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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...

To find out how you can profit from the oil market, read on...

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...

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.

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It's Time to Invest in Canada

This isn't the first time that I've written about Canada, a well-run country that has avoided many of the mistakes made by the United States. Its budget deficit is moderate, its balance-of-payments deficit is also small, its banking system is in pretty good shape and it faces very little inflation risk, since the country has maintained a reasonable monetary policy.

At this point, you might well be asking: Well, if you've said this all before, why does it bear repeating now?

The answer is simple: As I've hunted for attractive investments recently, I have noticed that a very high percentage of those companies are domiciled north of the border.

In short, it's time to invest in Canada.



To discover the profit opportunities available just north of the border, please read on...

BP Dives Into Brazil's Offshore Oil Industry With $7 Billion Deal

British oil giant BP PLC (NYSE: BP) has finally entered Brazil's vaunted deepwater oil market with a $7 billion purchase of Devon Energy Corporation (NYSE: DVN) assets. BP yesterday (Thursday) announced it would acquire some of Devon's interests in Brazil, Azerbaijan and the Gulf of Mexico. BP also agreed to sell Devon a 50% stake […]

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The Scramble for Africa: Profiting From World's Largest Cache of Commodities

In the quarter century stretching from the late-1880s to the First World War, there was a mad rush by the world's leading powers to occupy and annex African territory. Now, 100 years later, the world's elite again are scrambling to make their respective marks on the continent.

The methods of extraction have changed, but the end goal remains the same - to gain access to Africa's coveted bounty of commodities.

Most notably, Chinese interests have swarmed Africa, constructing roads, rail lines, municipal buildings, schools, ports, and pipelines in exchange for access to natural resources.

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Six Ways to Profit as Brazil's Economy Takes Off

In many ways, Brazil offers some of the best prospects among emerging markets and deserves to be a core holding in any international portfolio.

Brazil's economy had only a shallow recession and is now recovering nicely. Its market has been one of the best performing since Dec. 31, 2008, and both inflation and the budget deficit remain under control.

Yet one can be only moderately bullish - and I'll explain why.



To find out how to profit from Brazil's bullish prospects, read on...

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...

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Saudi Arabia Shifts its Focus to China as the United States Falls Out of Favor

Saudi Arabia, the world's largest oil producer, last year shipped more oil to China than it did the United States for the first time ever - a shift that highlights China's ascension to the ranks of the world's economic elite, as well as its position as the new focal point for the world's energy producers.

The flow of oil from Saudi Arabia to China rose to more than 1 million barrels per day (bpd) last year, just as demand in the United States fell below that level for the first time in more than two decades.

China in December alone imported a record-high 1.2 million bpd of Saudi oil, as its economy rode the momentum of Beijing's $585 billion (2 trillion yuan) stimulus package. U.S. imports of Saudi oil, on the other hand, fell to a 22-year low of 998,000 bpd in the first 11 months of 2009, as the world's largest oil consumer clawed its way back from its worst recession in 70 years.

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Schlumberger's Acquisition of Smith the Latest Evidence of a Takeover Trend

With global energy demand expected to surge over the next decade, straining production, it's no surprise that many of the sector's biggest players are racing to acquire competitors whose expertise will help them thrive in a more competitive environment. And Schlumberger Ltd. (NYSE: SLB) on Sunday became the latest energy giant to bring a competitor […]

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How to Profit as Wall Street Insiders Push Oil Prices Skyward

Most forecasts are calling for oil to edge up slowly over the next year. Or, that's what Wall Street wants you to believe anyway.The big Wall Street firms control millions of barrels of oil and can direct their clients' money into oil. Which way do you think they want oil to go? Find out how Wall Street can manipulate oil prices... and the one move to make now to profit right alongside the "big boys."

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Soaring Lumber Prices and Strong D.R. Horton Report May Not Signal an Immediate Rebound in Housing Stocks

Crude oil, gold, steel and commodity stocks have all taken it on the chin to varying degrees so far this year.

But not every commodity has suffered this same tough fate. In fact, there's even been a major standout. It's a commodity that most investors rarely think about.

I'm talking about lumber.

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Ghana May Kill Exxon's $4 Billion Oil Deal

The government of Ghana may kill Exxon Mobile Corp.'s (NYSE: XOM) plans to buy a $4 billion stake in a giant offshore oil discovery from Kosmos Energy LLC. The move could help China expand its growing presence in the region through its state-owned oil company China National Offshore Oil Corp. (NYSE ADR: CEO).

Ghanaian Energy Minister Joe Oteng-Adjei sent a letter to Exxon last week informing the company that the government wouldn't approve the deal with Kosmos. The letter said the government is "unable to support an Exxon Mobil acquisition of Kosmos's Ghana assets," according to a copy reviewed by The Wall Street Journal.

The government said Dallas-based Kosmos had shared critical information about the field with potential buyers without its permission. Ghana also said Kosmos had left Ghana's state-run oil company, Ghana National Petroleum Corp. (GNPC) out of discussions held to determine how the field should be developed.

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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.

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