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While Washington Stews, You Can Cash In on the Biggest "Tax-Inversion" Deal in History

Back in June 2012, we recommended that you pick up shares of Big Pharma player Abbott Laboratories Inc. (NYSE: ABT). The reason: Abbott was planning to split in two at the end of the year, meaning folks who took our advice would end up with stakes in two companies for the price of one.

There was more than bargain-basement thinking at work here.

You see, these corporate breakups – known as spin-offs – have a habit of turning into market-beating profit plays. And the newly minted spin-off firms often end up as takeover fodder – also at big profits.

Abbott followed part of that blueprint.

  • Oil Prices

  • Ride the Boom With These 5 Bakken Oil Shale Stocks The Bakken oil shale boom is the opportunity of a lifetime.

    With activity ramping up rapidly - production has soared from 100,000 barrels a day in 2005 to 494,000 barrels a day in February - the Bakken oil shale boom could turn out to be just as big, if not bigger than the California gold rush 1849.

    Last week we told you about how the Bakken oil shale boom has affected Williston, ND. The town has an absurdly low unemployment rate of 0.8%, and the average pay for the oil company jobs is about $90,000.

    One way to take advantage of this boom yourself would be to move to North Dakota.

    But with dozens of companies flocking to the region, a much easier way to get in on the boom is to simply invest in some Bakken oil shale stocks.

    The allure of big profits has attracted dozens of companies to the Bakken oil shale formation. The list ranges from industry giants like Exxon Mobil Corporation (NYSE: XOM) and ConocoPhillips (NYSE: COP) to pipeline companies like Enbridge Inc. (NYSE: ENB).

    With oil prices expected to keep rising, and the production in the Bakken not expected to peak until 2020, it will be hard not to make money in Bakken oil shale stocks.

    "Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," Harold Hamm, CEO of Continental Resources Inc. (NYSE: CLR) - one of the major players in the Bakken oil shale boom -- told The Wall Street Journal last October. "We expect our reserves and production to triple over the next five years."

    Still, some Bakken oil shale stocks will benefit more than others.

    For example, the really big companies like Exxon, with large global operations, will see less of a boost than companies with operations concentrated in the Bakken and other North American shale deposits.

    Money Morning has taken a look at these Bakken oil shale stocks and found five companies positioned to benefit most from this historic find's tremendous potential.

    To continue reading, please click here...

  • 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.

    To continue reading, please click here...
  • How to Profit from a Drop in U.S. Gas Prices U.S. gas prices have slipped from their recent peaks of $4.00 and above – is there a profit play here? Indeed, Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business’ “Varney & Co.” to discuss what’s going on with U.S. gas prices. Watch this clip to hear Fitz-Gerald explain what’s driving gas prices. He also shares two stocks investors can buy to profit from this move – if they act fast. Read More...
  • Election 2012: President Obama Can't Solve High Oil Prices with Trading Regulations The Obama administration lost its bid to get the Buffett Rule (which would have increased taxes for those earning $1 million or more) passed, so on Tuesday it shifted focus to another battle: Slowing the rise in oil prices.

    U.S. President Barack Obama's proposed solution to painfully high prices is to limit speculation in oil markets.

    The new bids that the president proposed seek more money ($52 million) for market enforcement and monitoring activities, call for loftier penalties for market manipulation, and require oil traders to put up more of their own cash for transactions.

    At a White House press conference Tuesday President Obama said, "None of these will bring gas prices down overnight. But they will prevent market manipulation, and help protect consumers."

    The move is in stark contrast with Republicans, who have been lobbying for more domestic drilling to help alleviate the near record-high gas prices. Paying more at the pump takes a bite out of consumer spending and has the potential to stall the slow-going economic recovery.

    The maneuver, however, may be focused more on political strategy than consumer interest.

    It is extremely doubtful that House Republicans will pass any measure that aims to implement more limits on Wall Street while the GOP looks to reduce regulation of the financial sector.

    House Speaker John Boehner, R-OH, called it a political ploy and disparaged President Obama for not using the means already at his disposal to deal with the oil situation.

    "The president has all the tools available to him if he believed that the oil market is being manipulated," Boehner said. "Where's his Federal Trade Commission? Where is the SEC? He's got agencies there. So instead of just another political gimmick, why doesn't he put his administration to work to get to the bottom of it?"

    To continue reading, please click here...
  • Stable Oil Prices are the Key to Chinese Growth Last week, oil prices dropped on concerns that Chinese demand might begin to slip.

    It appears those concerns are going to be short lived.

    According to a report by the IMF this morning, Chinese GDP will rebound strongly to 8.8% in 2013, up from a dip to 8.2% in 2012, propelled largely by increased domestic consumer consumption.

    That's important to note since the Chinese also need reliable energy sources to continue this remarkable, ongoing boom.

    After all, China needs to procure oil supplies from around the globe to facilitate this sort of growth.

    Click here to continue reading...

  • High Oil Prices: Even $200 Oil Won't Cause a Recession Last Friday's weak unemployment numbers, with only 120,000 jobs created, brought renewed wails that high oil prices were causing a recession.

    Having heard this refrain so many times, I thought I'd dig a little deeper.

    After all, a peak of $145 per barrel in the West Texas Intermediate oil price pretty well coincided with the onset of the 2008 recession.

    The question is whether or not high oil prices are always correlated with an inevitable downturn.

    For instance, when you look closer, oil was not to blame in 2008. Other factors were much more serious culprits, including the housing crisis (by then in market collapse) and the banking crisis that followed.

    Between them they are the hallmarks of financial crisis that brought on the nasty recession.

    To find out why, we need to do a little arithmetic.

    High Oil Prices and the Economy

    The U.S. Bureau of Labor Statistics breaks down personal consumption expenditures (PCEs) on energy versus other items on a month-by-month basis.

    The PCE on energy goods (which include natural gas and electricity) rose from 5.05% of total PCE in 2004 to 5.88% in 2007 and 6.31% in 2008. When oil prices peaked in July 2008 PCE hit a maximum monthly level of 7.01%.

    Thus taking the increase from 2007 to the highest month in 2008, energy PCE rose by 1.13 % of total PCE, or about $115 billion on an annualized basis.

    That sounds like a lot of money, but it's well under 1% of GDP.

    For example, it's less than the estimated $152 billion cost of former President Bush's ineffective 2008 tax rebate stimulus.

    Indeed, it is one-seventh the size of President Obama's stimulus the following year, which didn't have much visible effect. Thus the high oil prices of 2008 might have made the difference between marginal growth and marginal decline, which according to the "butterfly effect" of chaos theory could have caused other larger changes.

    However, high oil prices were certainly not sufficient to push an otherwise healthy economy into recession.

    To continue reading, please click here...
  • Iran Talks: A False Dawn for Oil Prices? Kent Moors, was in usual good form just now on “The European Closing Bell” from Frankfurt, Germany, talking about the problems in Iran, the restriction of oil through the Strait of Hormuz, how it affects worldwide production and ultimately, the price of oil. Read More...
  • Oil and Gasoline: A Tale of Two Prices A number of you have contacted me asking some variation of the same question.

    How can the price of oil be declining, yet the price of gasoline remain so high?

    Good observation.

    At close of trade yesterday, the West Texas Intermediate (WTI) benchmark futures crude oil contract for the near out month in NYMEX trade had declined 2.6% for the week and 4% for the month.

    However, the same contract for RBOB (Reformulated Blendstock for Oxygenate Blending) - the NYMEX gasoline futures standard - was up 1.6% for the week and 4.2% for the month.

    Normally, we expect that movements in the crude oil price, as the single-largest component in oil product prices, would pretty much dictate where gasoline is headed.

    And in normal circumstances, that is usually the case.

    Welcome to the Unusual Pricing Case

    The current gasoline phenomenon results from several factors:

    • Refinery capacity utilization;
    • The continuing outsized spread between WTI and Brent oil prices in London; and
    • The mix of increasing unconventional domestic oil flow (shale, heavy, tight oils produced in the U.S., synthetic oil from oil sands coming down from Canada); and
    As to the last point, the unconventional production actually adds cost to the extraction-upgrading-processing sequence.

    Put simply, while we are using more of this new "replacement oil" than we ever have (a good thing for those concerned about reliance on imports from abroad), its use is also adding to the price at the pump.

    Of greater importance, however, is the second element: the WTI-Brent pricing environment.

    We have talked about this spread on a number of previous occasions. Brent is again selling higher by about 20% to the price of WTI.

    That's important when factoring in the actual cost of the feeder stock for refineries.

    While the WTI price has been going down (until this morning), Brent has been more subdued. In fact, the Brent price is down only 0.5% over the past month and is slightly higher (also about 0.5%) over the past week.

    This year, the U.S. market is likely to be importing on average about 45% to 47% of what it needs on a daily basis. Only a few years ago, that market was dependent on imports for two-thirds of its requirements.

    Additionally, American domestic daily production will be close to 10 million barrels, a level not seen since the mid-1990s. That is a result of the acceleration in unconventional extractions in places like the Bakken in North Dakota, the Monterey in California, and Eagle Ford in Texas, as well as for prospects for new basins like the Utica in eastern Ohio.

    There's another important question that needs to be asked at this point.

    Click here to continue reading...

  • Not Even Saudi Arabia Can Save Us From High Oil Prices With oil prices soaring ever higher, Saudi Arabia stepped in last week and vowed to increase its production by 25% if necessary.

    But while that assurance managed to siphon a few dollars off of oil futures, the reality is there's nothing Saudi Arabia - or anyone else, for that matter - can do about rising oil prices.

    In fact, crude is still on track to reach $150 a barrel by mid-summer.

    As Saudi Oil Minister Ali Naimi pointed out last week, current oil supplies already exceed global demand by 1 million-2 million barrels per day.

    For its part, Saudi Arabia is already breaking its own OPEC-imposed production quota limit, churning out about 10 million barrels of oil per day - close to its 12.5 million barrel capacity.

    Yet the effect of that production has been negligible.

    Oil is still trading at $106 a barrel on the NYMEX - something that has clearly flummoxed the world's largest oil producer.

    "I think high prices are unjustified today on a supply-demand basis," said Naimi. "We really don't understand why the prices are behaving the way they are."

    Naimi and his colleagues may not understand oil's price gyrations, but Dr. Kent Moors, an adviser to six of the world's top 10 oil companies and energy consultant to governments around the world, does.

    "Despite the excess storage capacity in both the U.S. and European markets and the contracts already at sea, oil traders set prices on a futures curve," said Moors. "In a normal market the price is set at the expected cost of the next available barrel. During times of crisis, on the other hand, that price is determined by the cost of the most expensive next available barrel."

    And with tensions with Iran running high, we are currently in crisis mode. Pushed to the brink by Western sanctions, Iran has threatened to close the Strait of Hormuz - the narrow channel in the Persian Gulf through which 35% of the world's seaborne oil shipments and at least 18% of daily global crude shipments pass.

    If Iran closes the Strait of Hormuz, crude oil prices will pop by between $30 and $40 a barrel within hours. Should the strait remain closed for 72 hours, oil trading will push up the barrel price to $180 in New York, and closer to $200 in Europe.

    The situation is further complicated by potential military conflict - such as an Israeli air strike on Iran's nuclear facilities.

    And with indications that Iran will have the ability to develop nuclear weapons in the next 18 to 24 months, Western powers have apparently shifted their focus from halting Iran's nuclear program to sowing instability in the country with the hopes of catalyzing a regime change.

    So what does that mean for investors?

    To continue reading, please click here...
  • The Strategic Petroleum Reserve Becomes a Political Football (Yet Again) With the prices of both crude oil and gasoline racing higher, it was just a matter of time before the cries began sounding to open up the Strategic Petroleum Reserve (SPR). The White House is now under renewed pressure to combat rising gas prices by releasing that oil. The problem is that the SPR was […] Read More...
  • Hydrokinetic Power is the Next Wave in Cheap Energy In an era of cheap capital, emerging technology companies could provide investors the biggest bang for the buck we've seen in years.

    The key is finding a market that already has billions of dollars in pent up demand - like cheap energy.

    Of all the cheap alternatives available to us today, I'm most excited by hydrokinetic power systems for the simple reason that the oceans contain enough energy to potentially support more than 50% of US demand alone, according to the US Department of Energy.

    In case you are not familiar with the term, hydrokinetic systems produce power from the water's kinetic energy. It's quite literally power from the motion in the ocean.

    Critics charge there are limits involved because the technology we need to make, transmit and store wave-based energy is primitive and prohibitively expensive.

    And they're right... it is, or at least has been to date.

    That's why despite years of effort and billions of dollars in government-sponsored financing, there are a mere 5 megawatts of wave-generated energy being created worldwide.

    According to Forbes Magazine, that's only enough to light 4,000 U.S. homes.

    Yet studies estimate that two-thirds of the world's economically feasible hydropower has yet to be exploited. Perhaps not surprisingly, much of this untapped energy is concentrated in South America, Asia and Africa.

    That's my kind of opportunity - but it will require a sea change in our thinking (pun absolutely intended).

    The Rising Tide in Hydrokinetic Power

    That's because traditional "alternative" power choices tend to evolve in terms of how applications like solar, hydro, thermal and gas production ties into the grid. As such, they're dependent on environmental variables that come and go.

    On the other hand, hydrokinetic systems really are the grid. By placing turbines, bobbers and impellers into large bodies of water, they become part of the very system they're tapping into.

    And it's a whopper of a system.

    To continue reading, please click here...

  • Occidental Petroleum Corp. (NYSE: OXY): The Best Way to Profit From the Monterey Shale It has been a long time since California seen a profit opportunity like this.

    The state's Monterey Shale formation may hold as much as 500 billionbarrels of oil making it more valuable than the gold rush of 1848.

    With oil prices expected to hit $150, if not $200 a barrel this year that means the profit potential is limitless.

    After all, peak oil isn't a myth - it's a reality.

    Traditional oil production is plateauing, while demand in emerging markets continues to rapidly increase.

    Meanwhile, turmoil in the Middle East has threatened supplies even further. And the war with Iraq didn't end up being the energy bonanza many thought it would.

    And now the Arab Spring and tensions in Iran have escalated to the extent that military intervention there seems to be a foregone conclusion.

    That's why the Monterey Shale - a rib-shaped formation that extends from Northern California down through the Los Angeles area and then offshore to outlying islands - is getting so much attention.

    And unlike other shale plays in the United States, the Monterey is primarily oil, not gas.

    That means Monterey shale does not require hydraulic fracturing, which has come under fire from environmentalists.

    It also means companies can extract much of the oil using simple vertical wells, rather than the more expensive horizontal drilling needed for shale gas plays. Some horizontal drilling will be used, but it is not required in all fields, greatly reducing operating expenses.

    In fact, in large parts of the formation, production costs are less than $10 a barrel.

    Think about what that means for profit margins with crude prices currently near $110 a barrel.

    So how can investors profit?

    To continue reading, please click here...
  • Iran is Now a Full-Blown Crisis, Stage Set for $200 Oil Just when it looked like we could take a breather from the Strait of Hormuz, all attention is back on Iran.

    There are three reasons for this - all happening within the last week:

    1. First was Tehran's successful launch of a satellite, viewed by all in the region as being for military intelligence.
    2. Second, in his toughest talk to date, Iranian Supreme Leader Ayatollah Ali Khamenei voiced defiance to Western sanctions and pledged open retaliation if they are instituted.
    3. Finally, last Thursday, U.S. Secretary of Defense Leon Panetta expressed concern that, if matters continue, Israel could attempt an air-strike takeout of Iranian nuclear facilities within a month. Iran has been frantically moving essential components of its nuclear program underground to withstand such an attack.
    All of this is, once again, leading to a rise in crude oil prices.

    What's more, the EU decision to stop importing Iranian crude starting July 1 will cripple any chance Tehran has to combat escalating economic and political turmoil at home.

    Yet Khamenei's defiant tone during his Friday prayer meeting speech indicates that Iran's religious leadership will not wait for the system to unravel.

    And that is what makes this both a full-blown and an intensifying crisis.

    Brinksmanship in the Straits of Hormuz

    So what's being done?

    Washington has little - leverage, save its ability to temper an immediate escalation by Israel (leverage the U.S. can still apply, at least for the moment). It also has some indirect influence on what the E.U. does.

    Meanwhile, Saudi Arabia also is a wild card. It will not tolerate a nuclear Iran.

    And yes, there are ample indications that American and Israeli intelligence have concluded Iran will achieve the ability to develop nuclear weapons in the next 18 to 24 months.

    Some elements of that process will be available earlier, but remember: A weapon is of little value unless it can be controlled and delivered. The logistical and infrastructure considerations need to be in place first.

    Yet with such an inevitable conclusion staring them in the face, the West has decided to embark on a risky path...

    The target here is not the nuclear project at all (over which there is less and less outside control). Instead, it has become about creating massive domestic instability to bring down a regime.

    Now, this is not about ending the theocracy. With or without Mahmoud Ahmadinejad as president or Ali Khamenei as supreme leader, Iran will remain a Shiite-dominated country. Religion decisively controls politics, and the clergy oversees the society.

    The West is seeking a more moderate application of what will remain the Iranian cultural reality.

    However, as the brinksmanship intensifies, so will the price of crude oil. Tehran, in this dangerous game of international chicken, really only has one card to play - the Strait of Hormuz.

    There has been much misinformation circulated about the strait. Here are the facts.

    On any given day, 18% to 20% of the world's crude oil passes through it.

    According to the Energy Information Administration, the Strait's narrowest point is 21 miles wide; however, the width of the shipping lane in either direction is just two miles, cushioned by another two-mile buffer zone.

    Of greater significance, though, is the fact that most of the world's current excess capacity is Saudi. (This is the oil that can be brought to market quickly to offset unusual demand spikes or cuts in supply elsewhere.) And, unfortunately, Saudi volume must find its way through the same little strait.

    If we're unable to access the Saudi excess, that loss guarantees the global market will be out of balance. That will intensify the price upsurge - an upsurge that is already happening.

    Now for the question I'm being asked several times a day in media interviews...

    Just how bad can it get?

    To continue reading, please click here...

  • The Keystone Delay Won't Stop These Canadian Oil Sands Stocks I'm not a knee-jerk hater of the Obama administration.

    But the President's decision to reject the Keystone pipeline was one of his worst.

    Aside from creating jobs, the pipeline would have decisively swung U.S. energy supplies more toward domestic sources and those of our friendly neighbor Canada.

    To continue reading, please click here...

  • Anadarko Petroleum Corp. (NYSE: APC) Ready to Rebound After Oil Spill Losses Anadarko Petroleum Corp. (NYSE: APC) reported after market close today (Monday) a fourth-quarter profit loss, due to a $4 billion pay out made last quarter related to the BP PlC (NYSE ADR: BP) oil spill in 2010.

    Anadarko, the largest U.S. independent oil and gas company by market value, reported a $358 million, or 72 cents per share, loss for the quarter. Revenue rose 42.7% to $3.84 billion from the year earlier quarter.

    Excluding the spill-related payout and other items, Anadarko earned 85 cents a share. Wall Street expected the company to book earnings of 60 cents a share, more than doubling the 29 cents earned in 2010's last quarter.

    Now with its legal battles behind it, the company is ready to take off as higher oil prices and a recent discovery drive future earnings.

    To continue reading, please click here...