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How to Profit From Wall Street's Biggest Gaffe in Decades

I was perusing the newswires a few weeks ago when the following Reuters news story headline all but physically grabbed my attention.

It stated: “Exclusive: Morgan Stanley Rebuilds in Commodities Trading.”

Most folks probably looked at this and tossed it off as just another of the endless machinations of Wall Street.

But I knew better…

  • Oil Prices

  • United States Lifts Oil Drilling Ban to Reduce Foreign Energy Dependence President Barack Obama announced will lift a 20-year ban on offshore oil and natural gas drilling and exploration, hoping to create jobs, generate revenue and reduce the United States' dependence on foreign oil.

    Obama and Interior Secretary Ken Salazar released a detailed plan to allow drilling off the Atlantic coast, eastern Gulf of Mexico and north coast of Alaska, provided coastlines are protected. Environmental concerns about the possibility of oil spills initially caused the drilling ban. Drilling would still be prohibited from New Jersey northward, on the Pacific Coast and in Alaska's Bristol Bay.

    The plan aims to bolster the United States' ability to supply its own energy, but also acknowledges the need to move toward clean energy policies and protect natural resources.

    Read More...
  • How the Little Guy Will Fix Oil Futures and Get In on the Profits Sometimes big things come from small meetings.

    As an example, consider one particularly contentious 1927 session at the Royal Institute of International Affairs that took place at Chatham House in the center of London's Westminster. It originated an idea now used worldwide - the famous Chatham House Rule. Under its most recent revision (2002), the Rule allows the participants of a meeting to use the information received there, but prohibits them from revealing the identity or affiliation of anyone else present.

    The Chatham Rule also governed the meetings I attended at Windsor Castle outside London from a recent Friday through to the early-morning hours of the following Monday. These meetings were the annual consultations of the Queen's Windsor Energy Group, which were meant to be private, high-level, discretionary advisories. This is one of the few "old boys" clubs left in the world where talk can translate directly into action.

    Read More...
  • Despite the Near-Record Run in U.S. Stocks, Oil, Commodities and China Will be the Long-Term Winners Although U.S. stocks have made a fairly smooth transition into Year Two of what's so far been a near-record bull market, there are still many traps that can quickly ensnare a less-than-cautious investor.

    Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

    "I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."

    In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:

    • Predicted that oil and commodity prices are headed higher, making them "must-invest" asset classes for investors who don't want to be left behind.
    • Stated that ongoing miscues in Washington coupled with higher growth abroad make it imperative that U.S. investors embrace a truly global view when planning their investing strategies.
    • And predicted that many blue-chip U.S. companies will go for dual-listings, listing their shares on China's Shanghai Stock Exchange (SSE), providing those U.S.-based firms with access to the plentiful capital and robust growth available in that Asian giant's marketplace.
    For a full transcript of this interview, read on... Read More...
  • Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery Question: How can banks justify not giving out mortgage money in light of the fact that they can now qualify their applicants to a level not previously seen? I am talking about literally millions of people applying for loans with 800-plus FICO scores and Loan-to-Value (LTV) Ratios that are better than ever before.

    How can banks and lending institutions take our money and then turn around and shut nearly everyone out - which simply prolongs this recession? Can anyone explain why the present administration and regulatory bodies are not forcing the banks to loan monies to qualified applicants?

    At this rate, we will be dead soon. Without borrowing, we will die.

    (Signed) Living in Costa Rica

    Read More...
  • Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays Question: Shah, your article on capital-wave investing was outstanding. In fact, I would love to see a follow-up piece for those of us who are not traders and who are not out and about following the current short-term market trends.

    For example, when you talk about the Obama administration's determination to keep interest rates low - this has consequences. What will those rates be in, say, a three-year to five-year time frame? What if the European countries keep having implosions like Greece - meaning that countries like Portugal, Spain and Italy follow suit?

    In your opinion, will that eventually sink the euro, or does the Eurozone have to bail out those countries with a plan that's similar to the one that it is developing for Greece? What happens to other currencies in either of these scenarios?

    Finally, is it your opinion that China is trying to curtail its growth to keep itself from overheating? Can Beijing successfully continue to do this - or will this blow up in China's face? If you look down the road, say, three to five years, what do you believe the consequences, if any, will be?

    Again, Shah, this was a really informative article. I would love to hear your views on what you actually see playing out in each of these areas during the next few years.

    Answer: Thank you for your kind words about the article and for taking the time to pose your questions - which are excellent ones, by the way. Let's take a look at them, one at a time...

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  • High Gas Prices Got You Down? Beat the Oil Industry at its Own Game… As the price of crude oil moves above $80 a barrel, consumers are wondering just how high gas prices can go.

    Now is the time for such questions.

    It's during the month of March that the market begins to readjust inventory and production in advance of the summer driving season. This usually means that production shifts from heating oil to gasoline.

    Actually, the real issue is what refined products will be emphasized in the production process. To put it bluntly, U.S. refineries have insufficient capacity to handle all needs.

    And that could make you some serious money.

    To find out how you can profit from the oil market, read on... Read More...
  • How Capital Waves Are Creating the Biggest Profit Opportunities in Today's Markets Back when oil was trading at a record high of $145 a barrel - and was generally expected to go higher - I concluded that the forces at play were speculative, not fundamental - driven by new institutional money looking to diversify away from too many concentrated equity bets. I argued these forces were temporary, and not entrenched, meaning that oil prices were actually headed for a fall.

    The "forces" I was referring to are called "capital waves." Capital waves create some of the biggest trading opportunities in the markets today. Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't.

    With oil, for instance, pundits were calling for new highs of $200, $250, $300 and even $500 a barrel. But behind the curtain, there was a major capital wave at play: I knew that oil was being pumped out of the ground like mad, and that shipping rates were exploding because oil was being stored in offshore, idled tankers. I knew that as little as $20 billion had been "re-allocated" out of the equity markets and into this new-asset-class investment for pension fund accounts.

    As a speculative frenzy seemed to be enveloping the oil market, I called for oil prices to plummet - to more than a few looks of incredulity or outright guffaws.

    When the secondary capital waves took hold, the speculative advance in oil prices first stalled - and then oil prices plunged as capital exited in another wave.

    Don't feel bad if you missed this opportunity. That's the important thing to remember about capital waves - they're out there if you know where to look and how to interpret them. In fact, as good as this oil play was, I see even better opportunities ahead.

    To learn about the Top Five "capital waves," read on... Read More...
  • Oil Prices on the Rise as OPEC Holds Production Steady Oil prices yesterday (Wednesday) rose $1.23, or 1.5%, to close at a two-month high of $82.93 on the New York Mercantile Exchange (NYMEX) a fter the Organization of Petroleum Exporting Countries opted to keep its production quotas in place.

    However, it may not be much longer before prices take off again, possibly hitting $100 a barrel by the end of the year.

    Current prices are "beautiful," Saudi Arabian Oil Minister Ali al-Naimi told reporters before OPEC's meeting.

    "The producer is looking at this price, the consumer is looking at the price, the investor is looking at the price, and everybody is saying this is great," he said.

    OPEC, which supplies about 40% of the world's oil, set its official cap at 24.845 million barrels per day (bpd) in December 2008 and has kept it there for five straight meetings. In that time oil prices have more than doubled.

    Read More...
  • How to Profit from the Next Spike in Oil Prices Earlier this week, British company Desire PLC (Pink Sheets: DSPMF) began drilling in an offshore block of the Falkland Islands. Immediately, Argentina President Cristina Fernandez de Kirchner let loose with a howl of rage, and the Summit of Latin American and Caribbean Unity issued a protest against the British company's drilling operations.

    Argentina's claim to the Falklands had remained dormant since the war 28 years ago, yet the moment the drill bit touched seabed the years rolled away. This showed yet again that oil remains salient to international politics and the world economy in a way shared by no other commodity. So how should investors play it?

    For the best ways to profit from rising oil prices, read on...

    Read More...
  • Oil Prices Set to Surge to $90 a Barrel by Midyear, Retest Record High in 2011 In its 2010 forecast series, Money Morning predicted the price of oil would reach $100 a barrel by the end of the year. And while crude prices stalled in January, a growing body of evidence suggests that call may not be far off.

    Oil prices rose above $80 a barrel for the first time ever on Sept. 13, 2007. From there they jumped 84% to $147 a barrel in July 2008. Then, in 2009, they surged more than 133% from a low of $34.03 a barrel in February to $79.39 a barrel at the end of December.

    The price of crude again topped out above the $80 a barrel mark in early January, but has since slid back down to about $75 a barrel. However, some analysts believe that this is just period of temporary cooling before prices reignite and soar to $90 by midyear, and as high as $200 a barrel by 2012.

    Read More...
  • What Do Oil, Gold and Orange Juice Have in Common? Some Hefty Possible Profits "So what do you expect from the commodity markets in 2010?"

    If I had a dollar for every time I've been asked this question over the past few weeks, I'd be able to buy myself an ounce of gold.

    But allow me to tell you the same thing that I've told my friends and colleagues: I'm expecting more of the same. Just because it's a New Year doesn't mean we should expect commodities to behave much differently than they did in 2009.

    In my final Investment U column of 2009, I highlighted the crude oil and gold markets as the ones to watch as we headed into 2010.

    So far, neither market has been a... Read More...
  • Will China Supersede Saudi Arabia as the Key to U.S. Oil Prices? I bought a Toyota Prius last Saturday.

    The signs are everywhere that oil is headed for stratospheric highs - $200, $250 or even $300 a barrel. Some of these signs are just plain obvious. But even the subtle indicators are telling us that some very expensive energy costs headed our way.

    Let me tell you about one such indicator that I came across over the New Year holiday. A tiny news item said that Saudi Arabian oil concern Aramco is abandoning a lease on Caribbean oil storage, and further reported that PetroChina Co. Ltd. (NYSE ADR: PTR) is moving in to take Aramco's place.

    Most investors here in the West - if they even read the item - would've dismissed it as just another minor business transaction, one among the thousands that take place each day. But this particular deal was much more than that. It's another indication of China's continued global emergence. And it also underscores this country's relegation to the growing legion of "former" world powers that have been eviscerated by the financial crisis that they created.

    In case you missed the story, let me share the details, and then explain what I believe those details actually mean.

    To see why China is the "new" Saudi Arabia, read on... Read More...
  • The Five Reasons Gold Will Hit $5,000 Let me get right to the point. Gold's going to $5,000 an ounce.

    I know that sounds preposterous to most people. In fact, some of you probably think I'm crazy.

    But for a whole host of reasons, $5,000 may well end up being a conservative estimate.

    So before you start posting comments that I've gone bonkers, hear me out...

    For more on gold’s looming "superspike," read on...

    Read More...
  • Wall Street Scrambles its "Contango Convoy" to Capitalize on Higher Oil Demand A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, are firing up their engines and jockeying for position in a race to cash in on the bone-chilling deep-freeze plaguing the North America, Europe, and Asia.

    The supertankers, each of which can hold over 2 million barrels of oil, are steaming "all ahead full" to deliver their stores of crude, heating oil and other distillates to the United States.

    Their clients - which include several huge Wall Street investment firms - are eager to unwind what's become known as the oil storage trade. Read More...
  • Cold Snap Lighting a Fire Under Energy Complex and Agri-Commodities A relentless surge of cold weather is slamming nearly every country in the Northern Hemisphere, disrupting travel, threatening crops and driving energy and commodity prices higher as investors look for ways to cash in.

    In the United States, crude oil is trading near a 14-month high. Natural gas and heating oil prices have also surged, as the U.S. shivered under the onslaught of an arctic express that sent temperatures plummeting below zero across two-thirds of the country. Even Florida growers try to protect orange groves from overnight freezing temperatures.

    The cold snap is one of the nation's most widespread since January 1985, according to meteorologists at Accuweather.com. While the cold is expected to ease slightly starting Thursday, this winter is on track to be one of the coldest in the past two decades, Ken Reeves, director of forecasting operations at Accuweather told The Wall Street Journal. Read More...