Global Markets

Mideast Crisis Update: Don't Count on the Saudi Oil Supply

As the autocratic rule that has dominated the Middle East for decades continues to unravel, volatility in the global oil markets continues to point toward one overriding concern: How can we maintain an oil-flow balance in the face of this escalating uncertainty?

Global oil prices spiked to their highest levels in more than two years on Friday because of worries that the unrest and resulting production curbs in Libya would spread to other oil-exporting countries.

Oil prices retreated a bit yesterday (Monday) in the aftermath of several developments that investors perceived as positive. In the first, reports said that Libyan protesters were allowing oil shipments to resume from certain parts of the country. And in the second, Khalid Al-Falih, the head of state-owned Saudi Aramco, said that that "all incremental needs" for extra oil have been met.

Of course, even with the Saudi oil supply pledge, these developments offer only a momentary respite in the Mideast crisis. Almost two-thirds of the world's known conventional oil supplies are located in the Middle East region. And the question that isn't being answered – or even asked – right now is this: Are oil supplies sustainable in the face of a longer-term crisis?

The answer to that question will leave you feeling less than sanguine.

To understand why this crisis is worse than most believe, please read on...

Buy, Sell or Hold: The Libya Crisis and Record Oil Prices Will Ground United Continental Holdings Inc. (Nasdaq: UAL)

The growing Middle East unrest – and the impact that the turmoil and the resulting uncertainty is having on global oil prices – is clobbering the airline sector's bottom line. The crisis is far from over, and the implications of the higher fuel costs have not yet been fully discounted by the market.

The bottom line: It's time to sell United Continental Holdings Inc. (Nasdaq: UAL) – before it breaks down to new levels of weakness (**).

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The Middle East Crisis: Egypt, Libya and Triple-Digit Oil Prices

Given the events that we've seen in Egypt and elsewhere in recent weeks – as well as the developments we've seen in Libya in recent days – there's only one conclusion to reach.

We are right now looking at the prospect of significant and sustained instability in a region that's home to two-thirds of the world's known crude oil reserves.

The Middle East crisis – and the unsettling reality it represents – has already sent tremors through the international energy sector. Oil prices are on the march. And this is merely the beginning.

The problems will likely get much worse.

But forewarned is forearmed: Even if the Middle East crisis continues to escalate, we can predict how the global energy sector will be affected. In fact, if the crisis reaches the severity that I'm expecting, it will send the world's energy sector through three very predictable phases.

And each of those phases affords investors with very specific profit opportunities – if they know what to expect.

For the three phases to watch for, please read on…

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Global Bond Market Outlook: Three Ways to Dodge the Looming Bear Market in U.S. Bonds

Put 100 investors in a room and most will tell you how worried they are that the still-bullish U.S. stock market is going to betray them for a third time in slightly more than a decade.

But I submit that it's the bonds that these folks are right now holding that should be the real focus of their concern – and for one very good reason: Most investors view the global bond market as a stodgy source of fixed income, when it's actually the largest, most complex and most sensitive capital market in the world today.

To discover the three best bond-related moves to make now, please read on…

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Oil Prices Surge to Two-Year High on Middle East Turmoil

Protests in the Middle East drove oil prices to a two-year high yesterday (Tuesday) as anti-government violence spread in Libya, threatening the nation's oil industry and raising the possibility the contagion could soon affect larger producers in the region.

Oil jumped more than $7 a barrel, breaching $98 for the April contract of West Texas Intermediate (WTI) crude on the New York Mercantile Exchange. Meanwhile, Brent crude climbed as much as 2.7% to $108.57 on the ICE Futures Europe Exchange.

"Oil is being bought on the risk that this contagion will spread through the Middle East," Jonathan Barratt, managing director of Commodity Broking Services in Sydney, told Bloomberg News by telephone. "This effect is a knee-jerk reaction to the fact that this could spread."

Libya is the latest chapter in a saga of unrest that began in Tunisia in January and has raced through North Africa and the Middle East in recent weeks.

Iran added to the tension in the region yesterday by entering two of its naval ships into Egypt's Suez Canal headed toward the Mediterranean. Israel considers the presence of Iranian warships sailing through the canal "a provocation," Foreign Ministry spokesman Yigal Palmor told Bloomberg.

Fears of massive disruptions in the market have oil traders on edge and the energy markets are now braced for an even sharper run-up, according to Dr. Kent Moors, a noted energy expert and editor of the Oil and Energy Investor.

"That traders do not regard this as a short-term problem is seen in the futures contract curve. We have an escalating and contango market, one in which each month further out has a higher price than earlier months," said Moors. "The volatility will now kick in big time, and that will further unnerve the trading environment."

Libya's importance as an oil producer is more symbolic than anything else.

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Global Investing: Five Foreign Revenue Stocks That Will Boost Your Profits

"Globalization" has become one of the top financial buzzwords in recent years – and with good reason. The economies of many developing-market countries have achieved an important critical mass, meaning they're now growing a lot faster than much more-"mature" counterparts as the United States, Europe and Japan.

The upshot: Investors who ignore these opportunities in favor of a "U.S.-only" investment regimen face a future marked by lackluster returns.

In fact, the U.S. stock market ranked just 42nd in the world in terms of performance in 2010, despite posting a 12.78% return that was well above its historical average, according to results compiled by Bespoke Investment Group (BIG). Germany did a little better, leading the G-7 nations with a 16.06% return, but Great Britain managed just 9.00%. Japanese-stock-market investors suffered a loss of 3.01%, while those in Greece endured a 35.62% freefall.

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Global Food Prices: Five Reasons to Buy Rice Futures

The world is finally waking up to the fact that global grain prices are destined to head higher – much higher.

Nasty weather in key agricultural markets around the world has savaged the global grain crop, meaning worldwide supplies can't help but be squeezed. Australia, for instance, is experiencing additional flooding in areas that were already battered by the torrential rains of November, December and January.

And as if the supply-related increase in agricultural commodities wasn't enough, there's also the U.S. dollar – and the so-called "race to the bottom" – to contend with. Make no mistake: The endless devaluations in the greenback are having a worldwide impact on agricultural commodity prices. Since commodities are priced in dollars, these devaluations translate into higher prices for grains and other food-related commodities.

Short supplies and rising prices are bad enough, but concerns about these first two realities are creating an additional catalyst that completes a trifecta for higher agricultural commodity prices.

And that third catalyst is panic buying – especially with rice, which is a basic table staple in Asian markets. For instance, The Saudi Gazette last week reported that Bangladesh recently tripled its rice-import target and Indonesia just purchased 820,000 tons of Thai rice, nearly five times the volume initially sought.

"This is only the start of the panic buying," Ker Chung Yang, a commodities analyst at Singapore-based Phillip Futures, said in The Gazette report. "I expect we'll have more countries coming in and buying grain."

For global investors, there are five reasons why it's definitely time to buy rice futures.

To understand those five reasons - and to see how to profit - please read on...

Egypt's Uprising: Population Growth – Not Politics – Remains This CIVETS Economy's Biggest Challenge

Seven months ago, global investment bankers had anointed Egypt as the "next big thing" in the world of emerging-markets investing – naming it as one of the exciting "CIVETS" economies that every investor had to consider.

At that time, in a column here in Money Morning, I told you that I had my doubts, and said that "with an 82-year-old dictator and a radical Islamist movement, it doesn't look that attractive to me."

Given Egypt's uprising of the past two weeks, that call must look like it was quite prescient.

But here's a surprise: Egypt's brewing political troubles weren't the reason that I told you to steer clear of that economy. In fact, even with the escalating violence of the past couple of days, there's still another issue that remains Egypt's greatest challenge.

Investors should take heed. The challenge that faces Egypt is the same problem that plagues a number of the world's other emerging-market economies. That challenge will prompt us to question the long-term growth projections "experts" are throwing down for some of these other highly touted investment plays.

For Hutchinson's analysis of supposed "hot" markets around the world, please read on...

Beat the BRICS: The Three Latin America Markets You Can’t Afford to Ignore

The stock exchanges of Colombia, Peru and Chile agreed last November to merge their trading, giving international investors access to roughly 600 stocks – more than any single country in Latin America.

Earlier this month, the trio demonstrated just how serious they were, with the Peruvian and Colombian stock exchanges entering into a full-blown merger agreement. These are the three best-run countries in Latin America, with a combined gross domestic product (GDP) of more than $500 billion.

If they get their act together, it'll be these three countries – and not Brazil, that much-ballyhooed "BRIC" country – that are the "must-have" havens for our money.

Let me show you why…

For three hot Latin America profit plays, please read on...

China's Global Currency Expansion Bringing More Yuan Denominated Products to Market

Chinese regulators plan on developing more yuan-denominated products and allowing more offshore yuan investment opportunities in the continued push for the global expansion of China's currency.

More yuan-denominated bonds, foreign direct investment (FDI) opportunities and eventually initial public offerings (IPOs) will hit the markets in coming years as China gradually allows its currency, also called the renminbi, to be more accessible in international trade and investment. Chinese regulators also want to support international development of Chinese entities.

The People's Bank of China (PBOC) earlier this month announced that it has started looking into permitting Chinese companies with overseas yuan accounts to engage in FDI in the mainland. The central bank also recently said it would allow mainland companies to conduct overseas direct investments (ODI) with the yuan.

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