including 170 billion tenge financed by mortgages, according to government statistics.

Homebuyers have been receiving some help from the government, which in March 13 agreed to provide $500 million to help banks finance loans to builders in Almaty, although many are vociferous in saying that the money has not been arriving to them as promised. The governments announced $4 billion emergency investment program also includes funds to purchase 6,000 uncompleted apartments in Astana, the capital.

Prices for residential property soared 30.2 percent in 2007, reaching a record average mid-year high of 161,300 tenge ($1,338) per square meter, up from 123,900 tenge in 2006, according to the Astana-based state statistics agency. In the financial capital, Almaty, the average price was 345,200 tenge.

The drop in prices from these peaks and the sudden drying up of credit has caused numerous problems for would.be buyers, and Bank TuranAlem, Kazakhstan's second-biggest bank by assets, received $81.2 million last December from the state emergency investment program simply to finance the completion of unfinished construction projects.

The most recent government bailout of the construction sector was announced during the summer - just two weeks before the celebrations of Nazarbayev's 68th birthday and the 10th anniversary of the founding of the new capital Astana on July 6 - following the announcement by a group representing people who had purchased apartments in the unfinished buildings that they were planning a protest march to be held in Astana bang in the middle of the official festivities.

The Industry and Trade Ministry have said that there were 939 residential buildings, with 45,130 apartments pre-paid by homebuyers, under construction as of last January. Minister Edil Mamytbekov said in July that the cases of 4,558 homebuyers in 18 buildings "remain problematic'' because of conduct for which the builders in question had been "charged with crimes.'' The Kazakh Prosecutor General's Office said 123 construction companies that received 104 billion tenge ($865 million) in pre-payments from homebuyers were behind schedule or haven't even begun work on new apartment buildings.

Assets of "careless construction companies,'' including buildings and vehicles, have been seized to compensate lost investments of homebuyers and the government, according to the Prosecutor General's Office. Criminal investigations have been opened into eight companies. A total of 285 companies are building 407 residential projects in Kazakhstan and have received 231 billion tenge in pre-payments from more than 50,000 individuals and companies, prosecutors said. Of 200 ``problem'' projects delayed by at least six months, 110 are located in the capital Astana and 42 in Almaty.

The July rumpus was provoked by the fact that at the start of the summer the Kazakh government had spent only 51 billion tenge to complete stalled residential projects, a fraction of the bailouts promised by Prime Minister Karim Masimov in the autumn of 2007, according to data made public by the Ministry of Industry and Trade on June 23. The government had said on Nov. 14 2007 that it would spend $1 billion by the end of 2007 and another $3 billion in 2008 to "provide economic stability and growth'' by supporting the real estate market and small and medium-sized businesses. Following publication of this data, and some international press coverage, Masimov said that his original emergency investment program was in the process of being expanded, and his government announced plans to spend 17.2 billion tenge to complete residential projects in Astana.

President Nursultan Nazarbayev instructed the state to step in and finish projects, ``which have no source of financing,'' to ``help to reduce social tension,'' according to Edil Mamytbekov, a deputy minister of industry and trade, on June 20. President Nursultan Nazarbayev also said it was necessary to take ``tough measures against careless builders". As a result the Almaty mayors office announced on July 26 that another 46.4 billion tenge had been allocated to support residential projects in Almaty. The state had already invested 22.4 billion tenge and was going to spend the remaining 24 billion tenge by year's end, according to the announcement.

In April, however, the government had announced that the state development holding Kazyna would distribute 59 billion tenge to commercial banks during 2007 to finish 131 buildings in Almaty. Sergei Kuyanov, spokesman for Almaty Mayor Akhmetzhan Yesimov, declined to comment on the discrepancy between the numbers when question by journalists in July.

Whatever the complications of the present situation and the ins-and-outs of putting the construction and banking problems straight, we should not lose sight of the fact that Kazakhstan has, large financial resources which will surely help it weather the current situation. Official foreign currency assets totaled $46 billion in early June, comprising NBK reserves of $21 billion and oil fund (NFRK) assets of $25 billion. Commercial banks also have foreign assets of which about $3.5 billion are thought to be liquid. Total foreign assets broadly match foreign liabilities when the intracompany debt of the oil sector is excluded, while liquid foreign currency assets comfortably cover potential short-term foreign currency drains.

Favourable Demographics But Migrants Needed, And With Them Modern Citizenship Rights

The chart you will find below is known as a “heat chart”. It depicts the ongoing changes in Kazakhstan's age structure. Each dot represents the number of people in any given age group at any given point in time. A dark red dot represents the largest concentration of people, by age, in a particular year while deep blue dots show the lowest concentrations. A single dark red dot is the equivalent of almost 406,000 people while each deep blue dot represents nearly 23,000 people.

In the upper left-hand corner of the chart the bright reds and yellow areas depicts the population boom that started in the mid 1970s and lasted until the late 1990s. The remnants of that boom extend downward from left to right across the chart. The band also narrows as this population segment ages. This is simply a reflection of the reduction in the total numbers in the population bulge cohorts as out-migration has taken its toll.

Many ethnic Germans and Russians, for example, left Kazakhstan during the years following the end of the Cold War. In the lower left-hand side of the chart there is a preponderance of dark blue dots, indicating a relatively small number of people over the age of 60 years. Over time these dark blue dots are replaced by light blues and greens, a pattern reflecting a gradual but steady increase in the number of elderly people.

Kazakhstan’s population has fluctuated notably over time, rising during the 1980s and then declining during the 1990s (mainly due to outward migration). A low point occurred in 2001 but population has been rising since, with the upward trend expected to continue through 2020 when total population is projected to reach an all-time high of 16.7 million – reflecting a natural increase of 1.8 million between 1980 and 2020 - before the long run impact of below replacement fertility locks-in, and the population starts to decline.

The number of potential workers (those between 15 and 64 years of age) will gradually "peak" - after having increased by a total of 1.9 million between 1980 and 2020 , while the number of those over 60 will nearly double, growing by more than 1 million in absolute terms.

The Kazazh government, being aware of the country's enormous resource wealth and the need for a labour force large enough to exploit it, is taking a different view on this situation from its CEE peers, and is actively promoting the idea that the country's population should rise to around 20 million by 2015. Clearly given the fact that Kazakh fertility (1.89 tfr 2007) is already below replacement, and heading downwards, this target is only achievable via significant inward migration. However, while much of Kazakhstan's large surface area is desolate and uninhabitable, the densly populated urban areas currently lack the physical and social infrastructure necessary to accommodate any such lincrease in numbers. So to hit its "optimum" level of economic and social development the country needs both a positive migration policy and substantial infrastructural development in order to be able to adequately accommodate the new population.

Migration is nothing new for Kazakhstan, since its "no mans land" type location has meant that it has long been a transit point on the migration route of people back-and-forth between Asia and Europe. Kazakhsytans importance was only enhanced by the fact that historically it was used by Moscow as destination point to which colonists, dissidents, and other minority groups could be sent. Such groups included Volga Germans, Poles, Ukrainians, Crimean Tartars and Kalmyks.

Soviet-era policies were also designed to encourage the movement of ethnic Russians to the periphery of the then Soviet Union. As a result, by 1980 Russians had the largest nationality (exceeding even the Kazakh population) , and constituted slightly over two-fifths of the total.

After the fall of the Soviet Union, Kazakhstan's German population emigrated en masse, lured by better economic prospects, ethnic ties to their original homeland and Berlin’s generous programmes for resettlement. More than a quarter of Kazakhstan's ethnic Russian population returned to Russia during the 1990s, and the departure of such a large number of Russians had a particularly dramatic impact owing to their concentration in key urban areas (particularly in the then capital Almaty) and in specific occupations. In Almaty and a few other cities, Russians significantly outnumbered ethnic Kazakhs; they had their own cultural life, spoke their language freely and never even stopped to learn the local language. They also enjoyed a privileged occupational status, accounting for a disproportionate number of managers, scientists, professors, engineering-technical specialists, and other high-wage, high prestige professions. Filling the gaps created in Kazakhstans human capital resource base by the subsequent exodus of this population now constitutes one of the most important development challenges facing the country.

In order to facilitate the rapid population growth the government understands that the country needs, they have, as I say, set targets to increase the population from 15 million in 2005 to 20 million in 2015, including introducing programs for the return migration of 4.5 million ethnic Kazakhs - so called "oralmans" - from neighbouring countries in Central Asia, Turkey, Mongolia, and China. Although 374,000 oralmans have returned to Kazakhstan in recent years, this is not proving to be a hugely successful programme and the bulk of Kazakhstan’s current population growth is rather the result of illegal migration from other neighbouring countries in Central Asia.

At the present time the majority of migrant workers coming to Kazakhstan are Uzbeks and Kyrgyz nationals, although the number of Tajik migrants currently working in Kazakhstan is small in comparison compared with the size of their presence in Russia. Since the mid-1990s, Tajiks have been fleeing their country in significant numbers and the have mainly entered Kazakhstan either as refugees or externally displaced persons.

Tajik migrant workers in Kazakhstan are engaged mainly in seasonal agricultural employment. Many of them often work irregularly. According to some sources around 12,000 Tajik citizens were residing illegally in Almaty in 2006. Many Tajiks are working as traders in markets, selling agricultural products.

Large numbers of migrants from the other Central Asian countries are drawn to Kazakhstan quite simply because it is easier to move there than it is to move to Russia; xenophobia is much less rife; and the rhythm of economic development makes it very attractive in salary terms. According to official estimates, about 500,000 migrants from other Central Asian Republics work in Kazakhstan. At the CIS summit in October 2007, the Kazakh government distinguished itself by promoting a resolution which involved a series of legal and social protection measures for migrants.

According to a recent study by Marlène Laruelle of the Central-Asia Caucasus institute, more than half of Kazakhstan’s Central Asian migrants are comprised of Uzbeks, while around 200,000 are Kyrgyz and around 50,000 Tajiks. The majority of migrants are concentrated in four regions: Almaty, Astana, Atyrau and southern Kazakhstan. In the first two regions, migrants are chiefly employed in the construction industry, while in Atyrau, several tens of thousands of workers (according to some sources, at least 30,000 Uzbeks) work in the oil industry. In southern Kazakhstan, predominantly Uzbek migrants are employed in the agriculture, especially in cotton fields. In Kazakhstan, a kilogram of cotton pays US$0.40 compared with only US$0.05 in Uzbekistan. As for the Kyrgyz, a large number of them work on tobacco plantations.

According to Laruelle, nearly a third of the migrants work in the construction industry, another third in convenience services (the food service industry, small business, home repairs services), and the other third in agriculture. The highest salaries are in the construction sector (about US$200 per month), whereas those in agriculture earn a lot less (about US$80 per month). Although the overwhelming majority of migrants are male, there are now an increasing number of female migrants: in 2002, women made up only 15 percent of Uzbek migrants to Kazakhstan, but by 2004 they were nearly a quarter. Kazakhstan has had labour shortages in sectors largely staffed by women, such as agriculture, the tertiary sector of the food service industry, and domestic services.

Central Asian migrations to Kazakhstan can be divided into three categories: daily, temporary, and permanent. The first takes place notably in the border regions of southern Kazakhstan, where an increasing number of Uzbeks commute to work on the Kazakh side of the border during the day, and return home at evening. Regular border closures and administrative complications at customs often trigger tensions among villagers who have become economically dependent on being able to cross the border.

The border post at Zhybek Zholy, for instance, is crossed by more than 4,000 Uzbek migrants every day. But for the majority of migrants, leaving for Kazakhstan is temporary. The length of stays thus vary largely depending on available opportunities: mostly they last between two and eight months, with construction work being seasonal, mainly in spring and summer, and while work tends to be concentrated in the autumn. Many hope to return to their own countries after accumulating sufficient capital to construct a house or start up a small business. However, there are a growing number of migrants who decide to stay on a permanent basis. Between 1999 and 2004, more than 130,000 Uzbeks, drawn by higher living standards (an average Uzbek salary is around US$40 dollars, compared to 250 in Kazakhstan), moved to Kazakhstan permanently.

The Kazakh authorities are fully aware of the size of the migratory phenomenon and do nothing to actively resist these flows. Indeed the government has stated on multiple occasions that its citizens are not in competition for the work done by migrants because the latter fill a specific social niche, as they tend to take the poor paying jobs normally refused by Kazakhstani citizens. The authorities nevertheless are seeking to reduce illegal immigration and to encourage legal migration.

Thus, in 2006, the Minister of the Interior finally legalized 164,000 migrants from other CIS countries, despite having initially announced that the number would be only 100,000. Out of these, nearly 120,000 were from Uzbekistan, 23,000 from Kyrgyzstan, 10,000 from Russia and nearly 5,000 from Tajikistan. Astana’s open policy on migration has also led to the naturalization of many migrants: in 2005, more than 20,000 persons were granted Kazakhstani citizenship, three-quarters of these from Uzbekistan, 10 percent from Kyrgyzstan, and 5 percent from Tajikistan.

Although migratory relations between Kazakhstan and Kyrgyzstan are good, managing migratory flows between Kazakhstan and Uzbekistan has proved more difficult. Tashkent refuses to acknowledge the scale of the phenomenon. The Uzbek state has a monopoly on the legal dispatching of workers abroad, meaning each migrant is obliged to obtain official authorization from the Uzbek Agency of Work Migration. Since 2006-2007, the Uzbek government has also sought to hive off some of the financial flows of its “Gastarbeiters”. According to a government resolution “On registration of citizens seeking employment abroad”, Uzbek labor migrants have to come back to Uzbekistan, go through registration and pay customs dues before returning to work abroad. As a result, the majority of Uzbeks leave without legal permission and thereafter are unable to seek protection from their home state. This situation promotes human trafficking and the organization of mafia networks by recruiters who go from door to door asking for volunteers to work in Kazakhstan.

Working conditions for Central Asian migrants in Kazakhstan are still relatively poor, a fact which is not that surprising given the kind of work they do. And legislation dealing with all this immigration continues to be largely inadequte, being light on penalties for those employers who abuse the system while failing to guarantee minimum social rights for newly arrived migrants.

Main Risk Factors

Returning now to the economic front, and to Karim Masimov's assurance, the principal short-term risks to Kazakhstan's slow landing would seem to be threefold: (i) a prolonged period of tight conditions in global financial markets; (ii) a substantial drop in oil prices and other commodity prices, and/or; (iii) a major domestic event that triggered a loss of confidence in the banks. All or any of these could easily cause a process which was now largely under control to become much less so.

Looking forward, growth is expected to remain relatively subdued. Assuming limited bank access to external financing and only modest deposit growth, credit within the economy is likely to decline in real terms. Nonoil GDP growth is forecast by the IMF to slow to 4.7 percent this year, from 9.2 percent in 2007, with spillovers from the oil sector partly mitigating the impact of the credit crunch. Oil output should support somewhat stronger overall growth of close to 5 percent in 2008. A strengthening in growth to 6.25 percent is projected next year assuming global financial conditions improve and pressures on bank balance sheets are reduced. The current account is even projected to move into surplus in 2008, following the large deficit last year, due to higher oil and commodity prices and much slower import growth. With banks repaying debt, the external debt/GDP ratio is projected to fall sharply this year, and appears to be on a sustainable path under a range of scenarios, while the overall government budget surplus is projected to increase to 6.75 percent of GDP in 2008 due to strong oil revenue growth.
Exchange rate stability is a central policy objective of the NBK. At present, exchange rate stability is viewed as essential for maintaining depositor confidence, limiting the risks from the large foreign currency exposure of the corporate sector, and helping reduce inflation. The central bank noted that downward pressures on the exchange rate had abated since the turn of the year, and its foreign currency reserves have been rising, in part due to the decision to delay the automatic conversion of oil fund revenues into foreign currency assets. The country’s official foreign assets (NBK reserves and NFRK assets) are now well above the level reached prior to the onset of market volatility in August 2007. Intervention in the foreign exchange market has been substantially scaled back (as a share of total transactions) in recent months, although the NBK stands ready to intervene in the market if downward pressures on the exchange rate re-emerge. The authorities continue to view the exchange rate regime as a "managed float with no predetermined path for the exchange rate."

The NFRK continues to be managed prudently, and the government does not
expect to draw on the Fund beyond the amount of the guaranteed annual transfer to the
budget. The assets of NFRK consist of a stabilization portfolio of about $5 billion (invested in short-term debt securities) and an investment portfolio (invested in longer-term debt and equity securities). While the NFRK fulfils both a stabilization and savings role, at present the government has no intention to use the Fund’s assets to help cushion the downturn. Indeed, the government spent only 86 percent of the guaranteed transfer from the NFRK last year, and expects the mandated transfer to be adequate to meet spending needs this year.

The exchange rate regime in Kazakhstan has been reclassified from a managed
float to a conventional peg under the IMF’s de facto classification system. This is due to the very limited movement of the tenge against the U.S. dollar since last October. At present, the IMF take the view that there is no clear evidence of either over or undervaluation of Kazakhstan’s real exchange rate when compared to its estimated equilibrium level.

Kazakhstan fiscal position is very strong. It has a large budget surplus and low public debt. And external debt has been reduced from 92.8% of GDP in 2007 to an estimated 67.9% in 2008, with the IMF forecasting a further reduction to 59.6% in 2009. The IMF said the following in their most recent concluding Mission statement in September:

The strong budget position in Kazakhstan has provided scope for the government to use fiscal policy to support the economy as growth has slowed. We believe that the increase in spending in the recent supplementary budget is appropriate, and that the automatic fiscal stabilizers should be allowed to work, with any revenue shortfalls due to a weakening economy being accommodated in the near future rather than offset with expenditure cuts to meet budget targets. Going forward, the government's recently announced three-year budget plan maps out a transparent path for fiscal policy over the medium-term. We believe, however, that it is important that the government not commit to further large increases in public sector wages and pensions in future years given uncertainties about budget revenues—particularly from the oil sector—and the stage of the macroeconomic cycle in two or three years time.

The Kazakh government is to buy as much as $5 billion of distressed assets from banks in the next two years and will seek to spur growth by spending up to $10 billion from the National Oil Fund on agriculture and development projects. The government is also going to release 52 billion tenge ($430 million) for a bank-rescue fund.

However, not everything is going to be plain sailing. Oil has now tumbled to as little as $72 a barrel, down is down $75 — or 51 percent — since catapulting to a record high of $147.27 on July 11.

Commodity prices continued their downward march last week, with the Reuters/Jeffries CRB Index of 19 raw materials from coffee to silver, dropping 3.6 per cent amid concerns that the global economy was heading into recession. The abrupt falls in commodities - the RJ-CRB index hit its lowest level in four years - even engulfed gold , which closede last Friday at a one-month low of $775 a troy ounce,

And property prices continue to fall, which prices in the Kazakhstan's largest city Almaty are now down at 15 percent from a year ago (according to the national statistics agency) and more like 40% according to sources cited by the IMF. Net income at Kazakhstan's 36 banks fell 47 percent the first eight months of this year as lenders put aside more money to cover bad loans. So there should be no doubt that conditions in Kazakhstan at this point are "tight".

However, in contrast with Iceland, Kazakhstan has $49.5 billion of reserves to weather its crisis in the short term. That includes $27.6 billion in the National Oil Fund created eight years ago to guard against a drop in oil prices. The existence of this fund means that the Kazakh government could repay all $13.7 billion of foreign debt due in the second half this year, including $9.3 billion owed by banks. The reserves would also cover the $16.9 billion of debt maturing next year, including $6.9 billion owned by banks, according to a recent report by Goldman Sachs, which cites National Bank of Kazakhstan data.

We should also stop for a moment and think about the implications of assuming that oil and other commodity prices will not rebound as we move through 2009. The implication here would be that global demand would have dropped and stayed down. If we go for that scenario, this would seem to imply a generalised recession in the developed economies of almost unprecedented depth (at least in post WWII terms). While not doubting that some individual countries (Spain, for example) may be in for a very rough ride indeed, I am not convinced that conditions will universally deteriorate to this extent. We will have a recession in 2009, but hope fully it will not be so deep as to send Kazakhstan off into Iceland-type bankruptcy.

Let me put this another way, if the recession is so deep that Kazakhstan goes off into receivership, then I dread to think what the situation will look like almost universally across the CEE.

So then, to return to my original question which was posed at the start of this post: should we simply believe Karim Masimov when he tells that Kazakhstan won't be needing that IMF help? Well no we shouldn't, since among other things he would be saying that, wouldn't he - and if you don't believe me just look what the rest of East European walking wounded are saying as they amble in.

But we don't have to take Masimov's word for it in this case, since there are other, more objective evaluations of the situation available. So why don't we close by taking a look at what the IMF themselves have been saying, in this case in their September 28 Mission Concluding Report. At this point in time their assessment and judgement is good enough for me, especially since I think the principal arguments they advance make a lot of sense.

Kazakhstan has large financial resources to help it weather the current situation, and medium-term economic prospects remain favorable. Official foreign currency assets, comprising central bank (NBK) reserves and oil fund (NFRK) assets, reached $48 billion at end-September, well above the mid-2007 level. The current account balance has strengthened significantly this year, and oil production is set to increase substantially in the years ahead.

As at the time of the Article IV consultation discussions in April, we believe that in the short-term policies should remain focused on managing risks to the outlook and setting the stage for the resumption of strong and sustained growth. Since our last visit, the authorities have continued to skillfully handle the difficulties the economy has faced, and we welcome the policy steps that are being taken in the monetary, fiscal, and supervisory areas to strengthen the resilience of the Kazakhstani economy. Nevertheless, considerable challenges remain, and these have been heightened by the renewed bout of global financial market volatility.

Why Smart Investors Should Be Thinking about Cows

Contrarian Profits — Mon, 13 Oct 2008 15:42:48 +0000

The 'financialization' of the American economy is an era coming to a close, says Mayer's Special Situations editor and commodities expert Chris Mayer.

So it's back to the basics of wealth creation, to what Chris calls "the basics of owning and making useful things."

It makes sense.

As Whiskey and Gunpowder's Greg Grillot puts it, "A cow is a much better investment than a piece of over-leveraged debt."

This from Chris:

A cow is, of course, a useful animal to have around. Maybe some chickens, too, and some farmland with ample water and a good stand of fruit trees. These things have always had value to mankind. We need to eat and drink. During times of crisis, people may make do with an old sweater and forgo buying a new one. They may patch up that old couch, skip the movies and pass on the latest iPod. But they always eat and drink.

I’ve been thinking more about the global food chain lately. In the last issue, I wrote to you about what I called the “topsoil crisis.” Fertile land is becoming an extremely valuable asset. And what I think will happen is that the whole food chain will become more valuable with it. It’s sort of like the oil story.

As the price of oil rose, oil reserves became much more valuable. But so, too, did the whole energy infrastructure — pipelines, refineries, companies and people who can build and repair oil rigs and such.

I think the same thing is happening — or will happen — with farmland and the entire food network that feeds this hungry planet. The ability to supply hogs and chickens and grains will become much more valuable.

Here are a couple more ideas worth rolling around in your head as you think about investing:

The stock selection process is complex.

Remember that unlike other professionals, a prudent and wise investor cannot afford to do what other investors do.

For example, if ten doctors tell you an appropriate prescription, then it’s wise to accept that consensus. Likewise, if ten engineers agree on the design of a bridge, then that’s surely the right way to build it. But if 10 investment analysts tell you to buy a particular stock — or gold, deutsche marks, denominated bonds or whatever — it is probably the wrong thing to do.

Investing inhabits a peculiar world. You have to walk with the minority as an investor. You have to have the fortitude to stand against the crowd. As Templeton says below, the only way to pick up bargains is to buy what people are selling:

Buy those things that are depressed. A security is depressed in price only when people are selling. There is no other reason why the price should drop to an undervalued level except the pressure of selling.

So in securities markets, you have to be prepared to do the opposite of what most investors are doing if you are going to get bargains and make superior profits in the long run.

These are certainly trying times. The recent market crash will test the nerve and resolve of every investor. But there is not much to do other than wait it out. And for those who have the stomach for it — and the means — it’s also a time to pick up some great bargains.

PS: Chris is onto something here. Keep a reserve of tangible assets: your physical gold and silver…maybe even some productive land if possible. Right now it’s possible to acquire some very productive companies who grow, extract, make or maintain the real stuff that humanity will always need. Having both the real stuff in your hands as well as stakes in the enterprises that produce the real stuff is a winning combination. Chris has very specific advice on what to buy in order to protect and grow your wealth, especially in times like these. Click here to find out more.

Source: In Crisis, Seek Tangibility

Global Nuclear Power Renaissance Is Well Underway

Contrarian Profits — Fri, 03 Oct 2008 17:26:49 +0000

US Energy Secretary Samuel Bodman says the America's "nuclear renaissance" could be derailed by the credit crisis.

But Smart Commodities UK editor Garry White says a number of nuclear power projects are already underway in other parts of the world. India plans to build between 18 to 20 new nuclear plants over the next 15 years. Even the Middle East is shifting to the atom for its future energy needs.

Nuclear plants are also proven to be effective at water desalination. This will be vital in emerging markets, where populations are rising rapidly.

This is from Fleet Street Daily:

He [Bodman] made the comments on the same day as the US senate signed off the nuclear co-operation deal with India. It was also a few days after Russia agreed to help Hugo Chavez with a nuclear programme. But if you want to feel assured about the prospect for nuclear power, just have a look at what is going on in the Middle East. A place awash with petrodollars.

There are two main reasons for the rush to nuclear power in Iran and Saudi Arabia. And neither of them is the pursuit of nuclear weapons.

The first of these is the fact that they don’t have as much oil as everybody thinks. The second is water.

Let’s take a look at Iran’s reserve situation.

The simple fact is that Iran HAS to develop nuclear power because the country is running out of oil. Iran’s “massive” oil reserves are a big, fat lie.

One of the people who made that reality crystal clear to Iran's leaders a few years ago was Dr Ali Morteza Samsam Bakhtiari.

Dr Bakhtiari started working for the National Iranian Oil Company back when the Shah was in power. For 36 years he worked for the company in a variety of senior positions until he retired.

This is what he told President Mahmoud Ahmadinejad:

"As for Iran, the usually accepted official 132 billion barrels is almost 100 billion barrels over any realistic assay."

The current estimate of Iran's reserves is 136 billion barrels. That's the second highest oil reserves in the Middle East after Saudi Arabia. Dr Bakhtiari thinks this should be closer to 36 billion barrels.

I believe that Ahmadinejad needs to go nuclear because his country's oil industry is struggling to keep its oil production at close to 4 million barrels per day. And it’s only going to get worse.

That’s why Iran needs nuclear – and that’s why Ahmadinejad will never give up his nuclear programme.

The second reason is water.

The population in the Middle East is set to soar in the next 15 years. In Saudi Arabia, almost 40% of the population is under the age of 14. It has a fertility rate of 5 children per woman. The country is set for a massive population explosion at a time when its infrastructure is creaking.

The Kingdom is already the world's largest producer of desalinated water. It currently has 27 desalination plants which provide 70% of its drinking water requirement. But it will need more. Much more.

That’s where nuclear power comes in.

Desalination is an extremely energy-intensive process, but nuclear plants can be used for the duel purpose of producing electricity and desalinating water.

Nuclear desalination is a proven technology. Kazakhstan produced water by nuclear desalination for almost 30 years until its reactor was decommissioned in 1999.

The country’s BN-350 fast reactor at Aktau successfully produced up to 135 MW of electricity and 80,000 m3/day of potable water over 27 years. Around 60% of its power was used for desalination.

Then there’s Japan...

It has ten desalination facilities linked to pressurised water reactors operating for electricity production. They have yielded 1000-3000 m3/day each of potable water.

India has also got in on the act. In 2002 it set up a demonstration plant coupled to twin 170 MWe nuclear power reactors at its Madras Atomic Power Station.

So, Mr Bodman needs to be a little less US-centric when talking about the future of nuclear power. The world’s going nuclear whether the US does or not. There’s plenty of money in the Middle East, in Venezuela, in India and in China.

Source: Iran Needs Nuclear because it’s Running Out of Oil

4 Real Assets Set to Profit from the Death of the Dollar

Contrarian Profits — Mon, 22 Sep 2008 18:25:33 +0000

The headlines are dramatic. Short selling banned for 799 financial institutions. $50bn injected into money markets. Plans for a massive bailout fund to clear the system of bad debt and stabilize the housing market. The Unholy trinity – the Federal Reserve, SEC and Treasury – has pulled out all the stops this time. But while US [...]

Evergreen Solar (ESLR) shares in the $5 range

Eric Cheshier — Thu, 11 Sep 2008 17:50:30 +0000

Evergreen Solar, Inc. (NASDAQ:ESLR) is looking like a prime Value Play at current levels. Evergreen shares have been cut in half since late June and hitting new 52-week lows all week. At a time like this, their catch phrase really means something - Think Beyond.

Brazil Central Bank Raises Interest Rates Another 0.75%

Edward Hugh — Thu, 11 Sep 2008 08:47:00 +0000

Brazil's central bank raised its benchmark interest rate three-quarters of a percentage point yesterday. Three of the eight directors expressed the view thatthe raise was excessive, which seems to indicate that the monetary tightening process may be nearing its close in this cycle. Policy makers voted 5-3 to raised the so-called Selic rate a fourth time since April to 13.75 percent from 13 percent in an attempt to keep a tight grip on inflation, and to confirm the Banks growing reputation as the "Bundesbank of Latin America". The decision raised Brazil's real interest rate - which is the nominal rate adjusted for the 6.17% CPI inflation - to 7.58, the highest among emerging and developed economies alike. The dissenters on the board voted for a half-point increase.

Real Decline

Despite the interest rate rise the real fell below the 1.80-per-dollar level today for the first time since January an indication more of deteriorating global sentiment - today's drop was triggered by speculation Lehman Brothers is about to collapse. The real dropped 1.8 percent to 1.8202 per dollar at 11:03 a.m. New York time, from 1.7878 yesterday. Earlier it touched 1.8374, the weakest since Jan. 22. Lehman's 38 percent fall today pushed the Standard & Poor's 500 Index to its lowest since November 2005. As wer can see in the chart below, the real had been rising steadily in 2008 until the start of August. Then the wind clearly changed, and the dollar had been rising and the real falling.

If we look at the three month chart things are even clearer, and we can see that sentiment had been deteriorating since mid July, and then really to a hard jolt downwards in late August. Most of this evidently has no direct relation with the strength of the Brazilian economy, or with any deterioration in the inflation outlook (quite the contrary, see below) but rather with global factors, like, of course, commodity prices, since the movement conforms reasonably well wilh the downward shift in the price of oil.

Brazil's stock market, the Bovespa index (about half of which consists of raw material companies), is also vulnerable to concerns about global growth, and the has dropped around 23 percent so far this year, hurt by both inflation concerns and a decline in commodity prices.

But we need to ask ourselves some basic questions about the current USD rally and the extent to which a continuing US slowdown would will lower growth in key global movers like Brazil and India. It is also worth asking the question whether there is any real danger of capital flight from either of these two economies to the dollar perceived as a safe heaven currency. This whole argument seems to be very overstretched at this point. Indeed it seems to be a real paradox that the USD continues to be considered a safe heaven despite US credit markets being the epicenter of the current global economic turmoil, and especially at a time when returns on USD assets continue to be negative, while any continuing upward movement in the dollar can only help the trade deficit deteriorate again, Thus it is my view that the current USD rally unsustainable as seen against a select group of emerging economy currencies (and in particular the rupee and the real, is not justified, and basically not sustainable with increasing all those imbalances people had been working so hard to try and correct.

And Is Inflation Already On The Wane?

At the same time Brazil's consumer prices rose at their slowest pace in 11 months in August after food and beverage costs fell for the first time in more than two years. The August price increase as measured by the benchmark IPCA index was just 0.28 percent, compared with 0.53 percent in July, as a result annual inflation slowed to 6.17 percent from a three-year high of 6.37 percent.

Food and beverage costs dropped 0.18 percent last month, the first decline since June 2006, after rising 1.05 percent in July. On the other hand, non-food inflation actually accelerated, indicating the central bank is quite right to try to squeeze out second round effects at this point. Service prices rose by 0.73 percent in August, up from 0.51 in July. Prices for non-food goods not subject to government regulation also rose 0.5 percent in August, up from 0.3 percent in July.

The Impact Of Energy Prices

Energy prices also seem to be easing, and rapidly.

Oil prices fell to their lowest level in five months today as investors worried that the ongoing economic slowdown would continue to chip away at the demand for energy. Light, sweet crude for October delivery fell $1.88 to $100.70 a barrel on the Nymex, after dropping as low as $100.10 a barrel at one point. The contract settled yesterday at $102.58 — the lowest close since April 1. The last time crude traded below the $100 mark was April 2 Oil prices have now fallen more than $40 from the record high of $147.27 a barrel on July 11, two months ago, as a struggling global economy has cut into demand for energy. The US is leading the way in the decline in demand for oil, and the US Energy Information Administration reported last week that imports of crude in August were 200,000 barrels a day below the same four-week period last year. This pattern is repeated to some degree or another in economy after economy across the globe.

Now this decline in oil will evidently have a floor, but where exactly does that floor lie? My own view is that the decline will continue, but that it may hit bottom around $80, since at some point inflation will ease back as a major problem in a number of significant economies, and growth will rebound in some key movers (deciding which those are going to be is the tricky issue at this point), and then of course the oil price will start to head up again.

My feeling is also that we could then see quite a quick turnaround in inflation in some emerging economies like India (from the current 13% to say 7%) or Brazil (back down to the 4.5% range?) and this will then mean the negative "lose-lose" dynamic we have been seeing across a number of emerging economies of rising inflation, rising trade deficits, rising interest rates, falling currencies and falling growth can transform itself once more into the "win-win" dynamic of falling inflation, falling trade deficits, slightly lower (but still very yield differential attractive) interest rates, rising currencies and rising growth.

The interesting question is when will we hit the inflection point? Well, if we look at the NYMEX chart below, we will see that oil prices really started to take off in October 2007, and that at current rates of decline in oil prices the two curves should cross (ie 2008 prices should be below 2007 ones) sometime between October and November. Now this will be quite an important event in the emerging market economies, since given the weight which has been attached to energy and food rises in the total inflation picture, once these (for so called base effect reasons) start to clock negative readings, headline inflation should start to sink back.

GDP Growth Remains Strong

The key question then is, of course, how much will Brazil's economic growth be negatively affected by falling commodity prices, and how much will it benefit from the easing back in inflation? In the short run this is a hard one to call (although I think in the longer run commodity prices are likely to remain relatively high, and this will be more to Brazil's advantage than anything, especially if the central bank can manage to squeeze second round inflation effects out of the system.

Brazil's economic growth actually accelerated in the second quarter, so at this point there is no great sign of any formidible slowdown. Gross domestic product in fact was up 6.1 percent from a year earlier, beating all the main forecasts. Growth was fueled by a mixture of investments and exports, and was up from a revised 5.9 percent rate in the first quarter. The economy was also up 1.6% quarter on quarter, from the first quarter of 2008.

Capital investment in Q2 was up an annual 6.2 percent, the fastest pace since the second quarter of 1995. Household spending grew 6.7 percent after a 6.6 percent expansion in the first quarter. The volume of exports rose 5.1 percent, reversing a 21 percent decline in the first quarter.

Finance Minister Guido Mantega argued today that he expected Brazil's economic growth this year to be above the current government's 5 percent forecast. Mantega, who has to some extent been a critic of central bank rate increases, said economic growth wasn't stoking inflation because supply was keeping up with demand.

The Iara Field

Basically it is hard to see why some people are so pessimistic for the outlook on the Brazilian economy. The favourable demographic moment Brazil is facing in terms of the share of the population in the working age groups means there is plenty of available capacity, and the continuing development of Brazil's oil industry means that there should be a constant and adequate inward flow of capital. As if to ram this point home, Petroleo Brasileiro, Brazil's state-controlled oil company (otherwise know as Petrobras), said yesterday that its Iara offshore field contains 3 billion to 4 billion barrels of oil, making it the second giant find in a year and offering enough oil on its own to keep Brazil supplied for up to five years.

The assessment is the first estimate of recoverable oil since the discovery of the field was announced on Aug. 11. Petrobras said in January its Jupiter field in the same region contained gas quantities similar to its Tupi area, the largest oil find in the Americas since 1976. Iara is in the Santos Basin to the north of Tupi, a 5 billion- to 8 billion-barrel field announced in November. If confirmed, Iara and Tupi, which sit in non-adjacent parts of the same exploration block, could almost double Brazil's 12.6 billion barrels of proven oil reserves.

The Iara estimate is based on a well drilled in 2,230 meters (7,315 feet) of water. The final well depth is 6,080 meters. Petrobras has not said whether Iara is an extension of Tupi. Unleased and unexplored areas sit between the two fields. The block, named BM-S-11, is in two, non-contiguous parts. The Iara portion is less than a quarter the size of the Tupi portion, according to a map supplied by Petrobras.

The Outlook Is Solid

So my feeling is that within six months or so of the oil "cross-over" we should see the Brazilian economy really start to pick up speed again, and in particular we should see a strong rebound in industrial output. Brazil, remember, is still growing at a 6.4% annual rate, and while this may well drop back in Q3 and Q4, this velocity will quite possibly be attained again as the key emerging economies start to "break sweat" and head upwards towards their earlier strong upward paths. Brazil will be there amonst the leaders, as will India. But when the role call is taken, just who will be present and who will be absent is going to make interesting reading.

Whither Oil Prices?

Richard Shaw — Fri, 05 Sep 2008 20:36:06 +0000

Where are oil prices going? We don’t know. You don’t know. Nobody knows. Short-term events could drive oil higher or lower. The current trend is clearly down, but where it stops is not evident. What is an investor to do? One reasonable thing to do is nothing, if you don’t have particular oil exposure, or [...]

Four Ways to Fight the “Oil-Flation Epidemic”

Money Morning — Wed, 03 Sep 2008 00:47:08 +0000

By Don Miller Contributing Editor Want to know what the price of a barrel of oil will be in eight years? Exactly $119.50 a barrel. There’s no shortage of pundits predicting where oil... Money Morning is here to help investors profit handso...

Trans-Orient Petroleum Ltd. (TOPLF.OB): Finding Energy Solutions in Overlooked Places

QualityStocks — Tue, 02 Sep 2008 01:21:52 +0000

Trans-Orient Petroleum (TOPLF) explores for oil and natural gas resources in shale and rock, primarily in Australia and New Zealand and other under-explored regions. The company was active in exploring in Australia from 1996-2000 and revived operations in 2006 as the worldwide energy boom surged. Tran-Orient has said it will use the same technology used [...]

Striker Oil & Gas Inc. (SOIS.OB): Riding the Energy Boom to Profits

QualityStocks — Tue, 02 Sep 2008 01:18:20 +0000

Striker Oil & Gas (SOIS) develops, explores and acquires crude oil and natural gas reserves, operating along the Gulf Coast of Texas and Louisiana, as well as in East Texas and Mississippi. It is speculated that Striker has potential oil and gas reserves of $400 million in Texas and Louisiana. That equates to 32.5 billion [...]

Real Wealth Recommends Enbridge

CEO Blogger — Thu, 21 Aug 2008 23:39:04 +0000

viastockadvisors “Despite the expected pullback in oil, we’re as bullish as ever,” notes Larry Edelson, editor of Real Wealth. Here, he looks at Canadian pipeline operator, Enbridge. Track Real Wealth’s picks at: http://trackthepros.com/categories.php?category_id=1431 “Crude oil futures recently hit a three-month low after the Energy Department reported a surprise jump in oil stockpiles and weakening demand in the United States. This [...]

China’s strategic oil reserves

Tony Sagami — Tue, 19 Aug 2008 23:28:14 +0000

China plans to build its strategic oil reserves in three phases over 15 years and expects to complete the construction of its first four strategic oil reserves by the end of this year.

China will have to jump into the open market to fill those massive storage tanks so what do you think that will mean to the price of oil when the buying binge starts?

Phase 2 and Phase 3 have yet to break ground.

Drilling Offshore to Affect World Oil Prices… and other Tales from the Iraq-Pakistan Border [0]

Menzie Chinn — Sat, 16 Aug 2008 17:15:18 +0000

Various individuals have argued for drilling in the Outer Continental Shelf (OCS) as a means to affect the price of oil. This is true despite this recent assessment by the Department of Energy's Energy Information Administration, the Federal Government's nonpartisan analytical group on energy issues. From Annual Energy Outlook related analyses (June 2007):

The OCS is estimated to contain substantial resources of crude oil and natural gas; however, some areas of the OCS are subject to drilling restrictions. With energy prices rising over the past several years, there has been increased interest in the development of more domestic oil and natural gas supply, including OCS resources. In the past, Federal efforts to encourage exploration and development activities in the deep waters of the OCS have been limited primarily to regulations that would reduce royalty payments by lease holders. More recently, the States of Alaska and Virginia have asked the Federal Government to consider leasing in areas off their coastlines that are off limits as a result of actions by the President or Congress. In response, the Minerals Management Service (MMS) of the U.S. Department of the Interior has included in its proposed 5-year leasing plan for 2007-2012 sales of one lease in the Mid-Atlantic area off the coastline of Virginia and two leases in the North Aleutian Basin area of Alaska. Development in both areas still would require lifting of the current ban on drilling.
For AEO2007, an OCS access case was prepared to examine the potential impacts of the lifting of Federal restrictions on access to the OCS in the Pacific, the Atlantic, and the eastern Gulf of Mexico. Currently, except for a relatively small tract in the eastern Gulf, resources in those areas are legally off limits to exploration and development. Mean estimates from the MMS indicate that technically recoverable resources currently off limits in the lower 48 OCS total 18 billion barrels of crude oil and 77 trillion cubic feet of natural gas (Table 10).
Although existing moratoria on leasing in the OCS will expire in 2012, the AEO2007 reference case assumes that they will be reinstated, as they have in the past. Current restrictions are therefore assumed to prevail for the remainder of the projection period, with no exploration or development allowed in areas currently unavailable to leasing. The OCS access case assumes that the current moratoria will not be reinstated, and that exploration and development of resources in those areas will begin in 2012.
Assumptions about exploration, development, and production of economical fields (drilling schedules, costs, platform selection, reserves-to-production ratios, etc.) in the OCS access case are based on data for fields in the western Gulf of Mexico that are of similar water depth and size. Exploration and development on the OCS in the Pacific, the Atlantic, and the eastern Gulf are assumed to proceed at rates similar to those seen in the early development of the Gulf region. In addition, it is assumed that local infrastructure issues and other potential non-Federal impediments will be resolved after Federal access restrictions have been lifted. With these assumptions, technically recoverable undiscovered resources in the lower 48 OCS increase to 59 billion barrels of oil and 288 trillion cubic feet of natural gas, as compared with the reference case levels of 41 billion barrels and 210 trillion cubic feet.
The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher -- 2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.
Similarly, lower 48 natural gas production is not projected to increase substantially by 2030 as a result of increased access to the OCS. Cumulatively, lower 48 natural gas production from 2012 through 2030 is projected to be 1.8 percent higher in the OCS access case than in the reference case. Production levels in the OCS access case are projected at 19.0 trillion cubic feet in 2030, a 3-percent increase over the reference case projection of 18.4 trillion cubic feet. However, natural gas production from the lower 48 offshore in 2030 is projected to be 18 percent (590 billion cubic feet) higher in the OCS access case (Figure 21). In 2030, the OCS access case projects a decrease of $0.13 in the average wellhead price of natural gas (2005 dollars per thousand cubic feet), a decrease of 250 billion cubic feet in imports of liquefied natural gas, and an increase of 360 billion cubic feet in natural gas consumption relative to the reference case projections. In addition, despite the increase in production from previously restricted areas after 2012, total natural gas production from the lower 48 OCS is projected generally to decline after 2020.
Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices. [Emphasis added -- mdc]

Here is Figure 20 from the report, showing the impact on lower-48 production in the baseline and the alternative.

Figure 20 from Annual Energy Outlook related analyses (June 2007).

What exactly is "insignificant"? One can get an idea by doing a back of an envelope calculation. The 3% increase by 2030 cited by the 2007 Annual Energy Outlook analysis works out to 0.163 millon barrels per day (mbpd) incremental production. Projected world output of conventional oil in 2030 is 99.30 mbpd. This means access to the OCS would result in a 0.164% increase in output.

Let's appeal to a supply-demand framework, assuming log-linearity:

q^s = a₁ + a₂p^s + a₃X

q^d = b₁ + b₂p^d + b₃Z

Where q is log quantity, p is log price, X and Z are other shift variables, assumed to be exogenously determined. a_i and b_i are parameters, a₂ > 0 and b₂ < 0. Z could be income, for instance.

Solving the simultaneous system of equations for the equilibrium price leads to:

p = (a₁-b₁)/(b₂-a₂) + (a₃X-b₃Z)/(b₂-a₂)

Taking the total differential and holding constant the shift variables X and Z leads to the following expression:

Δp = (Δa₁-Δb₁)/ (b₂-a₂)

Substituting in some parameter values, taking Δa₁ as the percentage increase in supply, namely 0.164% (0.00164), and setting the price elasticity of demand equal to -0.4, and and price elasticity of supply to 0.3 (Perloff and Whaples has cited these figures; plausible alternative parameter values would not alter the results in a qualitative fashion) yields the following: The resulting change from baseline in 2030 is -0.00234 (-0.23%). Taking the AEO 2008 baseline estimate of 70.45 2006$/barrel in 2030, the implied reduction in price is 0.165 2006$.

Now let's conduct some sensitivity analyses/robustness checks.

Intertemporal Considerations

There have been some assertions that driving down prices in the future will have an impact today. Since petroleum is durable, there is no doubt that this must be true; the question, as always, revolves around the quantitative magnitudes. Take the 2030 impact on today; one can calculate the present value of the innovation: (1+r)²². Take r = .027 (which is the average ten year constant maturity yield minus the lagged one year inflation rate over the 1976-2008 period), one finds that the 0.165 2006$ decline in 2030 results in a 0.106 2006$ decrease today.

Alternative Estimates of Reserves

As pointed out in several venues [1], there is some debate over the amount of technically recoverable oil in the OCS that currently not accessible; the CS Monitor editorial argues that there's been a big revision in estimation technologies. That may be, but here is a quote from the February 2006 report to Congress from the MMS of the Department of Interior (page xii):

Many proponents of domestic energy security consider gaining increased access to Federal resources to be one of the biggest challenges. Part or all of nine OCS planning areas, which include waters off 20 coastal states, have been subject to longstanding leasing moratoria enacted annually as part of the Interior and related agencies appropriations legislation, or are withdrawn from leasing until after June 30, 2012, as the result of presidential withdrawal (under section 12 of the OCSLA). Some of these areas contain large amounts of technically recoverable oil and natural gas resources. The MMS estimates that conventional oil and gas resources (i.e., UTRR) in OCS areas currently off limits to leasing and development total 19.1 Bbo and 83.9 Tcfg (mean estimates). There remains today, considerable uncertainty concerning the resource potential of many of these OCS areas. The availability of additional modern G&G data could reduce this uncertainty. It is instructive to note that perceptions concerning the resource potential of the Central, Western and portions of the Eastern GOM, areas experiencing robust levels of exploration and production effort, have continued to evolve for the better over the years. Critical to the changing perception is the fact that the MMS has acquired approximately 1.75 million line-miles of two-dimensional (2-D) common depth point (CDP) seismic data and nearly 300,000 square miles of 3-D seismic data. However, the additional G&G data and information that become available to assessors between assessments is frequently mixed in terms of having a positive or negative effect on the perception of the overall hydrocarbon potential of the OCS.

This implies that the EIA's base assumptions do not appear unreasonable, on the face of it.

Alternative Elasticities

The calculations rely upon long run elasticities, and a constant elasticity along the curves (Note: linear demand and supply curves do not exhibit constant elasticities.) If the supply curve in log-price/log-quantity space was still backward L-shaped, and the supply enhancement occurred with demand intersecting along the near-vertical portion, then the price change would be larger.

What about short run effects (in 2030 say)? When new suppy comes on line, the resulting deviation in price from baseline will be commensurately larger in the short run. But by definition, over the longer horizon, prices will gravitate toward those indicated by the long run analysis.

Alternative timing

The calculations I presented focus on 2030. One could examine the effcts earlier. But as shown in Figure 20 (reproduced above), production does not even begin until 2017 assuming leasing begins in 2012 (less than four years from now!). Even assuming the 2030 effect is achieved in 2020, that would mean the resulting change in today's prices would only be 0.12 2006$ per barrel.

Strategic Interactions

Reader Anon (in commments to this post) argues against my critique of offshore drilling arguments using a game-theoretic framework:

You are wrong. Opening up more acreage to exploration will affect psychology and markets. let me explain.
A credible threat of increased supply - even ten years away - certainly does have immediate impact to the ruminations of energy policy makers from Russia to Saudi to Mexico.
If you have a large control over marginal supply (Mideast/Russia/Mexico could all do a lot more if they choose to) and you see the glimmer of another North Sea or another ANS then you rightly might adjust your policies. Strategically speaking, if you dominate global oil supply then at some price point you rightly begin to fear Competitive Entrants.
...
In the case of Oil (by no means a free market), governments control access to resources (sell it like real estate and demand whatever they like or in many cases simply make everything off limits to private capital). However, if you push oil importing nation governments too far with overly high prices then you just might trigger competition.
I hope this makes it clear that the main reason we pay such high oil prices today is the government RESTRICTED ACCESS to reserves (a global phenomenon) that has tended to dominate the oil industry landscape for so long. The secure knowledge that the US Government is EXTREMELY UNLIKELY to open up new reserves for exploitation is enough to keep exporting nations confident that they can safely continue to extract higher rent for their commodity.
So just the credible threat of a surge in new competition (a la Bush statement) may be enough to open the taps a bit more or cause a flurry of counter-competitive increased supply activity to quickly try to KILL the new threat or frighten off competitive capital investment in new supply..
...
Think Strategically. BTW - I condemn Bush for many things and I sympathize with your attitude towards this administration, however, for once, Bush is actually right this time!
...

Anon admonishes me to read Barry Nalebuff's book Thinking Strategically (actually it's Dixit and Nalebuff); I confess I have not yet done so. But having endured some amount of game theory over the years, I'm going to wade ahead nonetheless.

First, consider this exchange from April 2004, where Nalebuff suggests investing $5 billion to enable Iraq's oil industry to export a million extra barrels of oil a day, thereby negating OPEC's monopoly power. One interesting aspect of Nalebuff's argument is that he doesn't propose something like exploiting US offshore reserves. I think the reason is quite simple, and is rooted in game theory -- Iraq in principle can be a low cost producer (after security is established). Supply from offshore sources in the US would be (and is known to be) a relatively high cost (per unit production) venture relative to, say, Saudi oil production. Hence, it's not clear increasing US production can have the strategic effect often suggested. (Example, see: [2])

I do agree with Anon that a lot of world production is undertaken by state owned enterprises, which lack proper incentives for responding to price signals. But I'm unconvinced that foreign state owned enterprises would be privatized simply because the US removed its moratorium on OCS exploitation.

So, opening up production in the currently inaccessible areas of the OCS might have substantial effects (perhaps on trade balance, or oil company profitability, Federal leasing revenue), but in my view is unlikely to have a substantial impact on oil prices (just as in the case of opening up ANWR).

As an aside, John McCain is still supporting a gasoline tax holiday [3], so on this count, I remain puzzled.

Technorati Tags: oil prices, outer continental shelf, offshore drilling, oil reserves, elasticities.

Ameriwest Energy Corp. (AWEC.OB) is “One to Watch”

QualityStocks — Mon, 16 Jun 2008 20:20:40 +0000

Ameriwest Energy is a domestic oil company with one very specific goal: to decrease foreign oil dependency by targeting pre-existing yet underdeveloped American oil reserves. Vast stores of oil still remain all over our country’s western regions, left unrecovered after traditional extraction methods have run their course. More than half of the oil originally discovered [...]

MARKET COMMENT May 21, 2008 One way Nigerians spend a romantic evening is watching the after-glow of another terrorist attack on oil production facilities.

David Fry — Thu, 22 May 2008 00:21:06 +0000

MARKET COMMENT May 21, 2008 One way Nigerians spend a romantic evening is watching the after-glow of another terrorist attack on oil production facilities. Well, it’s a cheap date! This leads me to my ongoing bitch complaint regarding the lack of “any” energy policy in the US since the first oil embargo in 1973. I mean, c’mon--34 years of no action!