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Wednesday's "Earnings Beat" Makes This The Perfect "Bad-Market" Tech Stock

In last week’s Private Briefing report Our Experts Show You the Stocks to Pick in a ‘Stock-Picker’s Market’,” Money Map Press Chief Investment Strategist Keith Fitz-Gerald identified SanDisk Corp.(NasdaqGS: SNDK) as one of three stocks to buy in the face of the stock market sell-off.

And now we see why…

  • oil price

  • Play the Bakken Oil Boom Like Buffett Energy oil pumping small

    Many investors have heard of the Bakken oil field in North Dakota and Montana, but most are unaware of how important this formation is becoming to the U.S. economy.

    More germane to investors is the fact that there is still a lot of money to be made from Bakken oil in the months and years ahead.

    Just ask Warren Buffett.

    He spotted the potential of Bakken oil well ahead of most and bought a non-energy company that would benefit greatly from the boom. Three years ago he bought Burlington Northern Santa Fe (BNSF) Railway Co. for $26 billion.

    That railroad is now one of the main beneficiaries of the Bakken oil boom. (And people thought he just had always wanted to own a train set!)

    "We're the 1,000-pound gorilla in the oil markets," BNSF CEO Matt Rose told Bloomberg News. "Crude by rail is going to be really strong for us. It's been a real benefit to us to replace some of that lost coal business."

    The Bakken oil formation isn't just an investing opportunity; it's transforming the U.S. energy landscape.

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  • Where Oil Prices Are Headed In the Face of the Fiscal Cliff You have heard all the stories of what will happen when the U.S. economy falls over the fiscal cliff.

    As I write this, it appears that will happen--at least on paper.

    Of course, it will take some time for the tax increases to kick in, while the automatic spending cuts may take a month or longer.

    That may make it easier for some Members of Congress to act. Since the taxes will have technically increased, it will be easier for them to vote for an artificial tax cut.

    I consider this the pinnacle of absurdity.

    Subjecting most Americans to this charade-making them vulnerable to cuts in paychecks, dividends, and social security benefits merely to make some political brownie points-is the height of travesty.

    But here we are.

    Even if there is a this weekend or Monday, nobody will know what that means for several weeks. This will drag the drama on for a while longer as the precocious children inside the Beltway refuse to play on the same ball field.

    Now we all know how this will end. There will be a stopgap measure rather quickly (probably around the time most receive that first paycheck of the New Year) to prolong the process into the first quarter - right into yet another showdown on increasing the debt ceiling.

    Isn't there anybody else out there as sick of this as I am?

    But in the end, we are interested in what the shenanigans mean for the energy sector.

    Oddly enough, gas and oil prices have acted as if the cliff were an ant hill.

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  • 2013 Oil Price Forecast: Why Oil Remains a "Must-Have" Profit Play Next Year One of the most important topics we discussed in Moscow last week were the various forecasts of where crude oil prices are likely to be in 2013.

    These 2013 oil price forecasts were all over the place, owing to the high level of uncertainty on a number of basic elements.

    According to the Russian Ministry of Energy, or Minenergo, the "official" government estimate has oil prices low - at about $80 a barrel in 2013.

    However, there were other estimates floating about. The Ministry of Finance (MinFin) set up what can only be described as a recession approach. That figure puts oil prices at $62-$65 a barrel.

    Then there was the Ministry of Economic Development (MED). MED considered both domestic and external trade considerations. The estimate coming from this ministry was lower than that of Minenergo, but at $75 a barrel was higher than that of MinFin.

    Against this backdrop of competing forecasts made by battling Russian ministries, estimates from the outside including my own are much, much different-as in decidedly to the upside.

    Granted, all of the non-Russian suggestions cite the three unknowns limiting the cost of crude elsewhere: the fiscal cliff, the Eurozone debt crisis, and the expected levels of productivity and demand coming from China.

    Nonetheless, a strong consensus did emerge from North American and European experts during our sidebar conversations in Moscow.

    The overwhelming view was that oil prices will be moving higher next year, although the continuing volatility will guarantee that this is hardly going to be a straight line advance.

    Even still, there will be a number of factors that will push Brent and WTI prices as much as 20% higher next year-particularly in the first quarter.

    Here's why oil will still remain a "must-have" investment next year.

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  • How the Biggest Investors Are Playing the "New World Order" in Oil and Gas Thanks to the fracking boom of the last few years North America is now on a path toward energy self-sufficiency.

    In fact, the International Energy Agency (IEA) now believes that, thanks to astonishing growth in oil and natural gas output, the U.S. could even become a net exporter of natural gas by 2020, and even net-energy self-sufficient by 2035.

    According to IEA estimates, the U.S. is already the world's No. 2 natural gas producer.

    The IEA has also indicated that increasing production from Canadian oil sands means North America could become a net oil exporter. And by 2035, it's forecast that nearly 90% of Middle Eastern oil exports will find a home in Asia.

    These tectonic energy shifts have not gone unnoticed by OPEC and large state-owned energy companies. Major Asian and Middle Eastern interests have already made major acquisitions in Canada and the U.S., with an eye towards many more.

    Every day it seems the energy scene is changing at a lightning pace, creating a new world order in energy.

    So to gain further insight into this rapidly changing climate, I recently sat down with energy consultant Peter Barker-Homek, a true energy insider.

    Peter is the founder of Eta Draco, an advisory firm focused on building operations and capital structures to provide for enduring growth and to anticipate cyclical downturns for small- to medium-sized enterprises.

    Mr. Barker-Homek knows more than a thing or two about the global energy sector.

    As the previous CEO at TAQA, the Abu Dhabi national energy company, and a seasoned energy executive in a Fortune 20 company, Peter has completed $40 billion in energy-related transactions.

    He has more than 20 years' experience in major markets worldwide, and even served in the U.S. Department of State and the U.S. Marine Corps as an Officer/Pilot. He has appeared on CNN, BNN, CNBC, Sky News, Bloomberg TV, BBC Radio, Al Jazeera, and CrossFire, and is regularly cited in industry journals and periodicals.

    I think you'll enjoy what Peter had to say during our recent Q&A.

    If I did my job right, some of it may even shock you.

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  • The Impact of Shale Oil Means the Tables Have Turned in Our Favor The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industry's growing natural resources phenomenon.

    We've witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.

    After seven long decades of importing oil, the U.S. seems only a few years away from reversing the flow, largely from shale technology not only in Texas but several areas around the country.

    In 2005, the U.S. reported net imports of 13.5 million barrels per day, or almost two-thirds of its oil needs, according to Raymond James. By the end of 2012, net imports are projected to fall to 8.6 million barrels per day, which is about half of the country's current consumption.

    By 2020, the estimated gap between supply and demand narrows considerably. Take a look...

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  • Are the Russians on the Verge of a Major Arctic Oil Coup? As I move into the main meetings here in Moscow, something unexpected has joined the conversations on oil prices, European pipeline prospects, liquefied natural gas (LNG) trading scenarios, and the prospects of unconventional shale.

    That something is venture capital funding.

    The Kremlin has developed several venture capital funds with potential state-supported investments amounting to at least $12 billion.

    It may be early yet, but I see signs of where these new efforts may be directed.

    You should watch out for two aspects with this story.

    The first must happen in Russia.

    But the second is likely to take shape in an unexpected place: Boston, MA.

    Here's why. It has to do with Arctic oil.

    Several years ago, then-Prime Minister Vladimir Putin declared that the under-used and under-equipped shipbuilding sector would be transformed into a global leader in the design and construction of offshore platforms and drilling rigs.

    Of even greater interest was the initial challenge given at the time - to develop a whole new generation of ice-resistant platforms for Arctic drilling.

    Moscow had already recognized it could arrest a serious decline in its mature Western Siberian fields only by moving out in three directions. They are:

    • Into highly promising but infrastructure-poor Eastern Siberian;
    • Onto the continental shelf; or,
    • North of the Arctic Circle.
    Then the U.S. Geological Survey (USGS) issued its long-awaited Circum-Arctic Resource Appraisal (CARA).

    This major multi-year effort evaluated petroleum resource potential for all areas north of the Arctic Circle (66.56 north latitude) having at least a 10% chance of one or more significant oil or gas accumulations (50 million barrels of oil equivalent or above).

    CARA concluded that 84% of the total undiscovered oil and gas left in the world is sitting offshore, the bulk of it in three huge Arctic basins.

    Russia, the survey concluded, controlled the largest single chunk of it.

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  • Put These Shale Oil Fields on Your Radar for Energy Profits Energy companies in search of the next big shale play are scouring shale oil and natural gas fields in Oklahoma and South Dakota.

    The shale oil fields in the two states remain largely unknown to energy investors.

    As Money Morning reported Nov. 27, fracking technology has opened vast shale oil and gas fields that previously had been uneconomical to exploit.

    With rapid growth in recent years, so-called unconventional oil has accounted for about 2 million barrels per day of production in 2012.

    In Oklahoma, where oil was discovered in 1897, conventional oil production peaked in 1927, and the state's fields were thought to be exhausted.

    Oklahoma's main field, the Anadarko Basin in the western half of the state, has yielded most of Oklahoma's oil and natural gas in recent years.

    Now drillers are targeting the basin's Woodford shale layer.

    One of the Most Unknown -and Promising - Shale Oil Fields

    One of the companies drilling in the Woodford shale layer is Continental Resources (NYSE: CLR), who told Reuters the site is "one of the thickest, best-quality resource shale reservoirs in the country."

    Continental is known for its success drilling in North Dakota's Bakken, one of the best-known shale oil fields.

    At 3,300 square miles in area, the Woodford shale layer is smaller than the 13,000-square-mile Bakken shale oil field or the 5,000-square-mile Eagle Ford field in Texas. But the Woodford shale reservoir is thicker, at 150 to 400 feet thick, compared with Eagle Ford at 100 to 250 feet and Bakken at 10 to 250 feet.

    The U.S. Geological Survey estimates Woodford contains 400 million barrels of recoverable oil. The site is also believed to contain 250 million barrels of condensates and lots of natural gas.

    Continental Resources is one of the bigger players in the Woodford reservoir. The company has increased its acreage holdings in Woodford at an even faster rate than it has in the Bakken. From 2009 to October 2012, Continental's net acreage in Woodford rose 1135 to 316,000 acres while its net acreage in the Bakken increased by 51% to 915,000 acres.

    Shale Oil: Moving South from the Bakken

    Another developing shale oil play that is relatively unknown - the Tyler formation - is in the Dakotas.

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  • These Signs Point to Higher Oil Prices in 2013 On Monday, oil prices climbed above $90 for the first time in over a month, as encouraging data from China subdued concerns about going off the fiscal cliff.

    Those worries have helped keep oil prices mired in the $85-$90 range after flirting with $100 in mid-September.

    But positive manufacturing data from China, the hopes for a fiscal cliff resolution and a subsequent market rally, along with the ever-present risk of violence and chaos in the Middle East, are all sending oil prices higher today.

    Those factors, as well as several others, should keep the pressure on for higher oil prices.

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  • Oil Prices: As the WTI-Brent Spread Widens, Refineries Are Set to Advance Brent and WTI crude oil prices have been on a downward trajectory. Recently Brent had declined for seven consecutive trading sessions while WTI had been down for five.

    Given the importance these benchmarks have in pricing crude worldwide, it is useful to review what they are before talking about their widening spreads.

    Brent and WTI (West Texas Intermediate) are the two principal crude oil price benchmarks of global trade. Brent is set in London, WTI on the NYMEX in New York.

    As I have observed in Money Morning on a number of occasions, neither benchmark actually reflects the quality of the oil traded worldwide.

    On average, 85% of the oil in the international market on any given day is more sour (having a higher sulfur content) than either of these benchmarks. That means the actual trades are done at a discount to the price of one or the other of these standards.

    Both are denominated in dollars, the currency in which virtually all oil consignments internationally are priced. That certainly is one primary reason for their continued use.

    In addition, the daily liquidity of futures contracts traded in the world's two largest investment locations is yet a reason for their use.

    Finally, with more than 200 benchmark rates for crude existing throughout the world, most having insufficient volume to constitute a basis for oil prices, there needs to be yardsticks to determine pricing differentials and swaps.

    Those common yardsticks should be the most liquid and highest volume trading contracts available.

    Brent and WTI fit the bill in all of these aspects, despite the fact they don't reflect the lower quality of most oil traded.

    Oil Prices: Global Markets Favor Brent Crude

    Still, the most interesting development since mid-August 2010 has been the following: despite representing lower quality oil, Brent has been trading at a premium to WTI.

    Of the two, Brent has more sulfur content. That should result in a lower price rather than higher comparative price.

    Actual trading conditions prompt a spread in favor of Brent for several reasons.

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  • Why Oil Prices Are Entering a "New Normal" One of the things I have learned from almost four decades of doing this is that oil and gas specialists know a great deal about what they do for a living.

    However, few of these specialists really understand enough about what the person to the right or left of them does. This tends to breed tunnel vision.

    And these days it has become a serious problem.

    That's because what is now hitting the oil and gas markets requires a more expansive and integrative understanding of what is actually taking place.

    The truth is energy markets are evolving.

    We are entering a period in energy and oil prices that I have begun calling the "New Normal."

    You see, a volatile, dynamically changing combination of factors now undermines the traditional way of viewing oil and gas markets.

    And it is about to get a whole lot more unnerving for the average analyst who still insists on pushing square pegs into round holes.

    Unfortunately, for the old school aficionado, we are rapidly moving into new territory. Here, market machinations are occurring that defy the "traditional" explanations.

    Oil Prices and the Talking Heads

    You know what I mean by "traditional."

    The talking heads on television try to explain the latest spurt or dive in oil prices by relying on the same trite and tired lineage of explanations.

    In just the last month, we've seen movements in energy prices justified solely on the following factors:
    • A supply glut in Cushing, Okla.;
    • Fluctuations in the euro-dollar exchange rate;
    • The European credit crunch;
    • The latest unemployment figures;
    • Inflation;
    • Manufacturing, housing, or production figures.
    But it really doesn't work this way anymore. While such factors are not completely irrelevant, they are also not calling the shots.

    There are several factors contributing to this New Normal, but I will be restricting my comments this morning to just three.

    They are:
    1. The balance between conventional and unconventional production;
    2. Increased market volatility; and
    3. Global geopolitical matters.
    So let's get started.

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  • You Can Drill All You Want, Oil Prices Are Still Headed Higher Today I want to focus again on oil prices. It seems that some TV pundits have never heard (with apologies to Alexander Pope) that a little knowledge is a dangerous thing.

    Some people on Wall Street believe that by scaring the individual investor they stand to make a greater profit for themselves.

    Over the summer, there was a report issued by Credit Suisse that said that oil could hit $50 a barrel. We've also seen predictions on CNBC saying $40 a barrel. Others think that oil prices could fall even go further.

    What I am telling you now is that these views do not reflect the actual market or the new reality we find ourselves in today.

    A lot of this sentiment stems from the idea that we have now increased our supplies here in the United States. Some political candidates even said that they guaranteed "$2.50" per gallon gasoline if they were elected.

    "Drill, baby, drill" has become something of a national catchphrase.

    The problem is that prices are not just reflective of new supplies, either too much or too little. By focusing only on how much is there, these analysts provide a fundamentally distorted view of the oil market.

    Yes, the rise of new sources has altered the picture. But so has the rise in demand globally and at a rate much faster than anticipated.

    In fact, the impact of unconventional oil (like our huge sources of shale oil) is now projected to be less than expected, even with additional volume coming on line.

    And one report issued last week reflects that fundamental view and explains why oil prices are set to rise, not fall in this age of expanded unconventional oil and gas.

    The Fundamentals Are What Matter to Oil Prices

    I want to introduce you to a company called Bernstein Research.

    They are regarded as the top energy research company in the world by their institutional investors. They're in 40 countries. They win awards every year for having the best analysts in the sectors they cover.

    And they are very successful in their forward focus because they emphasize the fundamentals.

    Last week, Bernstein Research released a detailed report reflecting the position I have been holding for some time-oil prices are headed higher.

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  • Ignore the Doom-and-Gloom Crowd When They Talk About $40 Oil I just returned from a week down South with a few of my energy clients. It's good to get my hands dirty and remind myself firsthand what is going on at the project level of some of the country's top energy companies.

    But when I returned home this weekend, I made the mistake of flicking on the television and opening the newspaper.
    I can't believe that the pundits are now predicting that oil will fall to $40 a barrel. They also are projecting that the entire natural gas sector is going to collapse.

    Here we go again.

    Yes, we are wrestling with an energy sector that remains gun shy on elements from market volatility to geopolitical tensions.
    And sure, $40 a barrel is possible, but only in an improbable situation where global demand for oil completely collapses, along with the world economy.

    But we are in a new reality. And such doom and gloom predictions are highly oversimplified and potentially dangerous to you as an investor.

    Here's why.


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  • Why a Strategic Petroleum Reserve Release Won't Help Oil Prices or President Obama With oil prices showing no signs of retreat during the final months of the U.S. presidential campaign, beltway insiders are turning to one misguided solution to combat rising oil prices.

    Releasing oil from the Strategic Petroleum Reserve (SPR).

    Trial balloons floated all over Washington during the past few days. The only reason politicians didn't move on this sooner (say a few months ago) was the price level.

    Until the last month or so, both oil and gasoline prices were heading in the other direction. Near-month futures contracts for West Texas Intermediate (WTI), the crude oil benchmark traded on the NYMEX, were below $78 a barrel in intraday trade toward the end of June, while the same futures for RBOB (the NYMEX traded gasoline contract) were at $2.55 a gallon.

    At the time, all the sage pundits predicted that oil would fall below $60 a barrel; some even suggested that prices could approach $40. On the gasoline side, these same wise guys were proclaiming we may see prices at the pump breach $3.

    Everything has changed quickly.

    Yesterday morning the markets opened with WTI 23% higher than late June and RBOB up by more than 20%. Oil stands at more than $96 a barrel in New York, while Brent has exceeded $116 a barrel in London. And retail gas prices are once again approaching $4 a gallon.

    Recently, I discussed why oil prices are moving up. But for some politicians, including the fellow running for reelection at 1600 Pennsylvania Avenue, those prices are becoming a job liability.

    So it's back to hitting the SPR.

    But there are four reasons why tapping the SPR won't make oil prices any cheaper in the end.

    Maybe you should let your Congressman know about them...

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  • What EROEI is – and How to Use It In Friday's Oil & Energy Investor, I began a discussion about the importance of a metric known as Energy Returned on Energy Invested (EROEI).

    As our research disclosed in the "Your Future: The Ultimate Pyramid Scheme" documentary, the factor is becoming a substantial element in the availability and cost of energy in general.

    But oil is the most critical energy source in this discussion.

    Our research has found that the situation will not be improving. We will be reaching a point when our need for exponential growth in energy, the environment, and the economy will become unsustainable. From there, we will experience a tipping point, and then a major collapse.

    This will require that each of us change the way we structure our investments, secure our assets, and provide for our families.

    However, in the interim, there will also be some amazing opportunities to make unparalleled profits in the energy sector.

    And, in all of this, EROEI will be figuring in important ways.
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  • Oil Price Manipulation: What President Obama Doesn't Understand About Oil
    If you think gasoline prices are volatile now, stay tuned. President Obama's plan to clamp down on oil speculators is going to make things worse.

    I'm sure you've seen the news by now.

    The president wants to clamp down on so-called "oil price manipulation" and has proposed a $52 billion plan to increase f ederal supervision of oil markets.

    What the p resident doesn't understand is that the oil markets already have this function built in.

    Speaking from the Rose Garden last Tuesday, President Obama noted specifically that we can't afford to have "speculators artificially manipulating markets buy buying up oil, creating the perception of a shortage and driving prices higher - only to flip the oil for a quick profit."

    Evidently, the president hasn't passed Econ 101.

    If he had he would know that prices on everything from eggs to houses are by their very definition self regulating.

    Speculation, as opposed to manipulation, is a vital part of the markets - they are not the same thing despite the fact that the p resident is interchanging the terms.

    If prices are too high, people stop buying. If prices are too low, they stop selling. By authorizing $52 billion in oversight, he's chasing a ghost that he'll never catch.

    The Real Problem with Oil Prices

    The real problem is that the United States consumes 20% of the world's crude but only produces 2%.

    It comes a time when oil demand is expected to rise more than 25% (to 105 million barrels a day) by 2015, according to a new report titled Oil and Gas: A Global Outlook by Global Industry Analysts, Inc.

    If you want the biggest piece of the pie from the deli, you have to pay a premium.

    There is no hocus pocus and there's no additional oversight necessary. Rather, we need to enforce the laws we already have on the books.

    Sure the $10 million fines he's jawboning about (up from $1 million) sound great but they're really a non-starter. In fact, given that Exxon Mobil Corporation (NYSE: XOM) alone generated an average of $1.33 billion a day in 2011, they're little more than an acceptable cost of doing business. Nice try.

    Take gasoline, for example.

    Prices have jumped 78.2% since the p resident took office and that doesn't sit well with the party faithful who are convinced that evil oil price speculators are responsible.

    They are distraught that traders put hundreds of billions of dollars into energy every month because that may cause prices to rise.

    This is not complicated. Any time there are more buyers than sellers, prices go up. Any time there is more demand than supply, prices go up.

    Contrast what's going on in the oil markets with what's happening in natural gas.
    Prices for natural gas are at ten- year lows. Demand has risen but supply has risen faster. There are more suppliers than buyers. So natural gas prices drop.

    Natural gas, by the way, is traded by many of the same traders who trade oil.

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